(Oct 8): PT Garuda Indonesia is planning to raise more debt and has negotiated longer payment terms with main fuel supplier PT Pertamina, the airline said in an earnings call, as soaring oil and maintenance costs extended losses to a sixth straight quarter.

The flag carrier is looking at tapping banks, among others, to raise funds for working capital, Balagopal Kunduvara, director of finance and risk management at Garuda, said in a Wednesday call with analysts, according to a person who attended and asked not to be identified. It is also considering hedging fuel costs and will use up what remains of the US$1.4 billion (RM5.72 billion) financing it secured last year from sovereign wealth fund Danantara over the next six months for aircraft maintenance.

Representatives from Garuda, Pertamina and Danantara did not respond to requests for comment.

Efforts by the 77-year-old airline to boost its finances come after it reported that it had US$624 million of cash at the end of June against US$1.6 billion of current liabilities, according to its first-half financial statement released last week. 

“For a carrier of Garuda’s scale, the standard global industry benchmark is to maintain 20% to 25% of annual revenues in liquid reserves,” said Harry Su, managing director for research at PT Samuel Sekuritas Indonesia. “Garuda should ideally possess US$720 million to US$900 million in unrestricted cash to withstand potential shocks.”

The airline should secure additional financing within the next three to six months as high fuel costs and its losses would accelerate cash erosion, Su said.

Rescuing Garuda which employs around 10,000 people is important for Indonesia, Southeast Asia’s largest economy. President Prabowo Subianto’s administration transferred the government’s 65% stake in Garuda to Danantara in March last year to help out the airline. The fund’s ownership increased to 91% after the US$1.4 billion injection.

The carrier grounded about 40% of its fleet last year amid funding constraints and rising maintenance expenses and the subsequent surge in fuel prices caused by the Iran war has made its recovery path more costly. 

The airline posted a US$120.7 million loss in the first half even as revenue rose 16% to US$1.8 billion. The loss pushed Garuda’s equity to a deficit of US$52.2 million from a US$44.4 million surplus at the end of 2025.

Garuda is operating 104 planes as of June including for sister carrier Citilink, up from 98 at the end of last year, according to its latest financial statement. It spent US$232 million for aircraft maintenance in the first half of the year, more than triple the amount from a year earlier.

Garuda’s situation highlights the shaky and costly path to recovery, and survival, for the loss-making airline with oil hovering around US$100 a barrel. It’s taken its toll on the airline’s stock which slid to a 16-month low this week and has lost 47% this year. Prabowo has said he hoped Garuda would become profitable next year.

Other airlines are facing similar challenges. Budget carrier AirAsia Group Bhd (KL:AAGB), which reported losses for two straight quarters, has more liabilities than assets. The industry’s biggest casualty so far has been US low-cost carrier Spirit Aviation Holdings Inc which ended operations in May amid soaring fuel prices and the failure of a government bailout.

Uploaded by Chng Shear Lane