JAKARTA (REUTERS) - National carrier Garuda Indonesia will start terminating contracts with 700 workers next month, forced to cut costs by the prolonged Covid-19 pandemic, its chief executive said on Tuesday (Oct 27).

The workers, representing nearly a tenth of the airline's workforce, are among about 800 put on unpaid leave since May as demand for air travel plummeted, hit by global curbs to rein in the spread of the coronavirus.

"We have to take this tough decision in the midst of a situation that is still full of uncertainty," chief executive Irfan Setiaputra said in a statement.

"This pandemic is causing a long-term impact, beyond our expectations, to the company's performance, which, up to this point, has yet to show significant improvement."

Garuda employed 7,878 people by the end of December 2019, including temporary hires, its stock exchange filings show. By the end of August that number had fallen to 7,341.

Between January and August this year, Garuda has laid off 146 staff and nearly 6,000 workers faced adjustments in salary or workload, the filings show.

To help keep it afloat, Garuda plans to issue convertible bonds up to a maximum of US$581 million (S$790 million) to be sold to Indonesia's finance ministry to gain fresh funds.

The coronavirus caused a drop of 57 per cent in the number of domestic air passengers from January to August, Indonesia's statistics bureau has said, while international air travellers dropped by 72 per cent.

Garuda posted a net loss of US$728.2 million in the first six months of this year, down from a profit of US$78.68 million a year earlier.