The cash-strapped airline, Indonesia's flag carrier, says the government made the promise in September, allowing for payments to be made as scheduled to the US Export-Import Bank covering the financing of 11 Boeing 737s.
Garuda says the cash infusion is "only to take care of some of the debt to help Garuda in a difficult time", but it may also help cement an important debt restructuring with key creditors.
The airline's senior management has been talking to creditors for months on a debt restructuring, but has so far failed to reach agreement. The last round of talks was held early in September after financial adviser Deutsche Bank completed a five-year restructuring plan through 2004.
Following word of the promised cash, totalling nearly $500 million, new talks are planned for the coming months in the hope that a restructuring package can be finalised by the end of the year. The airline will not comment but many see the cash injection as a condition made in past meetings by major creditors.
Garuda's outstanding debt is estimated at nearly $1.4 billion, of which the carrier says more than $600 million is owed to European export credit agencies. It also says nearly $300 million is owed to suppliers, $170 million to state-owned banks and $300 million in issued promissory notes.
The carrier was hit hard by the regional economic downturn which began in mid-1997, and last year, after reportedly being on the verge of collapse, called in Lufthansa Consulting.
A division of the German flag carrier, Lufthansa Consulting is working on an internal restructuring and is due to remain on contract for at least another two years, according to Garuda.
Meanwhile, the carrier claims a financial turnaround this year, saying its first-half operating profit stood at 484 billion rupiah ($56 million). That compares with a 1.1 trillion rupiah operating loss reported for the same period of last year.
Source: Airline Business
