Garuda Indonesia fails to pay aircraft lease, faces a lawsuit

Kentaro Iemoto / Flickr

Indonesia’s flag carrier, Garuda Indonesia, is facing a lawsuit from an Ireland-based aircraft lessor AerCap. The latest lawsuit came after the cash-strapped air carrier failed to pay aircraft lease due to the setbacks of the ongoing COVID-19 pandemic. 

The aircraft leasing firm based in Ireland, AerCap, filed the insolvency lawsuit against Garuda Indonesia with the Supreme Court of New South Wales in Australia on June 4, 2021, the airline revealed on July 15, 2021. During the ongoing trial, Garuda said it was “in the process of negotiating with AerCap to reach a commercial deal and restructure the contract outside the Court”.

AerCap is not the only lessor that is failing to get payments for aircraft lease from the ailing Jakarta-based air carrier. Aircraft lessor, SMBC Aviation Capital, has also filed a lawsuit to the London Court regarding the payment of aircraft leases “which have not yet been paid by the company”. 

In 2020, Garuda Indonesia chalked up a net loss of $2.5 billion, and continues to suffer losses every month due to the COVID-19 pandemic. Therefore, the airline is seeking to start a restructuring process. In the financial statement for the full year of 2020, the Indonesian airline reported that it was currently waiting for “approval from the authorised agency in the government so that the group could carry out financial and operational restructuring”.

“We have to go through a comprehensive restructuring, a total one,” President Director Irfan Setiaputra said in an address to staff on May 19, 2021, according to a recording heard by Bloomberg earlier in May 2021. “We have 142 aircraft and our preliminary calculation on how we see this recovery has been going, we will operate with a number of aircraft no more than 70.”

Currently, Garuda Indonesia is operating at reduced capacity, 39 aircraft, due to pending payments for its aircraft lessors and the ongoing health crisis, the data shows. Garuda has a fleet of 134 aircraft, which are 9 years old on average. The largest part of the airline’s fleet consists of the Boeing 737 aircraft family: 66 Boeing 737-800s and one Boeing 737 MAX aircraft. Adding to that, Garuda operates 27 Airbus A330s, 18 Bombardier CRJ-1000s, 12 ATR-72s, and 10 Boeing 777-300ER aircraft.


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