Garuda Indonesia (GA, Jakarta Soekarno-Hatta) has secured 90% approval to restructure its sukuk bond obligations, a vital step towards improving its financial position as coronavirus-linked travel restrictions continue, local media reported.

Holders representing more than 90% of the value of the USD498.88 million sukuk, or Islamic bonds, approved to delay payment by three years, CEO Irfan Setiaputra told a virtual news conference on June 5. The debt had been due to mature on June 3.

The company will wait until June 10 for all holders to vote, Setiaputra said. Garuda had offered a bonus fee of up to 1.25% to those voting in favour before June 1.

“We have put forward a proposal that makes sense in this current situation. Hopefully, in three years, conditions will improve, and we can execute our obligations,” Setiaputra said.

As previously reported, the chief executive said one month ago, on May 4, that Garuda had suggested to sukuk holders to consider either a smaller repayment now or a payment extension.

Travel restrictions have cut passenger volumes by 90% at Garuda Indonesia, which posted a profit of USD6.5 million for 2019. Since the crisis took hold, the flag carrier has focussed its business on cargo and charter flights. The company foresees a potential 10% rise in cargo revenue in 2020, having carried 335,764 tonnes last year.

On June 2, Indonesia’s religious affairs minister, Fahcrul Razi, announced the cancellation of the Hajj pilgrimage this year due to the pandemic, an event scheduled to take place between July 28 and August 2. This is another huge blow for Garuda, Setiaputra said, as Hajj trips have accounted for around 10% of the carrier’s annual income.

The company had already prepared the fleet for the trips, he added, readying at least sixteen B777 and A330 widebodies for the Islamic pilgrimage to Mecca, Saudi Arabia.

Garuda currently has seven A330-200s, seventeen A330-300s, three A330-900neo, and ten B777-300(ER)s, according to the ch-aviation fleets advanced module, alongside seventy-three B737-800s, one B737-8, thirteen ATR72-600s, and eighteen CRJ1000ERs.

Setiaputra also stressed during the news conference that the company would continue to look for other solutions to labour issues before approving layoffs, including bringing forward the end of employee contracts.

“Layoffs are a last resort at Garuda. As long as there is a way to save jobs, we will do it. What we are doing is accelerating contracts, which are often termed layoffs but are not,” he said.