PT Garuda Indonesia needs at least US$1 billion of additional funds to cut debt and stay afloat, as the government says it could give up its majority control of the troubled flag carrier, Bloomberg reports.

Garuda is currently in talks with creditors to restructure US$6.3 billion worth of debt and expects to reach an agreement in the second quarter of 2022, according to Kartika Wirjoatmodjo, a Deputy Minister at Indonesia’s State-Owned Enterprises Ministry.

The state-controlled airline has prepared several options in the debt negotiations, including turning to instruments such as mandatory convertible bonds or zero-coupon bank loans.

“We are negotiating with many parties with different needs, so their preferences vary,” Wirjoatmodjo, who oversees state transport companies, told Bloomberg News in an interview on Monday. “I have to emphasize that the government is not looking to bankrupt Garuda. What we are looking for is debt settlement either outside court proceedings or through court proceedings.”

Once a debt agreement is in place, Garuda will start looking for ways to raise US$1 billion to repay its liabilities and for working capital. With such high funding needs, the government is now choosing to be realistic and open to the possibility of private investors becoming majority owners.

“We are reaching out to major hub players,” he said. The airline must slash its debt by 70%-80% in order to survive, he said. The company’s latest available financial reports show that Garuda had negative equity of US$2.8 billion at the end of June.

Garuda joins a number of global airlines decimated by the pandemic. AirAsia Group Bhd’s long-haul arm has offered to pay creditors just 0.5% of the more than US$8 billion total debt they are owed and terminate all existing contracts, while Philippine Airlines Inc filed Chapter 11 bankruptcy in New York in September.

Outside Southeast Asia, Chile-based Latam Airlines, Aeromexico and Colombia’s Avianca Holdings sought court protection in 2020.

A veteran banker, Wirjoatmodjo was used to dealing with debt restructuring, but he said he found Garuda’s woes unique due to factors including the pandemic, exchange rate volatility and oil price sensitivity.

Under the government’s worst-case scenario, Garuda would be the one asking for court protection if all negotiations falter, according to Wirjoatmodjo.

“I’d put Garuda’s challenges at 9.5 on a scale of 1 to 10,” he said. “We are just running on hope now.”