Indonesian Government to Summon Garuda’s Auditors and Directors Next Week
The Australian Competition and Consumer Commission (ACCC) have make a peace agreement with state-owned flight carrier, PT Garuda Indonesia Tbk (IDX: GIAA) - Photo by the Company

JAKARTA (TheInsiderStories) – The Australian Competition and Consumer Commission (ACCC) have make a peace agreement with state-owned flight carrier, PT Garuda Indonesia Tbk (IDX: GIAA), said the management on April 19. The Federal Court of New South Wales ratified the peace treaty in law case Number NSD955 of 2009 concerning cargo fuel surcharge pricing.

“The company is required to pay fines and fees for the ACCC with a payment mechanism that will be made in installments for five years starting from 2021,” director of finance, Prasetio, wrote in a disclosure information on Monday.

For background, the case of the price fixing came to light after the ACCC ordered Garuda to pay a fine of A$19 million (US$14.84 million). The court found evidence that between 2003 and 2006, the airlines entered into agreements with a number of airlines to fix security prices, fuel surcharges and customs fees from Indonesia.

This case stemmed from the ACCC accusation that 15 airlines have agreed and fixed prices for cargo transportation routes to Australian jurisdiction. Of the 15 airlines, only Garuda and Air New Zealand have filed legal remedies from the first stage at the Federal Court to cassation at the Australian High Court. The 13 other airlines have decided to reconcile by pleading guilty, and have been subject to fines and damages ranging from A$3 million to A$20 million.

On Oct. 31, 2014, the Australian Federal Court rejected the ACCC lawsuit in favor of Garuda and Air New Zealand on the basis of the consideration that the relevant market is in Indonesia. However, in the appeal court on June 14 2017, High Court Australia granted the ACCC lawsuit with the result that Garuda – Air New Zealand was found guilty of the accusation.

On May 30, 2019, the Australian Federal Court issued a verdict, and Garuda – Air New Zealand was fined A$19 million and asked to pay court fees that had been issued by the ACCC. Then, Garuda appealed. The fine in this case should also be not more than A$2.5 million, considering that its cargo transportation revenues from Indonesia was A$1.1 million and cargo transportation revenue from Hong Kong was US$656,000.

Beside with Australia, Garuda has disputed with Nordic Aviation Capital (NAC), a global aircraft leasing company caused the aviation firm has grounded and is returning its 12 Bombardier CRJ1000s to the partner before the leases have expired. The company made the decision to directly acquire six CRJ-1000 aircraft from Bombardier all of which Garuda has operated since 2012.

These aircraft were selected by Garuda prior to any engagement with the lessor. Subsequently, the company selected NAC to provide a further twelve CRJ-1000 aircraft under a lease agreement which ends in 2027.

In light of the global pandemic and Garuda’ difficult trading environment, NAC had extensive discussions with the airline to help their cash position during the crisis. The Denmark-based firm has continued these discussions but there has been no agreement to date, and no termination notice has been received.

State own enterprises (SOEs) minister, Erik Thohir, and CEO of the issuer, Irfan Setiaputra, announced  that the 12 CRJ1000s were grounded on Feb. 1 and will be returned to NAC, even though the leases were only due to expire in 2027. Because of contract, said Setiaputra, the carrier has been losing money around $30 million per year.

His party also speaking to Export Development Canada on the six purchased CRJ1000s and how it can achieve an early settlement on those aircraft which have a contract ending in 2024. NAC is also the major lessor of 13 ATR 72-600s to Garuda and all operated. The deal with the lessors signed on February 2012 to lease six CRJ-1000 fleets with an option to take delivery of an additional 12 jets with total amount $1.32 billion.

The aviation company then took the first delivery of the Canadian-made regional jet in October 2012. Bombardier delivered its last CRJ-1000 in December 2015. As a result of this lease cancellation, the flight carrier is required to pay an early termination fee and fulfill the technical conditions for aircraft redelivery. However, this offer was rejected by NAC and the company unilaterally terminated the contract for the 12 aircraft.

Earlier, British’ Serious Fraud Office confirmed its investigating plane producer, Bombardier, over suspected bribery and corruption in relation to contracts or orders from Garuda. The body wrote, “In accordance with best practices when such allegations come to our attention, we have launched an internal review conducted by external counsel and we are co-operating with the investigation opened by the UK Serious Fraud Office, which has contacted Bombardier further to the Indonesian judgements.”

Orders from the state-owned flight carrier for A330s and A320s had been among agreements probed during a long investigation into allegations of failure to prevent bribery focused on Airbus. Early of 2020, the Corruption Eradication Commission announced that former CEO of Garuda, Emirsyah Satar, was convicted of corruption and money laundering, sentenced to a term of imprisonment and fined.

He was convicted of having received bribe payments from another individual for support in securing contracts for Bombardier, Airbus, ATR and Rolls-Royce. In 2012, he order for 18 CRJ1000s in 2012 and the airline remains an operator of the type.

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