Indonesian flag carrier Garuda’s financial troubles are mounting as it failed to make scheduled loan payments to creditors that were due at the end of last month, writes Nicholas Ionides.
The state-owned carrier has admitted to being in financial trouble and early last month said it had begun meeting with creditors over its debts, which amount to more than $800 million. It said then that it would be difficult for it to make principal payments that were due at the end of 2005 and appointed new financial advisers and lawyers.
Garuda says it deliberately missed principal payments of an unspecified amount, due at the end of December, but stresses it is continuing to pay interest and will meet all payments to aircraft lessors to remain operational.
The airline says it has been hurt by weaker revenues caused by a drop in demand after the Bali terrorist bombings in October. It has also been hit by higher fuel prices, weakening of the local currency, higher interest rates and increased competition.
Garuda last restructured its debts in 2001, when it owed $1.8 billion. It says its debt now stands at $826.5 million, with more than $500 million owed to European export credit agencies.
Source: Flight International
