Indonesia Prepares Garuda Backup Plan if Debt Talks Fall Apart

(Bloomberg) -- Indonesia is preparing a backup plan for flag carrier PT Garuda Indonesia if it fails to reach a deal with creditors, including the option of upgrading air charter PT Pelita Air Service to a scheduled airline.

The course of Garuda’s current talks with creditors hinges on a court decision on a debt petition against the airline, with the ruling set to be announced Thursday, Kartika Wirjoatmodjo, a deputy minister at the State-Owned Enterprises Ministry, said by text message on Tuesday. 

Garuda’s Debt Saga Hangs in Balance as Court Case Nears End

While the government still expects Garuda to be able to reach a settlement with creditors, there needs to be a backup plan in case of a deadlock, Wirjoatmodjo said. Garuda is struggling with about $5 billion of liabilities and needs to halve its fleet to keep the business afloat.

Pelita, a unit of Indonesia’s state energy company PT Pertamina, filed an application this month to upgrade its permit to be able to offer scheduled flights, in addition to chartered ones it currently offers. The new permit would allow Pelita to operate at the same capacity as existing airlines, such as Garuda and PT Lion Mentari Airlines.

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