Indonesia bails out Garuda

Indonesia’s parliament has approved a $110m cash injection for Garuda in a deal that would see ownership of some of the troubled flag carrier’s subsidiaries handed to a state-owned holding company for possible disposal.

The Rp1,000bn ($110m) cash injection will go towards operating costs and do little to resolve Garuda’s profitability problems or long-stalled debt restructuring talks with European export credit agencies owed some $800m.

Indonesian officials said they hoped it would send a positive signal to creditors such as the UK’s ECGD and Germany’s Hermes, which guaranteed bank loans to fund Garuda’s 1990s purchase of Airbus aircraft.

Emir Moeis, chairman of the Indonesian parliament’s budget committee, said in return for the bailout the airline would have to hand over several subsidiaries to Indonesia’s state-owned Asset Management Company, or PPA.

The cash will be disbursed in two Rp500bn tranches, he said.

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