Government-Owned Garuda Indonesia Has Filed For Bankruptcy – In The United States

A week and a half ago Indonesian flag carrier and SkyTeam member Garuda Indonesia revealed its plan to drop first class and most international service. It was losing money flying long haul, so planned to rely on partners to bring people to and from its flights in Indonesia. Somehow pivoting to focus on the more competitive domestic market, rife with low fares, was going to be a more profitable strategy for them.

Garuda has now filed for bankruptcy in the U.S.. A Chapter 15 filing prevents any creditor lawsuits here, as well as seizure of assets. Garuda restructured $9.5 billion in debt this year, and has $5.1 billion remaining. Boeing did not participate in the restructuring in Indonesia.

The airline has blamed high leasing costs for their woes, but those come from corrupt deals involving money laundering and bribery involving top airline officials at the government-owned carrier.

Despite plenty of domestic air service, the government of Indonesia has made it a priority to revive the fortunes of its flag carrier. I will leave it to you to speculate as to that motivation. Meanwhile they’re in the market to buy new planes and double their fleet.

There’s something odd about a majority government-owned airline declaring itself insolvent when the government that owns it claims not to be. Then again, companies separately incorporate subsidiaries and bankrupt those subsidiaries all the time.

Indonesia’s Ministry of Finance projects Garuda will become profitable next year. If you can trust the books, I’ll take the under on that.

(HT: @crucker)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. There is some justice in that some of Garuda’s largest creditors – Airbus and Rolls-Royce – who lost the most, got their now worthless contracts through massive bribes to Garuda’s now jailed ex-CEO. Reason to suspect that many of the lessor-creditors got their contracts the same way.

    I wonder if GA will keep their flights to Jeddah year round or only during Haj? Given the new airport in Jeddah, connecting to GA through JED might be one of the best ways to fly to CGK from East Coast USA with only a single stop in a good and fully opened airport.

  2. @ L3

    There have been no safety issues with Garuda for a long time. Perhaps you are thinking of the Lion Air crash, which was on Boeing.

  3. The entire Bahasa speaking region is strife and ripe with corruption. Didn’t GA learn any lessons from their neighboring MH cousins about 2-3 decades ago? There’s no reason to subsidize first class or ultra posh business class to shuttle elite ruling members and their family to far flung destinations..

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