Garuda Misses Pilgrim Windfall With Ban on Flights to Holy Mecca

(Bloomberg) --

Indonesia’s decision to suspend travel to Mecca in Saudi Arabia for this year’s Hajj pilgrimage is another blow to flag carrier PT Garuda Indonesia, already struggling from a slump in travel due to the coronavirus.

The Hajj is an important revenue generator for Garuda as pilgrims from Indonesia, which has the largest Muslim population in the world, travel in large numbers to the Islamic holy city. Indonesia’s Religious Affairs Minister Fachrul Razi said in a televised address Tuesday that travel to Saudi Arabia won’t be allowed due to health concerns. More than 220,000 Indonesians were expected to make the trip this year, according to the government.

Garuda President Director Irfan Setiaputra said the carrier will try to make up some of the shortfall through operations such as charter and cargo flights. The airline already said in April that first-quarter operating revenue could slide 33%, while warning of a worse scenario if Hajj flights were scrapped.

With much of its fleet grounded by the pandemic, Garuda has cut staff salaries and is seeking an extension for paying its $500 million sukuk maturing on June 3. The government, which owns 61% of the airline, also plans to provide it with 8.5 trillion rupiah ($590 million) in aid.

Shortly after the Hajj announcement, Indonesia’s statistics agency reported a nearly 90% year-on-year slump in foreign tourist arrivals in April, and a 45% drop for the first four months of 2020.

Indonesian Hajj pilgrims were due to travel between June 26 and Sept. 5, according to the Religious Affairs Ministry’s schedule. Indonesia has nearly 27,000 confirmed coronavirus cases and over 1,600 deaths, while Saudi Arabia has reported more than 87,000 infections and 525 deaths.

©2020 Bloomberg L.P.