Garuda Indonesia terminates lease for 12 Bombardier aircraft

Garuda Indonesia Airline's planes are seen here at Soekarno-Hatta International Airport in Cengkareng, Indonesia, on Wednesday, February 2, 2011. - Bloomberg

JAKARTA, Feb 14 (Reuters): Indonesian flag carrier PT Garuda Indonesia has terminated a lease for 12 Bombardier CRJ-1000 planes amid a bribery probe into the procurement of the aircraft, a cabinet minister announced recently.

The contract with Nordic Aviation Capital (NAC) was initially due to end in 2027, but Garuda will return the planes to the lessor early, State-Owned Enterprise Minister Erick Thohir said.

"There are two issues, first was obviously the legal case, and the second is a force majeure because of the COVID-19 situation," Erick told a virtual briefing.

In its decision for the early termination, Garuda took into consideration the bribery probe conducted by Britain's Serious Fraud Office (SFO) over the procurement process of the planes in 2011.

The SFO announced in November it was investigating Canadian industrial group Bombardier over suspected bribery in airplane sales to Garuda Indonesia.

"For the avoidance of doubt, NAC is not party to any investigation into the selection of the aircraft by Garuda in 2012 and there has been no allegation of any wrongdoing on the part of NAC in relation to the placement of the aircraft," NAC said in a statement on Wednesday.

Garuda is also in discussion for early payment settlement of its lease of six planes of the same model from Export Development Canada, which is supposed to end in 2024, Erick added.

At the same briefing, the airline's chief executive Irfan Setiaputra, said Garuda had losses on average of more than $30 million annually during the past seven years of using the CRJ-1000 aircraft.

"On top of that this pandemic forced us to end this contract," Irfan said.

NAC said it had not yet received a termination notice from Garuda and therefore the lease agreements remained in full force, and it expected Garuda to continue to honour its contractual commitments.

"While NAC is sympathetic to the commercial difficulties of Garuda, it is confident of its position and absolutely determined to protect its commercial interest," the lessor said. - Reuters
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