An appeal in the French courts by two Avenue Capital Group special purpose vehicles (SPVs) against a subsidiary of Garuda Indonesia (GA, Jakarta Soekarno-Hatta) has failed. The Paris Court of Appeals dismissed a plea from Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446, awarding costs to Garuda, the flag carrier revealed in a February 28 filing to the Indonesian Stock Exchange (IDX).

The court's decision on February 22 was the latest in a line of judicial setbacks for the Greylag entities, which have unsuccessfully contested Garuda's recent restructuring in various jurisdictions. Greylag 1410 and Greylag 1446 are the lessors of two Garuda aircraft, A330-200 PK-GPQ (msn 1410) and A330-300 PK-GPR (msn 1446). The SPVs leased them to Garuda Indonesia Holiday France (Garuda Holidays), which sub-leased them to the mainline carrier.

In January 2020, February 2020, April 2020, and January 2022, the Greylag entities issued notices to Garuda Holidays and Garuda Airlines declaring default events. At that point, per the terms of the lease agreements, the two Indonesian companies became indebted to the SPVs.

In December 2021, the Jakarta Commercial Court allowed Garuda Indonesia to begin PKPU proceedings, akin to the US Chapter 11 process. PKPU allows financially distressed entities to suspend debt payments and restructure the business, including liabilities.

In June 2022, 95.07% of the admitted creditors that carried 97.46% of Garuda's debt voted in favour of a plan that would see USD825 million returned to creditors. The Greylag entities voted against the plan. However, with the overwhelming majority of creditors supporting it, the Jakarta Commercial Court ratified it later that month.

At this point, the Greylag entities embarked on a series of legal challenges to overturn the ruling. They argued that Garuda's administrators had failed to correctly calculate the debt owed to them during the restructuring and excluded some aspects of their claim. They also said the airline had breached the subleases while the PKPU proceedings were ongoing. Since then, Greylag 1410 and 1446 have commenced legal proceedings in the United States, France, Australia, and Indonesia. To date, they have not managed to overturn the June 2022 debt restructuring ratification decision.

Greylag 1410 and 1446 had their initial challenge in the French courts defeated in February 2023. After filing the case the previous year, they persuaded the court to freeze Garuda Holiday's local bank accounts, but when the court handed down its final ruling it lifted the freezing order and ordered the Greylag entities to pay Garuda EUR230,000 euros (USD249,000) in costs. At the time, Garuda Indonesia CEO Irfan Setiaputra called Greylag's legal challenges "unfortunate and contrary to the spirit of synergy between Garuda Indonesia and all of its stakeholders."

The Greylag entities appealed the February 2023 ruling, and it is this that has now failed. The Paris Court of Appeal also ordered the SPVs to pay Garuda another EUR80,000 (USD86,500) in costs. Referring to the Greylag legal challenges, Setiaputra recently told ch-aviation that lessors need to respect the law and legal processes, including bankruptcy and restructuring laws, of the markets they sent aircraft into. Indonesia, he added, has a transparent and well-regulated legal framework.

Travel and tourism merger

In related news, Garuda Indonesia has responded to local speculation that it will merge with state-owned tourism and aviation company Aviasi Wisata Indonesia, doing business as InJourney. In a February 23 IDX filing, Garuda confirmed discussions were underway and that the parties were "exploring different options."

Adding that Garuda viewed the plan positively, the disclosure said that "the various substantive aspects to the proposed inclusion are still in the early stages, which are being studied carefully and continuously together with the Ministry of State Owned Enterprises and other relevant stakeholders. This is aligned with the ministry's goal of strengthening the national air transportation system ecosystem towards an increasingly competitive industry."

InJourney is a holding company for the state's tourism and aviation businesses. These businesses include Angkasa Pura I and Angkasa Pura II, which manage airports in different parts of Indonesia; hotel management operator Hotel Indonesia Natou; Sarinah, a retail and trade business unit; and Taman Wisata Candi Borobudur, Prambanan, and Ratu Boko, which manage theme parks, events, and tourist attractions.

This week, minister of state-owned enterprises, Erick Thohir, told reporters he would like to see the merger close by October 2024, clarifying: "We are proposing that Garuda enter the InJourney ecosystem."