National flag-carrier Garuda Indonesia on Tuesday secured US$100 million (S$137 million) in loans through a sharia financing agreement with private lender Bank Internasional Indonesia (BII), which is part of Malaysia's Maybank.
Garuda Indonesia president director Arif Wibowo said Tuesday the loan, which comes with a one-year maturity period, would be used partly to refinance the airline's maturing debt this year, which has reached some $300 million.
"This process is usual in any business. This means our company wins the trust of financial institutions," Arif said.
"This agreement will give added value to Garuda in line with our Quick Wins programme to support the company's expansion in the future," he continued.
Among the firm's Quick Wins programs are improving revenue-generating strategies by closing unprofitable routes and opening several new routes. The firm will also restructure its cost drivers to increase efficiency and re-profile its debts.
I Gusti Ngurah "Ari" Askhara Danadiputra, Garuda's chief financial officer and risk management head, said the bridging loan aimed to support the company's future financial plan, adding that the country was waiting for the right time to issue global sukuk.
The firm plans to raise $500 million from the bond issuance, some of which will be used to refinance its debt, with the rest used for general purposes, including capital expenditure.
At the end of last year, the company's liabilities amounted to $2.18 billion; $1.21 billion in short-term liabilities and $964.73 million in long-term liabilities. Garuda's total liabilities increased 17.2 per cent in 2014 compared to 2013, when they stood at $1.86 billion.
As reported earlier, the flag carrier recorded a $373 million net loss in 2014 - a significant dip from the $11.2 million net profit in 2013 - as foreign exchange losses and rising costs cut into revenues.
The airline, however, recorded a positive financial performance in the first two months of 2015, with the company posting a February profit of $1.2 million compared to $77.4 million in losses in February 2014 as passenger numbers spiked by 10.8 per cent to 1.72 million during the month.
In January, passenger growth reached 15.1 per cent year-on-year to 1.87 million. However, Garuda booked a $2.8 million loss in the first month of 2015.
Arif said the airline would focus on expansion into China this year by opening new routes to 10 cities, with a target of 800,000 passengers from the world's second-largest economy.
In addition to opening the new routes in Chengdu, Chong Qin, Ningbo, Harbin, Xian, Shenyang, Wuhan and Chengzhou, the airline also plans to increase the frequency of flights between Shanghai and Denpasar.
"The government is aiming to welcome 2 million passengers from China this year. With the plan to waive visa requirement, I believe that the number of passengers from China can reach 1 million this year, which is a good contribution for the government as well," Arif said.