📒 Quick Take: Garuda Indonesia’s Quicksand
The capital injection from sovereign fund Danantara risks drying up faster than expected.
The erosion of Garuda’s buffer may accelerate due to the oil price jump, weaker rupiah and aircraft maintenance costs.
If both equity and credit are constrained, then the flag carrier will continue being dependent on Danantara or the state to keep it flying.
Garuda Indonesia has landed on quicksand, as the capital injection from sovereign fund Danantara risks drying up faster than expected.
In April last year, I reported that Indonesian officials were discussing a potential equity infusion into the flag carrier via Danantara. I also warned that Garuda was struggling to meet the required aircraft maintenance expenses and had to ground some planes due to a shortage of components.
I wrote on 13 May 2025 that renegotiating Garuda’s costly leases would have been a logical move to reduce its burden, but the airline is likely hamstrung by its local in-court restructuring (PKPU) agreement. PKPU is like a last chance saloon where borrowers have one shot at an in-court restructuring and could be filed into bankruptcy if they re-default.
Given the restructuring fault lines, I noted that the options left for Garuda were to restructure its debt one by one, protect its key units, or start a new company. “All three options are unpalatable for Garuda, so officials might be tempted to throw just enough cash at the problem and pray that it’ll resurface later rather than sooner,” I wrote back then.
Garuda announced in October 2025 that Danantara would inject around USD 1.8 billion into the airline, but this was quietly downsized around a month later to USD 1.4 billion. The use of proceeds also shifted from a fleet expansion towards paying the fuel debt owed by Garuda’s budget unit Citilink to state-owned energy company Pertamina.
Garuda’s 2025 results – which were released last week – showed that the recapitalization improved the airline’s balance sheet, but has not turned around its operations. While Garuda’s equity flipped into positive territory, USD 91.9 million is a relatively thin buffer that could be eroded again without an operational recovery.
This erosion may accelerate because of three factors:
The Iran War has pushed up oil prices and forced some airlines to fly longer routes to avoid the geopolitical minefield.
The weaker rupiah has increased the costs of repairs and maintenance.
Nearly 40% of Garuda’s fleet was reportedly grounded, meaning that the airline has to keep paying for maintenance without being able to fly those planes.
I also wrote on 21 November 2025 that Garuda was handing out stakes in return for support from Danantara and fellow state-owned enterprises. After its capital injection, the sovereign fund has become Garuda’s biggest shareholder with a 91.11% stake, according to the airline’s shareholding composition this month.
The credit world is even tougher because lenders will likely scrutinize Garuda’s cashflow. Net cash provided by operating activities fell to USD 468.38 million in 2025 from USD 585.74 million a year earlier, partly due to a drop in cash receipts from customers and a higher payment of finance cost, according to my review of its results.
Furthermore, Garuda has gone through three major debt restructurings in its history, with the latest deal struck in 2022. If both equity and credit are constrained, then the airline will continue being dependent on Danantara or the state to keep it flying.