Indonesia wants to inject funds into state-owned airline Garuda Indonesia and may also sell a stake, Transport Minister Hatta Radjasa said on Thursday.

The stake in Garuda, in default on a USD$55 million debt repayment that was due at the end of 2005, might be sold via an initial public share offer (IPO), Radjasa told reporters.

Radjasa gave no details on the possible sale, but State Enterprises Minister Sugiharto was quoted on Thursday by the Jakarta Post daily as saying the government was considering selling up to 49 percent to strategic investors.

"The government will help Garuda cope with its financial problems, but parliament must be consulted first because any decision involves funds that would come from the government," Radjasa said.

Garuda said last month it would implement a standstill on payments of about USD$55 million in principal debt due at the end of last year, but would continue to pay interest on all its debts and make required payments to aircraft lessors.

Sugiharto said many investors were willing to put their money into Garuda.

"There is no reason for us not to let them join the airline. But the government will remain in control with 51 percent ownership," he said.

Garuda President Director Emirsyah Satar has said factors such as the weakening rupiah, higher oil prices, competition in the industry and security issues, including the Bali bombings in October, have made it harder for the firm to service its debt.

The company has said total debt stands at USD$826.5 million, with more than 60 percent owed to the European Credit Agency (ECA).

Indonesia's privatization program has moved in fits and starts. Some government officials and politicians, as well as private critics, have said the holdings were valuable assets and that the privatizations have often been at fire-sale levels.

Garuda finance director Alex Maneklaran said it the company was still in default on the USD$55 million principal debt payment that was due at the end of 2005 because it had had no response from creditors on the debt restructuring proposal.