The situation at cash-strapped Garuda Indonesia looks set to deteriorate further, with debts mounting and warnings that the airline could face repossession of leased aircraft.

Indonesian state enterprise minister Tanri Abeng has described the airline's condition as "critical", with reports that the carrier has $200 million in debt, up to half of which is now due for repayment.

Management, under heavy pressure to produce a workable survival plan, confirms that it can no longer afford to lease aircraft and will return the 12 remaining leased 747-400s and 737-300/ 500s. Japan Fleet Service, International Lease Finance and Sunrock are among the leasing companies affected by the latest moves, as well as Boeing.

In addition, it was earlier reported that six Boeing MD-11s and six A330-300s are being returned to Boeing and a consortium of European banks, respectively. Boeing has placed in storage seven newly completed 737s ordered by Garuda, which the carrier cannot finance. The moves leave the airline with McDonnell Douglas DC-10s, 747-200/400s and 737-400s, Airbus A300B4s and Fokker F28s.

Pressure on Garuda grew again earlier this month as about 1,000 staff gathered outside its headquarters in a protest against corruption and business links to former Indonesian president Suharto.

In response, the company has severed key contracts linked to the Suharto family. Included are US and Japanese ground servicing contracts, insurance and some cargo deals.

Source: Flight International