Citing plunging flight numbers and passenger demand, Garuda Indonesia has announced a US$712.73 million loss in the first half of 2020. It is a sharp turnaround from the same time last year when the Indonesian airline posted a profit of $24 million.

If you think $712 million sounds a lot, it is over 10 trillion in the local Indonesian rupiah currency. Ouch.

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The pandemic impacts passenger numbers and drives down revenue

Garuda Indonesia president, Irfan Setiaputra, told The Jakarta Post.

"The COVID-19 pandemic has had a severe impact on the company’s performance as our daily flight frequency has been reduced from around 400 to 100 flights. In addition, the number of passengers has also plummeted by around 90 percent."

On the back of this, Garuda Indonesia's revenue in the first half of 2020 was down 58.2% to $917 million. But expenses were also down across the same period to $1.6 billion.

In July, the Indonesian Government approved a $583 million financial aid package for Garuda Indonesia. This was in the form of a mandatory convertible bond.

But don't call the deal a bailout. As a publicly listed company, Garuda Indonesia is not eligible for state aid in the form of direct cash. Instead, a state-owned infrastructure financing company will buy the bonds. Those bonds will convert into stock in three years.

At the time, Garuda Indonesia said it was in desperate need of cash and it followed a $120 million loss in the first quarter of 2020.

Garuda Indonesia moves to slash outgoings

While Garuda Indonesia was busy tieing up its financial aid package from the Indonesian Government, it was also working hard to reduce outgoings and expenses.

Approximately $500 million worth of global Islamic bonds were originally due in June. The maturation date is now 2023. Also, Garuda Indonesia began talking to Airbus to delay the delivery of four A330 aircraft due this year.

Garuda Indonesia has nine A330neos coming over the next few years. Its low-cost offshoot, Citilink, also has 25 A320neos due.

"We are negotiating to delay that,” Irfan Setiaputra told an Indonesian parliamentary hearing in July.

Garuda Indonesia has 142 aircraft in its fleet, ranging from Boeing 777s to ATR 72s. The majority are leased, and around half the fleet appears to be parked. This is an improvement on the May 2020 figure of 70%.

Negotiations ongoing with aircraft lessors

In addition to pushing back aircraft deliveries, Garuda Indonesia is running the ruler over its leasing deals. All up, 31 lessors have planes at Garuda Indonesia. Variously, the airline wants to either seek lower prices, extend the lease periods, or cancel leases altogether.

Around a dozen lessors are reported to have come to the party. Negotiations with a further dozen are continuing, and the remainder have declined to renegotiate the original deals.

“Today, there are a number of lessors who grounded our planes because of our incapability to make payments,” Mr Setiaputra told the parliamentary hearing.

“The company has taken strategic financial steps by renegotiating airplane leasing costs, loan restructuring and increasing cost efficiency to align between the supply and demand trends during the pandemic,”

Garuda Indonesia is reporting slow but steady improvements in demand and loads. It remains heavily dependant on cargo and repatriation flights. Irfan Setiaputra is pinning his hopes on passenger numbers returning to normal to stabilize the airline's finances. That may take longer than he hopes.