Indonesia’s State-Owned Airlines Garuda and Pelita Air Consider Merger with Citilink for Cost Efficiencies

Indonesia’s Minister of State-Owned Enterprises, Erick Thohir, has proposed the merger of state-owned airlines PT Garuda Indonesia Tbk and PT Pelita Air Service, commonly known as Garuda Indonesia and Pelita Air, along with Garuda’s low-cost subsidiary, Citilink. The objective of this potential merger is to achieve fleet efficiencies and offer more affordable airfares while reducing logistics costs in the aviation sector.

Minister Thohir cited the success of an efficiency program at state-owned port and logistics operator PT Pelabuhan Indonesia as an inspiration for the aviation sector’s restructuring. The merger aims to consolidate resources and streamline operations within the state-owned airline entities, ultimately enhancing their competitiveness.

Dendy Kurniawan, President Director of Pelita Air, welcomed the proposal, emphasizing that it is still in the planning stage. Pelita Air is owned by PT Pertamina, Indonesia’s state-owned oil and natural gas corporation. The airline operates a fleet of 13 aircraft and expanded its services to include scheduled passenger flights in 2022.

Dewa Kadek, CEO of PT Citilink Indonesia, also expressed support for the merger, highlighting the potential efficiency benefits, particularly for Pelita, among the three carriers. Irfan Setiaputra, CEO of Garuda Indonesia and Garuda Indonesia Group, cautiously supported the minister’s plan, acknowledging that discussions about the merger are ongoing and in the early stages.

The Garuda Indonesia Group currently operates a fleet of 127 aircraft, including 69 at Garuda Indonesia and 58 at Citilink. Setiaputra previously indicated that Citilink would play a more prominent role within the Garuda Group following its restructuring, while the legacy carrier focused on consolidation and network optimization.

In a separate development, an attempt by Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446 Designated Activity Company to force a judicial review of Garuda Indonesia’s restructuring has been dismissed by the Central Jakarta District Court. These entities, controlled by Avenue Capital Group, resisted the restructuring efforts, which involved creditors, including lessors, accepting reduced payments as part of Garuda’s debt reduction process, totaling USD 9 billion. The court ruled that there is no legal remedy against an appellate court’s decision in connection with a court-supervised restructuring process, leading to the dismissal of the application by the Greylag entities.