The Attorney General accused the former CEO of Garuda Indonesia of buying planes at inflated prices. Meanwhile, a commercial court approved the company’s restructuring plans. The government says it has halved the debt and has plans to ensure profitability.
Jakarta () – The former CEO of the flag carrier Garuda Indonesia and one of his business partners have been accused of corruption for alleged irregularities in the acquisition of Bombardier and ATR aircraft. This was announced yesterday by the Indonesian Attorney General’s Office, while a commercial court approved a restructuring plan for the airline company that will lose billions of dollars to creditors.
Emirsyah Satar, CEO of Garuda Indonesia from 2005 to 2014, was sentenced to eight years in prison in 2020 for corruption and money laundering in the purchase of aircraft and engines from Airbus and Rolls-Royce. Together with his partner Soetikno Soedarjo, CEO of the Mugi Rekso Abadi holding company, between 2011 and 2021 he would have bought 23 Bombardier CRJ-100 and ATR 72-600 at inflated prices, causing losses of 8,800 million Indonesian rupiah (about 560 million of euros).
“This huge loss of money is due to rampant corruption at our flag carrier, Garuda Indonesia,” Attorney General Sanitiar Burhanuddin told a news conference.
The US Department of Justice and the UK Serious Fraud Office are also investigating an alleged corruption case related to the sale of jets by Canadian aircraft manufacturer Bombardier to Garuda between 2011 and 2012.
At the same time, the third restructuring of Garuda was approved. The Indonesian government declared today that it had halved the flag carrier’s debt and made significant cuts to ensure the state-owned company’s profitability. The company turned to foreign financial investors and foreign airlines to raise its capital, Kartika Wirjoatmojo, deputy minister for state-owned enterprises, told reporters. Under court supervision, Garuda also renegotiated the terms of aircraft leasing and order contracts.
“Garuda has rarely been profitable, due to low fleet utilization and high rental costs,” the deputy minister said. But “with an efficient fleet, optimized domestic routes and low rental rates, Garuda can make a profit.” However, the company has anticipated that it will face challenges related to rising fuel prices.
By the end of 2021 the commercial court had accepted a creditor’s bankruptcy petition and Garuda had entered a formal restructuring process, but as of last week two creditors continued to oppose the administrators’ proposed restructuring plan.
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