Commentary: Is Garuda Indonesia on the brink of bankruptcy?
COVID-19 has battered Garuda’s revenue and sent earnings plunging, causing trading of the airline’s shares to be halted recently after a bond default. CEO Irfan Setiaputra claimed the airline’s total debt was 70t rupiah (US$4.9b). This led to a meeting with the Ministry of State-Owned Enterprises, which put forward a number of potential resolutions including injections of state capital, privatisation or bankruptcy proceedings while the company restructures some of its debt. Irfan did not break down the figure in detail, but Garuda’s most recent financial disclosure from September 2020 provides some clues. By late 2020, total liabilities had ballooned to US$10.36b against US$9.9b in assets, meaning the company was returning negative US$455m in equity to its shareholders. With liabilities exceeding assets, financial insolvency is a real concern. This is especially so in Garuda’s case, as business has been frozen by pandemic-related travel restrictions. According to company operating statistics, international passengers fell from 193,380 in February 2020 to just 8,967 a year later. This begs the question whether Garuda’s financial problems should be viewed as a referendum on Indonesia’s style of state capitalism, or a result of a major and unpredictable external shock to demand. While Garuda’s corporate management is not blameless, the latter explanation is more persuasive -- story has more.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2021-07-09/sky/commentary-is-garuda-indonesia-on-the-brink-of-bankruptcy
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Commentary: Is Garuda Indonesia on the brink of bankruptcy?
COVID-19 has battered Garuda’s revenue and sent earnings plunging, causing trading of the airline’s shares to be halted recently after a bond default. CEO Irfan Setiaputra claimed the airline’s total debt was 70t rupiah (US$4.9b). This led to a meeting with the Ministry of State-Owned Enterprises, which put forward a number of potential resolutions including injections of state capital, privatisation or bankruptcy proceedings while the company restructures some of its debt. Irfan did not break down the figure in detail, but Garuda’s most recent financial disclosure from September 2020 provides some clues. By late 2020, total liabilities had ballooned to US$10.36b against US$9.9b in assets, meaning the company was returning negative US$455m in equity to its shareholders. With liabilities exceeding assets, financial insolvency is a real concern. This is especially so in Garuda’s case, as business has been frozen by pandemic-related travel restrictions. According to company operating statistics, international passengers fell from 193,380 in February 2020 to just 8,967 a year later. This begs the question whether Garuda’s financial problems should be viewed as a referendum on Indonesia’s style of state capitalism, or a result of a major and unpredictable external shock to demand. While Garuda’s corporate management is not blameless, the latter explanation is more persuasive -- story has more.<br/>
