JAKARTA: National flag carrier Garuda Indonesia is aiming for cost efficiencies of 17 percent from its hedging partnership with four private lenders, namely Bank Internasional Indonesia (BII) Maybank, Bank Mega, ANZ Indonesia and Standard Chartered Bank Indonesia, as well as its previous hedging agreement with state lender Bank Negara Indonesia (BNI), a senior official has said.
“The cost efficiency could account for between 15 and 17 percent and this partnership is in order to anticipate currency uncertainties,” Garuda Indonesia president director Arif Wibowo said as quoted by Antara after the signing of the hedging partnership agreement in Jakarta on Tuesday.
He said the hedging partnership was conducted via a ‘cross currency swap’ mechanism worth Rp 1 trillion (US$77 million), comprising Rp 300 billion with Bank Mega, BII Rp 400 billion, ANZ Rp 150 billion and Standard Chartered Rp 150 billion.
“This is the second phase of the recovery of Garuda’s position in 2015 because the challenges it is facing are not only from exchange rate fluctuations but also in economic growth,” said Arif.
He added that the partnership was part of a quick-win strategy Garuda Indonesia was working on to boost its revenue, currently up by 12 percent.
“We will focus on our work to ensure that our revenue generation can run well as we want to conduct refinancing and cost restructuring. This will not happen unless our revenue generator can perform well,” said Arif.
Under the partnership, the rupiah exchange rate is set at around Rp 13,000 per US dollar and the oil price of 75 US cents per liter.
Under the agreement, Arif said, the four banks would pay out the obligations of Garuda Indonesia as the issuer of rupiah-denominated bonds to bondholders effective as of April 5 this year. Garuda would then pay all of its obligations to the four banks in US dollars on July 5, 2018.
