Sriwijaya Air wins creditor nod for $488 million debt revamp

Distressed Indonesian carrier Sriwijaya Air won approval from creditors to restructure debt in a court-assisted process, the latest example of how the Covid crisis continues to reverberate even as travel bounces back.

The agreement, reached at a Jakarta court, involves as much as 7.3 trillion rupiah ($488 million) of debt, with maturities between 8 and 15 years, the airline’s lawyers said in a statement Wednesday. Under the plan, Sriwijaya will seek new strategic investment and it may include an initial public offering.

“This can reduce financial debt by around 80%,” the airline’s financial consultant Noprian Fadli at Triple B Advisory said in the statement.

The development highlights how the pandemic continues to occupy airlines and lenders after the slump in travel caused debt to mount. Flag carrier PT Garuda Indonesia also went through a $9.8 billion debt restructuring in 2022.

Garuda took over Sriwijaya’s operations in 2018 to expedite its debt restructuring, but the agreement ended within a year. Sriwijaya owed Garuda about $37 million as of the end of March. 

Covid’s impact on travel piled further pressure on Sriwijaya, as did a crash in January 2021, when all 62 people on board a domestic flight were killed. 

Air travel has recovered fast since Covid restrictions were lifted. Latest figures from the Association of Asia Pacific Airlines show international passenger traffic in the region was up 193% in May from a year earlier.