The CEO of Garuda Indonesia (GA, Jakarta Soekarno-Hatta) has told an Indonesian House of Representatives hearing that the Ministry of State-Owned Enterprises (SOE) is going ahead with plans to merge Garuda and Pelita Air (IP, Jakarta Soekarno-Hatta) into the state-owned tourism holding company PT Aviasi Pariwisata Indonesia, better known as InJourney. However, this will only happen once Garuda's equity turns positive.

“There was consideration that Garuda should join InJourney once its equity becomes positive to avoid burdening InJourney," Irfan Setiaputra told the July 3 hearing in Jakarta. “Discussions are ongoing regarding the merger’s model, timing, and how Garuda will be integrated into InJourney."

Plans to integrate Garuda into InJourney are not new. But Garuda's financial problems have prevented this from happening. Garuda entered into the local equivalent of Chapter 11, the Debt Payment Obligation Postponement (Penundaan Kewajiban Pembayaran Utang - PKPU) process, in late 2021 with debts of around USD9.8 billion. Roughly twelve months later, the state-owned airline exited the PKPU process, having reached an agreement with creditors to cut its debts to about USD5.1 billion and undertaken a restructuring of the fleet, network, and operations.

However, Garuda's latest financial results show it is still in negative equity territory. As of March 31, 2024, negative equity stood at USD1.33 billion, slightly higher than the USD1.24 billion on March 31, 2023. However, the airline is optimistic about resolving this, with revenues up 40% in the 2023 fiscal year, while costs only rose 4%.

Meanwhile, Singapore's Competition and Consumer Commission has conditionally approved a commercial joint venture agreement between Garuda and Singapore Airlines (SQ, Singapore Changi), which among other things will allow for revenue-sharing arrangements for flights between Indonesia and Singapore and offer reciprocal benefits for frequent flyer members. The two airlines have agreed to maintain seat capacity on an aggregated basis on the Singapore-Jakarta and Singapore-Surabaya city pairs at the levels that existed prior to the joint venture proposal, appoint an independent auditor to monitor compliance, and report that compliance to the CCCS on an annual basis. The approval is contingent on the airline abiding by the conditions.

"We are very pleased to receive this approval," said Setiaputra. "Having regulatory approval as the first step in a commercial agreement will provide more opportunity for developing well-executed strategic ideas."