Garuda Indonesia is seeking to deploy capacity on cargo routes and to renegotiate leases as it seeks to contain the hit of the coronavirus outbreak,

The flag carrier intends to boost its cargo revenue and domestic capacity by redeploying aircraft previously used for Indonesia-China services that were suspended on 5 February on the orders of the Indonesian government.

Chinese services account for one-fifth of Garuda’s total international passenger numbers, the airline notes. On a group level, this proportion rises to 7%.

In the wake of Saudi Arabia’s decision to suspend visa issuance for pilgrims and tourists on 27 February, Garuda says it is still operating 24 weekly flights from Jakarta to Jeddah and Madinah, partially to accommodate the return of pilgrims to Indonesia. The airline has not specified the financial impact of the visa suspension, but states its intent to “continue to fulfil its responsibilities in line with its [flight] schedule, and to comply with terms and conditions”.

Discussions with aircraft lessors on lease extensions and rate reductions, as well as contract renegotiation with other parties, are also under way as the airline tries to reduce costs.

Garuda disclosed these measures after being queried by the Indonesia Stock Exchange on two reports dated 28 February in newspaper Tempo on Garuda’s international network and maturing debt, as well as a 27 February online report by CNBC Indonesia on the Saudi visa suspension.

Regarding the debt that will mature in the coming months, Garuda states that it is still sourcing financing both within Indonesia and overseas, and hopes to “secure the funding based on favourable market conditions, while still fulfilling the applicable regulations”.

The airline may consider using funds set aside for operations to pay off maturing debt, it adds.

Towards the end of February, Indonesia’s minister for state-owned enterprises Erick Thohir said that Jakarta was looking to restructure Garuda’s debts, as the maturity of one of its bonds, with a face value of $500 million, drew close. The bond in question is likely to be a 2015-issued, $500 million, 5.95% sukuk which matures in June.

At the start of this year, Garuda delayed plans to raise $900 million to refinance its debts, as its financial results for 2019 would not be ready for an extraordinary general meeting that was scheduled for January.

Garuda was planning to seek shareholder approval for three fundraising options: a global sukuk issuance, a private placement, or peer-to-peer lending. The fresh debt would have been used either to refinance the sukuk or clear debts with a one-year repayment term.