Garuda Defends Its 2018 Financials Amid Regulator Scrutiny

(Bloomberg) -- PT Garuda Indonesia defended the validity of its 2018 finances after a regulator raised questions about how the national carrier accounted for certain transactions, including with a startup technology company.

The airline booked revenue of $211.9 million from PT Mahata Aero Teknologi, its annual report showed. The contribution helped Garuda to report a net income of $809,846 last year compared with a loss in 2017.

“The accounting rule requires us to record the transaction in such a way,” Fuad Rizal, director of finance and risk management, said at a briefing at Jakarta Airport on Wednesday. “Even under an extreme situation where the contract was terminated by Garuda or by Mahata, our rights over the receivables will not go away.”

In exchange for the payment, Mahata gained the rights to provide inflight entertainment, internet connectivity and earn revenue from onboard advertising on Garuda’s flights, Rizal said

His comments come days after Indonesia’s Financial Services Authority, known as OJK, said it will scrutinize some dealings which may affect Garuda’s 2018 financial results. The agency may impose sanctions on the company or its auditor if wrongdoing is uncovered, OJK said.

The stock rose 4.6% on Thursday, taking its gain this year to 38%. Hoesen, an executive at the Financial Services Authority who goes by one name, told reporters on Thursday that the agency is still gathering the data to analyze the financial reports of the carrier and has not reached a conclusion yet.

I Gede Nyoman Yetna, a director at the Indonesia Stock Exchange, didn’t reply to requests for comment.

“Garuda has no risks in this contract and we don’t have to incur any expenses,” Rizal said. “Only Mahata can offer a business concept where Garuda or the airline doesn’t have to incur any expenses to provide airborne internet connection for the customers.”

Garuda Group is Mahata’s only customer, Thomas Widodo, the tech firm’s business development director, told reporters.

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