Garuda Indonesia to Return Bombardier Planes After Ending Lease

Indonesia’s flag carrier PT Garuda Indonesia said it unilaterally ended a Bombardier leasing contract with Nordic Aviation Capital A/S and will return a dozen CRJ jets amid an ongoing bribery probe.

The airline terminated the contract on Feb. 1 after a series of negotiations on price with Nordic Aviation yielded no satisfactory results, according to President Director Irfan Setiaputra. The 12 planes under the contract, which is originally set to mature in 2027, are currently grounded at the Soekarno-Hatta International Airport, Setiaputra said in a virtual press briefing on Wednesday.

Garuda is also negotiating with Export Development Canada on an early settlement for the lease of six other Bombardier planes, whose contract will end in 2024. It cited the ongoing bribery probe against Bombadier Inc. and efficiency measures during the pandemic as reasons for terminating the deal.

The U.K.’s Serious Fraud Office is investigating Bombardier’s dealings with the Indonesian airline over “suspected bribery and corruption” in Garuda’s order for Bombardier CRJ 1000 regional jets. Indonesia’s anti-corruption agency in 2019 detained Garuda’s former head as part of a probe into aircraft procurements.

“We are still waiting for the results of SFO’s probe, but that is also one of the reasons we use to convince Nordic Aviation that this was not an emotional decision. This is a commercial decision and it has a legal foundation,” Setiaputra said. The airline could cut losses and save around $220 million by ending the use of the 12 planes, he said.

Garuda has no plans to purchase new aircraft and will use its existing Boeing 737-800 fleet to serve the routes previously catered by the CRJ jets, said Setiaputra.

©2021 Bloomberg L.P.

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