Indonesia Aids Garuda On $1B Debt Plan, Ex-CEO Imprisoned

Indonesia has no plans to inject cash directly into the flag-carrier.
Credit: Joe Pries

The Indonesian government is in the process of helping Garuda Indonesia draft a $1 billion financing proposal as the state-controlled airline has a $500 million Islamic bond (sukuk) due in June.

The package will consist of a new plan to restructure the $500 million sukuk and another $500 million worth of bridging loans for working capital to tide the flag-carrier over for the next three to six months. 

Deputy state-owned enterprises minister Kartika Wirjoatmodjo told local reporters that Garuda will table the sukuk proposal to investors on May 18. This will include an option to extend the maturity of the securities by three years, or for repayments to be staggered. In 2015, Garuda issued a $496.8 million global sukuk with a five-year tenure and an annual return of 5.95%. 

The minister ruled out directly injecting funds into the airline, which saw its cashflow hit hard in the first quarter (Q1) of 2020 as COVID-19 struck. A total domestic flight ban has been imposed in Indonesia until June. Revenue for Q1 slumped 33% year-on-year.

Meanwhile, former CEO Emirsyah Satar has been sentenced to an eight-year prison term and fined $1.4 million by the country’s corruption court for bribery and money laundering relating to the procurement of A320 and A330 aircraft from Airbus as well as Trent 700 engines from Rolls-Royce. His sentence will be extended by two years should he not pay the fines. He was accused of receiving kickbacks and a car—totaling around $3 million—via a middleman. Satar was CEO between 2005 and 2014. 

In 2017, Rolls agreed to approximately US$800 million in settlement charges after an investigation by the U.S. Justice Department and the UK’s Serious Fraud Office revealed bribes had been used to secure contracts with Garuda, Thai Airways and other customers around the globe. Airbus is also paying around $4 billion in fines after settling with prosecutors in France, the UK and the U.S. 

Another Garuda CEO, I Gusti Ngurah Askhara Danadiputra, aka Ari Askhara, is also facing potential criminal charges relating to a smuggling incident involving a Harley Davidson motorcycle in the cargo hold of a newly delivered A330neo. He was fired from his post in December 2019. 

Chen Chuanren

Chen Chuanren is the Southeast Asia and China Editor for the Aviation Week Network’s (AWN) Air Transport World (ATW) and the Asia-Pacific Defense Correspondent for AWN, joining the team in 2017.