Climbing debt a drag on Indonesian airline

JAKARTA - Indonesia may sell up to 49 per cent of its national airline PT Garuda to strategic investors as it struggles to deal with mounting debt, according to the Jakarta Post.

"Many investors are willing to put their money into Garuda. There is no reason for us not to let them join the airline. But the Government will remain in control with 51 per cent ownership," State Enterprises Minister Sugiharto was quoted as saying. He did not give a timeframe for the stake sale.

The wholly-owned state firm said last month it would not be able to repay about US$55 million ($80 million) in principal debt due at the end of last year, but would continue to pay interest on its debts and make required payments to aircraft lessors.

Garuda's president director, Emirsyah Satar, has said negative factors such as a weakening rupiah, higher oil prices, competition and security issues, including the Bali bombings in October, have made it harder for the company to service its debt.

Its total debt was US$826.5 million ($1.2 billion), with more than 60 per cent owed to the European Credit Agency.

Indonesia's privatisation programme has moved in fits and starts. Some Government officials and politicians, as well as private critics, have said privatisations have often been at fire-sale levels.

- REUTERS