Garuda Indonesia to halve its fleet as costs explode amid pandemic

Indonesia’s national airline Garuda Indonesia is planning for a major restructuring as it strives to survive the near-collapse of air travel amid the Covid-19 pandemic, with one measure being to cut its fleet number by half.

“We have to go through a comprehensive restructuring, a total one,” the carrier’s president-director Irfan Setiaputra said in an address to staff on May 19, according to Bloomberg News.

“We have 142 aircraft and [as per]our preliminary calculation on how we see this recovery has been going, we will operate with a number of aircraft no more than 70,” he said.

As the second-largest airline in Indonesia behind Lion Air, Garuda’s fleet is nine years old on average. The largest part of the airline’s fleet consists of the Boeing 737 aircraft family, namely 73 Boeing 737-800s and one Boeing 737 MAX aircraft. Adding to that, Garuda operates 27 Airbus A330s, 18 Bombardier CRJ-1000s, 12 ATR-72s and ten Boeing 777-300ER aircraft.

Due to the ongoing pandemic, the airline is already operating only half of its fleet, 58 aircraft, flight data portals show.

Debt grows by $70 million a month

Setiaputra also provided an update on the airline’s perilous financial position. Total debt has now reached $4.9 billion and is growing by $70 million a month. Total equity is negative at minus $2.85 billion and relief is not in sight as Setiaputra does not see flying conditions in Indonesia improving much this year.

Like with other airlines in the region such as Thai Airways, structural problems at Garuda predated the 2020 travel downturn and the pandemic highlights many of those underlying issues.

Furthermore, with international borders closed and widespread travel restrictions imposed, many of Garuda Indonesia’s international services ceased in 2020. The airline is now operating scaled-back schedules to just ten countries.

High overheads regardless of passenger numbers

The main problem for Garuda – and many other airlines – is the high level of fixed costs. Regardless of passenger numbers, the carrier’s 14,000 employees, aircraft lessors, airports and fuel need to be paid regardless of revenue flows.

With fewer seats available because of Covid-19 regulations, Garuda Indonesia’s revenue is taking a big hit. The airline has not yet published its 2020 financial figures, but with passenger numbers, load factors, available seat kilometers and revenue passenger kilometers all substantially down, a heavy loss is expected.



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Indonesia’s national airline Garuda Indonesia is planning for a major restructuring as it strives to survive the near-collapse of air travel amid the Covid-19 pandemic, with one measure being to cut its fleet number by half. “We have to go through a comprehensive restructuring, a total one,” the carrier’s president-director Irfan Setiaputra said in an address to staff on May 19, according to Bloomberg News. “We have 142 aircraft and [as per]our preliminary calculation on how we see this recovery has been going, we will operate with a number of aircraft no more than 70,” he said. As the second-largest...

Indonesia’s national airline Garuda Indonesia is planning for a major restructuring as it strives to survive the near-collapse of air travel amid the Covid-19 pandemic, with one measure being to cut its fleet number by half.

“We have to go through a comprehensive restructuring, a total one,” the carrier’s president-director Irfan Setiaputra said in an address to staff on May 19, according to Bloomberg News.

“We have 142 aircraft and [as per]our preliminary calculation on how we see this recovery has been going, we will operate with a number of aircraft no more than 70,” he said.

As the second-largest airline in Indonesia behind Lion Air, Garuda’s fleet is nine years old on average. The largest part of the airline’s fleet consists of the Boeing 737 aircraft family, namely 73 Boeing 737-800s and one Boeing 737 MAX aircraft. Adding to that, Garuda operates 27 Airbus A330s, 18 Bombardier CRJ-1000s, 12 ATR-72s and ten Boeing 777-300ER aircraft.

Due to the ongoing pandemic, the airline is already operating only half of its fleet, 58 aircraft, flight data portals show.

Debt grows by $70 million a month

Setiaputra also provided an update on the airline’s perilous financial position. Total debt has now reached $4.9 billion and is growing by $70 million a month. Total equity is negative at minus $2.85 billion and relief is not in sight as Setiaputra does not see flying conditions in Indonesia improving much this year.

Like with other airlines in the region such as Thai Airways, structural problems at Garuda predated the 2020 travel downturn and the pandemic highlights many of those underlying issues.

Furthermore, with international borders closed and widespread travel restrictions imposed, many of Garuda Indonesia’s international services ceased in 2020. The airline is now operating scaled-back schedules to just ten countries.

High overheads regardless of passenger numbers

The main problem for Garuda – and many other airlines – is the high level of fixed costs. Regardless of passenger numbers, the carrier’s 14,000 employees, aircraft lessors, airports and fuel need to be paid regardless of revenue flows.

With fewer seats available because of Covid-19 regulations, Garuda Indonesia’s revenue is taking a big hit. The airline has not yet published its 2020 financial figures, but with passenger numbers, load factors, available seat kilometers and revenue passenger kilometers all substantially down, a heavy loss is expected.



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

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