💼 Brief Take: Asian Airlines’ Survival of the Most Liquid
Survival depends on which airlines can stretch their liquidity the longest.
For state-owned airlines, their survival is linked to how deep their sovereign backers’ pockets are.
Garuda Indonesia’s leases are an albatross around the Indonesian flag carrier’s neck.
Asian airlines are shifting their focus from capacity growth to liquidity preservation as the oil shock weighs heavily on industry margins, The Business Times reported on 8 April 2026, citing Thai Airways CEO Chai Eamsiri. “Cash is king,” he said.
Eveline’s Take
Airlines around the world are in a survival-of-the-fittest mode, defined as who can stretch their liquidity the longest. “Most of the airline CEOs are not able to sleep,” Nasaruddin Bakar, President and Group CEO of Malaysia Aviation Group, reportedly said.
For state-owned airlines, their survival is also linked to how deep their sovereign backers’ pockets are. China is considering financial relief and other measures for its struggling state-run airlines, in what could be the industry’s biggest lifeline since the Covid pandemic, Bloomberg reported on 9 April, citing people familiar with the matter.
In Indonesia, President Prabowo Subianto ordered Garuda Indonesia to explore a joint venture with Saudi Arabia’s flag carrier to increase the flight efficiency for Muslim pilgrimages. I wrote on 8 April that while the president’s suggestion may make sense on paper, any traction depends on whether the Middle East nation would seriously consider it.
I also noted that Garuda will likely try to avoid a major increase in pilgrimage fares given the political sensitivity in Indonesia, which has the world’s largest Muslim population. The next day, Bernama reported that Indonesia aims to reduce Hajj costs by about IDR 2 million (USD 117) per pilgrim, without specifying how this will be achieved.
Garuda’s cash and equivalents more than quadrupled to USD 943.4 million as of end-2025 from a year earlier, thanks to the capital injection from sovereign fund Danantara, according to its latest results. However, I wrote on 26 March that the erosion of the flag carrier’s buffer may accelerate because of the oil spike and its perpetual lease burden.
Nearly 40% of Garuda’s fleet was reportedly grounded, yet the airline has to continue paying for rent and maintenance without being able to earn any money from those planes. Furthermore, the costs for repairs and maintenance have jumped because of the weakening rupiah, which sank to a record low against the dollar earlier this week.
Why are the leases such an albatross around Garuda’s neck?
Some of the leases are long-term agreements struck by Garuda’s past managements and breaking them may trigger significant claims or penalties.
The leasing industry is a tight-knit circle where an airline that defaults on its lease may get a bad reputation and struggle to find new lessors in future.
An accounting rule that kicked in from 2020 required Garuda to bring aircraft leases onto its stretched balance sheet.
I also wrote in April last year that the difficulty level for a new round of debt restructuring has increased as Garuda already went through three major restructurings and was running out of carrots to offer creditors. Garuda’s latest deal was a local in-court restructuring (PKPU) in 2022 and the airline risks being filed into bankruptcy if it breaches this agreement.
It remains to be seen whether Garuda would pursue a fourth restructuring given the challenges that I highlighted. I had outlined on 29 April 2025 the potential route and considerations (see below), but the problem is the carrier has an even weaker negotiating position now.
Still, whoever can crack the Garuda puzzle may have their place in the hall of fame.
📒 Quick Take: Lining Up the Garuducks
29 April 2025
The potential gameplan for Indonesian flag airline Garuda to get the buy-in from stakeholders and avoid bankruptcy.
It’s going to be a tough play, but it could be one for the history books.
Any restructuring or turnaround involves getting the buy-in from stakeholders and finding a solution that most of them can live with, but Garuda Indonesia’s case will likely raise the difficulty level to new heights.
To recap my previous takes, these are the parameters:
Garuda went through three restructurings, with the latest being a local in-court restructuring (PKPU) in 2022. A creditor can file Garuda into bankruptcy if the Indonesian flag airline defaults on its PKPU agreement.
Aircraft maintenance and repairs have been a bugbear for Garuda, which was saddled with expensive leases as a legacy of its past managements. The carrier must also service its restructured debt including bonds and bank loans.
Liquidating Garuda and starting afresh might be the easiest path, but this is unlikely to happen under President Prabowo Subianto, who has been championing his “Golden Indonesia” vision to his voters.
Now that we’ve established the rules of the game, let’s look at the potential gameplan.
The biggest problem for Garuda is that it already took the PKPU route, which means that it would be left exposed in Indonesia if it misses any payment or breaches any term under its 2022 agreement.
The bankruptcy of Indonesian shipping company Arpeni Pratama Ocean Line in the hands of Bank CIMB Niaga in 2019 underscores that a single dissenting creditor can nuke a post-PKPU deal that relies on an out-of-court amendment provision.
I wrote last week that Garuda is running short of carrots to offer its creditors given that it had already deployed an initial public offering (IPO) and a capital injection from the Indonesian government to get its previous restructurings across the line.
The best option now is therefore a partnership with a strategic investor who can bring in fresh capital and the expertise to expand into new markets, while giving Garuda the latitude to work on a fourth restructuring.
The joint venture-restructuring combo will probably be an easier pitch in Indonesia, which has the world’s largest Muslim population, if the partner is a Middle Eastern airline such as Emirates, Qatar Airways or Etihad Airways. These airlines are also likely to be existing clients of Garuda’s lessors, which may help in negotiations.
“With the rejuvenated entity, further negotiations can be entered into with its creditors and lessors to restructure each of its outstanding debts and liabilities,” said a lawyer friend with cross-border restructuring experience. In short, Garuda may have to pursue bilateral or one-on-one restructurings to avoid Arpeni’s fate.
Garuda will have to shore up its defense in case a creditor tries to push it into bankruptcy in Indonesia. A Chapter 11 filing in the US can provide a wide-reaching shield for Garuda, but it’s typically very expensive.
A more feasible option might be a Singapore proceeding, considering that the Singapore International Commercial Court (SICC) already recognized Garuda’s PKPU deal last year and the city-state has been trying to promote itself as a regional restructuring hub.
Garuda can potentially apply for a Singapore moratorium by showing that it has a “proposed plan in place” with the support of major creditors, but “the Court would keep a tight leash,” according to a Singapore-based lawyer friend. It’s also possible to get a Singapore moratorium recognized in Indonesia, as Indonesian textile company Pan Brothers’ court victory over one of its lenders, Bank Maybank Indonesia, has shown.
However, there’s a caveat. While most offshore lessors, banks and bondholders would comply with a Singapore court order because of their international presence, the local creditors are a wild card. Garuda’s Indonesian lawyers will therefore have to be the goalkeeper and fend off any bankruptcy petition on the airline’s home ground.
It’s going to be a tough play, but it could be one for the history books.
Acrostics Asia Coverage
Acrostics Asia is an independent Asia credit intelligence provider that takes end-to-end ownership of its signals – from origination to production and distribution.