JAKARTA, Indonesia — Garuda Indonesia reported a $2.4 billion financial deficit in 2020, prompting questions about the airline’s long-term viability in the Southeast Asian country. Garuda’s net loss is the company’s largest since at least 2005, according to Quick-Factset data, and it’s a massive increase from the $38.9 million loss it reported the previous year. The data, which were released to the Indonesian Stock Exchange late Friday, emphasize the company’s terrible predicament even further. Sales were down 68 percent year over year, and group current liabilities are $3.8 billion more than current assets, suggesting a major issue for Garuda in meeting its short-term financial obligations. It also had $1.9 billion in negative equity, which means that total liabilities exceeded all assets. It also had a negative cash flow of $96.5 million in 2020, indicating that it spent more money than it earned. In a second setback, Garuda’s auditor, PwC, issued a “no opinion” on the financial figures, indicating that an auditor is unable to determine if a company’s accounts have been correctly generated, further eroding investor trust in the carrier. Garuda shares have been off the market since June 18, after the business missed $500 million in coupon payments on an Islamic bond. PwC said in its auditor’s report that Garuda’s circumstances, including its problematic finances, “indicate the existence of material uncertainties that may cast significant doubt about the Group’s ability to continue as a going concern,” justifying its decision not to give an opinion on the financial report. Garuda noted in its financial statement that as part of its restructuring efforts, it is negotiating with creditors for a reduction in debt payments, rationalizing employee headcount, and requesting that the government disburse remaining rescue monies intended for the firm but not yet disbursed. Last year, Garuda and the government agreed on a rescue package of 8.5 trillion rupiah ($586 million), but the carrier only received 1 trillion rupiah due to failing to achieve certain performance requirements. According to PwC, most of Garuda’s improvements had not been implemented as of Friday. “Management’s ability to implement [the reform measures] is critical in supporting management’s assessment that preparing the Group’s consolidated financial statements on a going concern basis is appropriate,” the auditor stated. PwC claimed it was “unable to gather sufficient acceptable audit evidence to support the premise that the management’s strategy is attainable in the necessary time frame to provide a foundation for us to deliver an audit opinion” as a result of Garuda’s inability to implement the measures. “Should the Group fail to accomplish the above-mentioned management’s intentions, it may not be able to continue operating as a going concern,” the statement continued./n
Read More
