With the airline industry proving a challenging and unpredictable market for airlines worldwide, Garuda Indonesia lost more than $2 billion last year. This significant financial hit has raised concerns among auditors, who have questioned the Indonesian flag carrier’s continuity as a business. Let’s take a look at the key facts and figures regarding this loss.
Biggest loss since at least 2005
With the ongoing coronavirus pandemic having brought the world of commercial aviation to a near standstill for much of last year, many airlines suffered heavy losses. Indonesian flag carrier Garuda is one such airline, and Nikkei Asia reports that its losses for 2020 totaled $2.4 billion. The publication explains that this is Garuda’s biggest loss since at least 2005.
It perhaps wouldn’t have been unreasonable to expect Garuda to make a loss last year, even before the global health crisis struck. After all, 2019 also saw it post a net loss, totaling $39.9 million. However, the impacts of COVID-19 amplified the carrier’s struggles, and 2020’s loss clocked in at a staggering 6,170% higher than that of the previous year.
Other key figures include negative equity of $1.9 billion, and a negative cash flow of $96.5 million last year. With group current liabilities exceeding current assets by $3.8 billion, Garuda may find it difficult to meet its short-term financial obligations.
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Auditors not full of confidence
Garuda is working with auditor PwC to manage its finances. This company offered ‘no opinion’ n the Indonesian flag carrier’s 2020 results, which will come as a blow to confidence among shareholders and investors. Assigning ‘no opinion’ typically implies that auditors cannot determine the economic integrity of a given company’s accounts.
PwC has certainly demonstrated a degree of concern when it comes to Garuda’s prospects going forward. The auditor stated earlier this week that the airline is yet to achieve many of the reforms that it had outlined. PwC added that it had been:
“unable to obtain sufficient appropriate audit evidence to support the assumption that the management’s plan is achievable in the necessary time frame to provide a basis for us to issue an audit opinion. Should the Group fail to achieve the above-mentioned management’s plans, it might not be able to continue operating as a going concern.”
Cutting the fleet to save money
Amid its financial difficulties, one way in which Garuda has looked to save money is by making cuts to its fleet. It hopes to operate 66 aircraft by 2022, representing a reduction of around half of its existing fleet. It has already got started with this weight-shedding, by returning two of its Boeing 737-800s to their lessors earlier than planned.
Simple Flying has reached out to Garuda Indonesia for further information regarding its 2020 financial results. We shall add such details upon receiving a response.
What do you make of Garuda’s financial predicament? Have you ever flown with the Indonesian flag carrier? Let us know your thoughts and experiences in the comments.