Emirates, Qatar Airways and Etihad in Garuda Partnership Talks

Claire Jiao and Harry Suhartono, Bloomberg News

PT Garuda Indonesia aircraft outside a hangar at the company's maintenance facility at Soekarno-Hatta International Airport in Cengkareng, Indonesia, on Thursday, June 30, 2022. Garuda could post an operating profit next year after renegotiating its aircraft leases and focusing more on the domestic market, according to the government official in charge of its restructuring. Photographer: Dimas Ardian/Bloomberg , Bloomberg

(Bloomberg) --

Garuda Indonesia is in early talks with three different Middle Eastern carriers — Emirates, Etihad Airways and Qatar Airways — about setting up a possible partnership.

The Indonesian flag-carrier is seeking a partner that can offer expertise and connectivity, Deputy State-Owned Enterprises Minister Kartika Wirjoatmodjo said in an interview Wednesday. The airline can afford to take its time thanks to a rebound in air travel that has eased pressure on it to raise funds, he said.

Garuda has left its state capital injection largely untouched and should achieve $150 million in free cash flow this year, he said.

“Initially we thought Garuda would require immediate additional equity,” said Wirjoatmodjo. “We don’t have pressure to do a rights issue for more money, but more for strategic collaboration.”

The airline’s shares jumped 9.3% to 106 rupiah as of 11:13 a.m. in Jakarta, set for the steepest gain in two years.

A deal between Garuda and a Middle Eastern airline would bolster the carriers’ Hajj pilgrimage flights, already among the Indonesian airline’s most profitable operations. Garuda has been seeking foreign partners to help revive its international reach especially to markets like Europe while the airline focuses more on domestic trips.

Garuda is in talks with potential investors to raise $300 million to $400 million via a private placement, State-Owned Enterprises Minister Erick Thohir said earlier this month.

--With assistance from Danny Lee.

(Updates with share reaction and more detail from deputy minister.)