Indonesian airline, Garuda Indonesia (GI), is forced to terminate 700 employees by 1 November. (Image via Bisnis.com)

Garuda Indonesia terminates 700 employees due to COVID-19

Starting 1 November, Indonesia-owned airline, PT Garuda Indonesia (GI) (Persero) Tbk, decided to terminate 700 employees, having been laid off with unpaid leave since last May. Speaking on Tuesday, the General Director of GI, Irfan Setiaputra, said that the early work termination was determined due to the GI's financial ability.

In order to keep the airline running, GI was forced to make the harsh decision as one of the countermeasures since the novel coronavirus disease (COVID-19) entered Indonesia in March and disrupted its flight and tourism industry.  Irfan assured that GI will fulfill its employees' rights according to the regulations, including early payment as the company's obligation to the remaining period of employees' contract.

Since the beginning, Irfan claimed that employees' interest has been GI's foremost priority. However, when other airlines started terminating their employees, GI kept struggling to seek other strategic measures in a balancing act to improve their performance for the sake of their employees' interest and the company's business sustainability. However, unfortunately, Irfan said that the decision has been made as the condition remains uncertain.

To mitigate the financial issue, the Indonesian government will roll out an Rp8.5 trillion bailout in December 2020. Irfan proposed that the bailout will take the form of a Mandatory Convertible Bond (MCB). Not wanting to take it easy, Irfan pointed out that MCB should have a 3-year tenor until 2023 in order to give GI's management a chance to do a fundamental revamp. GI has already laid out three payment mechanism for the MCB:

1. GI will pay the MCB;

2. With the assumption that the GI's condition has improved, the company will apply for a foreign loan to pay the due MCB; and

3. The MCB could be converted to capital in order to give the minority stakeholders an opportunity to participate.

Source: https://bit.ly/3jvR1TT