Indonesia's state airline Garuda hangs by a financial thread

Indonesia's government is under mounting pressure to resolve the financial crisis at the nation's flagship airline, which faces an existential threat from COVID-19 after years of chaotic management and weak earnings. Analysts say Garuda Indonesia may need at least $1.3b to $3b in fresh capital to survive. But with the government, its largest shareholder, reluctant to stump up the money, and uncertainties over debt negotiations, there is still no indication of how the company can be saved -- two months on from its default on $500m of Islamic sukuk bonds. "If you are a creditor or a leasing company, Garuda is at the top of your list of those you are most concerned about," said one longtime aviation industry analyst. "Not because it is the only airline that has issues, but because there is so much uncertainty and not much communication, disclosure and responsiveness from Garuda for so long." Garuda disclosed in March that it had $4.6b in current liabilities -- financial obligations coming due, typically within a year -- and just $485m in liquid assets. The sukuk is only the tip of the iceberg. Nearly 40% of the near-term obligations are owed to leasing companies, amounting to $1.7b. The airline requires at least "3 to 5t rupiah ($210m to $350m) to keep its operations going at a greatly reduced scale for less than one year," and "more than 20t rupiah" to get back on track, said Ziva Narendra, CEO of consultancy Aviatory Indonesia. Alvin Lie, an independent aviation expert, thinks the amount needed is around 40t rupiah. "What is clear is that without a fresh cash injection, it will be difficult for Garuda to survive," Lie said.<br/>