MIAMI – Garuda Indonesia (GA) has reported a mammoth net loss of US$2.4bn in 2020. As a result, the auditor of the airline seems to raise doubt on the continuity of the flag carrier.
According to asia.nikkei.com, the amount was revealed in a presentation by GA CEO Irfan Setiaputra to MPs at a parliamentary session on Monday. Garuda has yet to officially report full-year statistics for 2020, but a US$2.4bn net loss would represent its biggest since 2005, the oldest available data on Quick-Factset.
The coronavirus pandemic has hit the airline’s finances so hard that trading of the airline’s shares had to be halted since June 18 due to a bond default of US$500m.
Some weeks ago, Setiaputra stated that the airline’s total debt was Rp70tn (US$4.9bn). The severity of the situation called for a meeting with the Ministry of State-Owned Enterprises, which put forward some potential resolutions including injections of the state capital, privatization, or bankruptcy proceedings while the company restructures some of its debt.
To put things in perspective, airline sales are currently down 68% and the group liabilities shadow its assets by a whopping US$3.8bn. In 2020, the airline’s expenses were more than it made producing a negative on their balance tab.
Insufficient Evidence Moving forward
Garuda’s auditor PwC assigned a “no opinion” on the airline’s financial results, which is given when an auditor cannot judge whether a company’s accounts have been properly created.
The airline was supposed to receive a rescue package of Rp8.5tn (US$586m) from the Indonesian government in 2020, but the package was not received as the airline failed to meet some requirements put forward and just managed to secure a tiny sum of Rp1tn.
Garuda’s auditor PwC said it was “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.”
It added, “Should the Group fail to achieve the above-mentioned management’s plans, it might not be able to continue operating as a going concern.”
Featured image: Garuda Indonesia PK-GID Boeing 777-300(ER). Photo: Roland Rimoczi/Airways