Garuda Expects to Receive IDR 20T Capital Injection From Indo Government Likely in Form of Assets to Flip Equity Positive

Indonesian flag carrier PT Garuda Indonesia Tbk is slated to receive an around IDR 20 trillion ($1.186 billion) capital injection from the Indonesian government, said two sources familiar with the matter. The injection is most likely to be in the form of assets, said the two sources and a third source familiar.

The injection will help to turn Garuda’s negative equity to positive, said one of the first two sources and the third source, who did not specify the timeframe for the injection.

Garuda reported $1.35 billion negative equity as of Dec. 31, versus negative $1.41 billion as of Sept. 30.

The government transferred on March 22 its entire 64.54% stake in the carrier to PT Biro Klasifikasi Indonesia, an operational holding company under Indonesia’s newly established sovereign wealth fund Daya Anagata Nusantara, or Danantara. The move was viewed positively by investors given the anticipated implied financial support for Garuda as it expands its fleet.

Garuda’s new CEO, Wamildan Tsani, had been tasked by Indonesian President Prabowo Subianto to re-expand the airline. It completed a court-supervised debt restructuring, or PKPU, in 2022, which covered a total of IDR 104.37 trillion ($6.19 billion) debt.

Garuda said in its March 25 released full-year 2024 earnings statement that it plans to operate 186 aircraft by 2026, up from the 96 aircraft as of October 2024 the company disclosed in a November 2024 earnings presentation.

The Indonesian government had a history of providing financial support to the airline.

In February 2021, the government provided IDR 1 trillion to Garuda through mandatory convertible bonds, or MCBs, though the amount fell short of the original plan of IDR 8.5 trillion as the airline was unable to meet the requirements to draw the full amount.

In December 2022, the government provided another IDR 7.5 trillion through a rights issue as part of the airline’s PKPU agreement.

Garuda did not respond to a request for comments.