The Indonesian Ministry of State-Owned Enterprises is investigating corruption with aircraft lease contracts and procurements at Garuda Indonesia. The investigation initially focuses on the purchase of Garuda’s thirteen ATR 72-600s, but the ministry suspects the involvement of other manufacturers as well. Indonesia suspects corruption Garuda over ATR lease deals.
The probe was announced on January 11 by the Minister of SOE, Erick Thohir, although reports emerged in Indonesia in late December. The topic was discussed that day during a meeting with the Attorney General, Sanitiar Burhanuddin. In a media statement on the ministry’s website, Thohin says: “Garuda is undergoing a restructuring process. But as we already know, valid data show that there are indeed signs of corruption in the leasing contracts of aircraft procurement, and we suspect there are various manufacturers involved. Particularly for today, the case is on the ATR 72-600 aircraft variant.”
Thonir added: “We focus on transforming Garuda into a more accountable, professional, and transparent company. This is not a blind accusation, and we act based on evidence. Our gratitude to the Attorney General for guiding SOEs in the transformation process.” The evidence Thonir is referring to consists of documents that have been collected by the ministry and Indonesia’s Finance and Development Supervisory Agency.
The aim is to ‘clean up’ Garuda as well as other companies in Indonesia, which is renowned for its corruption at high levels. Thohir said: “The Attorney General and the staff never fail to assist us all this time. Because for us, the most important thing is to transform the administration’s accountability.” The investigation should identify the extent of the corruption and who is involved.
ATR agreement announced in 2013
Garuda announced a purchase agreement for 35 ATR 72-600s in October 2013 in a cooperation agreement between the airline, ATR, and lessor Nordic Aviation Capital (NAC). Garuda took delivery of the first aircraft in December 2013. Until October 2018, it received eighteen turboprops but it returned five aircraft to NAC between 2018 and May 2020. Of the remaining thirteen ATRs, only two are in active service right now. NAC itself has filed for Chapter 11 bankruptcy protection in December to restructure.
Although minister Erick Thohir said he suspects the involvement of other OEMs in the corruption, he didn’t offer any evidence. Garuda’s fleet also includes 27 Airbus A330s (seven -200s, seventeen -300s, and three -900s), 38 Boeing 737-800s, and a single MAX 8, ten Boeing 777-300ERs, and eighteen Bombardier CRJ-1000s. The A330s have been leased from Macquarie AirFinance, ORIX, Avolon, and CDB Aviation, the 737s from Bocomm, Pembroke, DAE Capital, ORIX, and SMBC. The 777s have been sourced from ICBC, ALAFCO, and Altavair, while twelve CRJ-1000s are leased from NAC.
Investigation into Bombardier-Garuda bribery still ongoing
On November 5, 2020, the UK’s Serious Fraud Office announced it would launch an investigation into Bombardier “over suspected bribery and corruption in relation to contracts and/or orders from Garuda Indonesia.” The SFO has the case still under investigation and has the full cooperation of the Indonesian Corruption Eradication Commission. The CRJs were delivered to Garuda between October 2021 and December 2015.
The airline’s CEO at the time, Emirsyah Satar, was convicted in May 2020 to eight years of prison for bribery and money laundering of $3.4 million that included aircraft and engine sales from Airbus and Rolls-Royce. Airbus settled a long-running investigation into bribery in January 2020 for €3.6 billion after reaching an agreement with the French, British, and American fraud offices.
Garuda is in the process of a deep restructuring to reduce its $9.8 billion debts by some $3.7 billion.