Garuda Indonesia is working to finalise agreements with its creditors in time for the its initial public offering next year.
The national carrier still owes European credit agencies (ECAs), reportedly $450 million, as a result of a finance deal it did in the 1990s for the purchase of six Airbus A330-300s.
Garuda's CEO, Emirsyah Satar, tells ATI it has reached an agreement with the ECAs that is likely to be signed in mid-October.
It involves Garuda paying some money and extending the loan period, he says.
Garuda also owes $100 million to Indonesia's Bank Mandiri, in the form of mandatory convertible bonds. The bank says it wants cash.
Satar says Garuda is speaking to Mandiri to see if the loan can be extended or whether Mandiri can exercise the bonds and cash out when Garuda does it initial public offering in mid-2010.
The government plans to retain a majority stake, he says, adding that Garuda is doing the IPO to improve its balance sheet and so it no longer has to rely on government financial assistance.
Garuda received a government bail-out in 2006 and Satar says that year it reduced its fleet size.
But last year the carrier made a net profit of 669 billion rupiah ($67 million) and Satar says in the first six months of this year profits are higher.
But because of recent fuel price hikes, he stops short of saying full-year profits will be higher.
Satar attributes Garuda's profits to the Indonesian economy which, unlike many other Asian economies, has avoided recession.
The airline has also embarked on a growth spurt and is working to improve its service offering.
Garuda has 10 Airbus A330s and around 50 Boeing 737s and by 2014 it aims to have 90 737s, about 20 A330s and up to six Boeing 777-300ERs, says Satar, adding that the first 777 will come in 2011. This 777 is the first of ten it has on order.
The airline was originally planning to receive the first 777 in mid-2010 but Satar says it has delayed deliveries because of the global downturn in long-haul international travel.
Garuda has no services to Europe or North America but Satar says next June it plans to resume services to Amsterdam and the flights will go from Jakarta via Dubai using an A330.
It will then look to resume services to London, Frankfurt, Paris and Rome, he says, adding that the 777s are for the long-haul routes and as the 777s come in it will phase out its three Boeing 747-400s.
It also plans to resume services from Jakarta to Los Angeles but the soonest will be in 2012, he says.
Garuda's fleet expansion comes as it is works to reposition itself higher up the value chain so it can compete more effectively on international routes where it faces stiff competition, says Satar.
Passengers will still pay less on Garuda than on other full-service airlines but they will also get a good product, he adds.
Garuda's new marketing campaign, with the tagline 'The Garuda Experience', leverages off Indonesians' reputation for being hospitable, says Satar.
To deliver on its promise, Garuda's new aircraft have video-on-demand in-flight entertainment systems and it is training cabin crew to deliver a unique and high standard of inflight service, he adds.