Garuda Rescues Indonesia’s Sriwijaya Air Amid Shutdown Fears

 - October 2, 2019, 10:31 AM

Flag carrier Garuda Indonesia and its maintenance arm GMF AeroAsia have stepped in to rescue Sriwijaya Air after mounting debt and concerns over operational standards and safety forced the airline to ground 18 of its 30 Boeing 737s.

Speaking at a press conference on Tuesday, Juliandra Nurtjahjo, president of Garuda’s low-cost unit Citilink Indonesia, confirmed that Garuda and Sriwijaya had come to an agreement over a management partnership dispute, which saw the two sides sever ties on Monday. According to Nurtjahjo, Garuda will resume a partnership with Sriwijaya and its subsidiary, Nam Air, under an agreement forged in November 2018 as a means to improve the operational and financial performance of Sriwijaya and increase the overall market share of Garuda.

Talks between the two parties broke down last month after Sriwijaya ended its existing partnership agreement by dismissing three senior directors seconded from Citilink without prior approval. On September 25, Citilink filed a lawsuit against Sriwijaya and its subsidiary Nam Air on behalf of Garuda, and on September 30, Garuda began removing its logo from Sriwijaya aircraft.

Sriwijaya operations director Fadjar Semiarto and technical director Romdani Ardali Adang also resigned on Monday. Semiarto told local media that Sriwijaya had severed its partnership with GMF AeroAsia after failing to mitigate outstanding arrears. Semiarto also said authorities had issued a so-called red status of 4A concerning a hazard identification and risk assessment, designating Sriwijaya as unsafe.

Garuda decided to restart its five-year operational cooperation agreement after considering passenger safety and the protection of state assets, Nurtjahjo said. Sriwijaya’s acting director, Jefferson Jauwena, welcomed the agreement, stating it would restart the airline’s services “with achievable flight safety.”

Garuda, through its subsidiary Citilink, gained operational and financial control of Sriwijaya last year in an attempt to return the airline to profitability following a deep loss in 2017. The combination gave Garuda and Sriwijaya approximately 45 percent of the domestic market; Lion Air held the rest. At the time of the agreement, Sriwijya had allegedly owed more than $175 million to various companies that included state-owned oil and natural gas corporation Pertamina, Bank Negara Indonesia, and airport operators Angkasa Pura I and Angkasa Pura II. As of June 30, Sriwijaya debt to GMF AeroAsia stood at about $56 million.