Just as Central Jakarta District Court rejected My Indo Airlines’ attempt to forcibly restructure the debts of Garuda Indonesia (GA, Jakarta Soekarno-Hatta), the embattled flag carrier has again been sued, at the same court, this time by an IT services provider.

The aggrieved contractor, Mitra Buana Koorporindo, filed the Debt Payment Obligation Postponement (Penundaan Kewajiban Pembayaran Utang - PKPU) proposal - through which creditors can seek settlement while avoiding bankruptcy, similar to US Chapter 11 proceedings - on October 22, the court revealed on October 24.

Although the court provided no further details, the business magazine Kontan reported that the latest PKPU application related to an alleged debt of IDR4.78 billion Indonesian rupiahs (USD338,000). Mitra Buana Koorporindo had also been mentioned in the earlier application to the court of My Indo Airlines along with seven other creditors. The cargo specialist’s claim had been reported as being around USD700,539.

“We are still awaiting official notification from the court,” Garuda Indonesia CEO Irfan Setiaputra told reporters. “For now, Garuda will continue to focus on efforts to restructure its business and operating obligations.”

The airline’s negotiations with creditors, aircraft lessors, and sukuk bondholders have been tough, Kartika Wirjoatmodjo, chief executive of the state-owned Bank Mandiri and deputy minister for state-owned enterprises, told the news agency Antara. Bank Mandiri is also a Garuda creditor. If no paths forward can be found, the finances of the state-owned carrier cannot be saved, he admitted.

While the government still expects Garuda to reach a settlement with creditors, it has prepared contingency measures, he added, including liquidation and replacement by state-owned charter specialist Pelita Air (IP, Jakarta Soekarno-Hatta).

“If we meet a dead-end we will close it down, because injecting more state money is impossible given the company’s massive debt loads,” he said.

Garuda is currently negotiating with dozens of lessors as it struggles to restructure its debts. Even if its finances can be stabilised, it is almost certain that the company will no longer be able to serve long-haul routes in the future due to an inevitable fleet downsizing, Kartika said.

According to Garuda’s most recent financial statements, it had a debt of IDR70 trillion (USD4.9 billion) as of June 30, a pile that has been rising by IDR1 trillion (USD70 million) a month due to delays in loan repayments, according to the newspaper Kompas. Politicians are increasingly calling for its insolvency.

Evita Nursanty of the Indonesian Democratic Party of Struggle, the party of current President Joko Widodo, said in a written statement on October 23 that she supported the Ministry of State-Owned Enterprises’ proposal to shut down Garuda Indonesia if negotiations fail and replace it with Pelita Air. Pelita, a unit of Indonesian energy giant Pertamina, filed an application this month to upgrade its permit to also offer scheduled flights and operate at the same capacity as existing airlines.