PT Garuda Indonesia is in talks with several banks about refinancing and won’t default on its $500 million notes due June 3 despite challenges presented by the coronavirus, the airline’s Chief Executive Officer Irfan Setiaputra said.
Like airlines around the world, the Indonesian flag carrier has been deeply damaged by the virus and its impact on travel. Setiaputra said the outbreak has hit Garuda’s international market hard, with entry restrictions to Saudi Arabia a particular blow as the carrier typically flies more than half a million Indonesian pilgrims to Mecca and Medina every year. The airline has also cut Singapore flights to three a day from 10.
“For sure it is impossible for us to default in this note,” Setiaputra said in an interview with Bloomberg Television. “We are in discussions with several banks outside Indonesia as well as several state-owned banks in Indonesia. The progress of the discussion is quite positive and we are finalizing the term sheets with them, we do hope that we are going to do the refinancing rather than restructuring of this debt.”
The debt has tumbled to a record low of 49.67 cents on the dollar, according to Bloomberg-compiled prices.
Setiaputra has been head of Garuda for only two months, brought in after his predecessor was dismissed for allegedly smuggling a Harley-Davidson motorcycle on a flight to Jakarta. Setiaputra was previously a telecommunications executive with little experience in the aviation industry. He’s arrived at a challenging time.
In Friday’s interview, Setiaputra said “for sure” the state-owned carrier will cancel its remaining orders of 49 Boeing Co. 737 Max jets, which have been grounded for a year after two deadly crashes. He said the company will focus its fleet primarily on aircraft produced by Boeing and Airbus SE, and said that its 18 Bombardier Inc. CRJ1000 planes might have to be removed.
Garuda’s share price slid 5.9% on Friday, heading for a weekly loss of 29%. It has plunged 64% since Setiaputra was announced as chief executive on Jan. 22.