Govt Plans Fund to Keep Garuda Flying: Indonesia

At one time Garuda's balance sheet was in the black but with the ever increasing downturn in tourism the Indonesian government is exploring ways to keep the national carrier afloat.

In a Business News report a number of options are still being explored to keep the country's two state owned airlines afloat including using proceeds raised from the securitization of the government's shares in various companies to set up a special bailout fund.

State Minister for State Enterprises Sugiharto said that his ministry was preparing a state-enterprise restructuring fund to bail out national flag-carrier Garuda Indonesia and state-owned Merpati Nusantara Airlines. That's all well and good but you still have to put bums on seats to come anywhere near repaying the monies owed.

Although having huge potential, Garuda and Merpati are currently on the verge of bankruptcy due to their massive debt burdens and poor overall management.

And just how will Sugiharto raise the funds to bail out the national flag-carrier?. His plan is to establish a fund which of course is also intended to help other financially troubled state companies. Fair go here, let's help Garuda first!. Sugiarto explained that the money for the fund could be raised through the securitization of the state's minority shareholdings in a number of private sector and state firms such as in mining company PT Freeport Indonesia, telecommunications firm PT Indosat and state-owned surveyor firm PT Sucofindo.

Asset securitization is a common method of raising funds via the capital markets through the issuing of securities products backed by a pool of assets. He had first suggested the establishment of a special-purpose vehicle to manage Garuda's debts. Under this arrangement the SPV would have taken over US$644 million of the company's total debts of $794 million along with six of its aircraft.

Wait a minute, there's more. In comes Vice President Jusuf Kalla and calmly poured cold water on the two schemes and suggested instead that the airlines be sold to investors in order to reduce the burden on the state.

Obviously embarrassed by this Sugiharto said the government was still discussing the best solution to Garuda's problems, and was putting out feelers to see whether the firm's creditors would be willing to accept debt-for-equity arrangements.

Meanwhile back at the ranch, SBY s far too busy to worry about a national carrier much preferring to open conferences and attend meetings around the country. Will Garuda stay afloat?. Hey, is Superman real.