Garuda considers fewer Airbus orders as it seeks debt standstill

Beleaguered airline PT Garuda Indonesia is considering trimming its Airbus SE A330 orders and reducing the number of wide-body jets in its fleet, as it completely restructures its business to survive the pandemic.

The company is looking at canceling orders for the newest version of the Airbus jet—the A330neo—and has been talking to lessors about returning some of the A330s already in its fleet, people familiar with the matter said, asking not to be identified as the discussions were private. One of them said the carrier is also considering halving its number of Boeing Co. 777-300ER jets.

The move comes as the Indonesian flag carrier plans to seek a debt standstill with creditors to prevent the further depletion of its cash, Kartika Wirjoatmodjo, deputy minister at the state owned enterprises ministry, told parliament on Thursday. He said Garuda may be forced into bankruptcy if creditors don’t approve a planned restructuring. “This is what we are trying to avoid as much as possible.”

Garuda has outstanding orders for nine A330-900s and four A330-800s, according to Airbus’s orders and deliveries list. The state-owned carrier operates 10 Boeing 777-300ERs and 27 planes from the A330 family, which are mostly used for medium-haul routes. Excluding low-cost unit Citilink, it has 142 aircraft in total. Over half of those are Boeing 737-800NGs.

Garuda didn’t immediately reply to requests for comment on the aircraft orders and fleet plans. An Airbus spokesperson declined to comment. Boeing didn’t immediately respond to an email request for comment.

Airlines around the globe have been floored by the spread of Covid-19, with new variants adding more uncertainty on when international travel will return in earnest. Dozens have collapsed or been forced to restructure and adjust their fleets to ride out the crisis. Among them in the Asia region, Philippine Airlines Inc. confirmed in mid-May it had held talks with lessors about shrinking its fleet and returning planes.

Garuda President Director Irfan Setiaputra told staff on May 19 that the company needed to restructure, potentially more than halving its main fleet.

Before the pandemic, Garuda had the highest ratio of aircraft rental cost to revenue among airlines globally. Including Citilink, 90% of the group’s fleet was leased in 2019, making the airline vulnerable with many planes grounded.

The carrier would typically use its wide-body jets to connect Indonesia with places such as Tokyo, Amsterdam, Melbourne and Sydney. The A330s also operate busy routes such as Jakarta to Singapore or Bali.