GARUDA Indonesia Group is known to be still trying to negotiate with foreign lessors related to aircraft leasing and hopes to produce an agreement that will benefit both parties.

Previously there were concerns from the national airline industry that foreign lessors would make legal remedies their final solution if no agreement was reached regarding payment of aircraft leases. Moreover, since the COVID-19 pandemic, global aviation performance has dropped and has an impact on revenue.

According to Garuda Indonesia VP Corporate Secretary Mitra Piranti said that until now the negotiation process was still ongoing with the lessors. So far the negotiations went well. Negotiations with several lessors have reached agreement and for some other lessors in the finalization process.

“Communication and negotiations, he explained, are still ongoing up to now. Garuda hopes that it will be able to obtain mutually beneficial agreements for both parties,” Mitra said.

She added, the total rental costs deposited by the state-owned airline to the lessor each month were around US $ 70 million or equivalent to IDR1.02 trillion (exchange rate of IDR14,600). The total aircraft chartered by Garuda, namely 155 aircraft from 26 leasing companies including Boeing-777, Boeing-737, CRJ-1000 and ATR-72 aircraft.

Garuda Indonesia has also taken strategic steps in terms of managing costs by negotiating aircraft rental costs, debt restructuring, and implementing efficiency across all operational lines. The aim is to resolve trends in supply and demand during the pandemic.

Based on unaudited financial statements for the first half of 2020, GIAA posted a decrease in operating income of 58.18 percent year on year (yoy) to US$917.28 million as of 30 June 2020. The red plate airline posted a loss attributable to the owners of the parent entity US$712.73 million or equivalent to IDR10.19 trillion in semester I/2020.

Previously, the Indonesia National Air Carriers Association (INACA) hoped that the government would also provide support to national scheduled airlines related to the risk of legal efforts taken by foreign aircraft lessors due to reduced flight activity.

According to Chairperson of the Indonesian National Air Carriers Association (INACA) Denon B. Prawiraatmadja said flight activities had plummeted since the COVID-19 pandemic was announced by President Joko Widodo in March 2020. The same conditions were experienced by the aviation sector throughout the world.

“Automatically, flight activities will decline and planes [rental] will not be productive. As a result, several foreign lessor companies will fail to claim,” said Denon.

He added that this would impact on the financial performance of foreign lessors. The association is concerned that foreign lessors will pursue legal remedies related to the obligation to pay aircraft leases from national airlines. [ special]