March 26 (Bloomberg) -- PT Garuda Indonesia, the nation's biggest carrier, plans to buy 25 Boeing Co. 737-800 planes valued at as much as $1.87 billion to renew its aging fleet.

Garuda will start receiving the planes in 2009, President Director Emirsyah Satar told reporters today. Jakarta-based Garuda plans to fund the purchase using loans and a proposed stake sale to investors, Satar said.

``The new planes will replace some of the older Boeings,'' said Agus Priyanto, Garuda's marketing director. The net addition to the carrier's fleet will be about seven planes by 2012, he said.

Two fatal crashes, including one this month involving a Garuda jet that killed 21 people, sparked a review of Indonesia's airlines and heightened concern about the safety of air travel in the world's largest archipelago, where domestic passenger traffic has grown by more than 25 percent a year since 1999.

Indonesian Transport Minister Hatta Rajasa last month urged airlines to update their fleets and said the government may ban carriers from buying planes that are more than 10 years old. None of the nation's 20 carriers were given the highest safety rating in a government review of the industry this month.

One of Garuda's leased Boeing 737-400s crashed on March 7 upon landing in Yogyakarta in central Java. A PT Adam Skyconnection Airlines plane with 102 people on board disappeared off the coast of Sulawesi on Jan. 1, leaving no survivors.

Return to Profit

Garuda, which in September 2005 agreed to lease 10 Boeing 787-800s and 18 Boeing 737s, said it has since decided to purchase the aircraft. The company has paid $23 million to Boeing, Satar said.

Garuda posted a profit of 149 billion rupiah (16 million) in the first two months of the year, from a loss of 37 billion rupiah a year earlier, Satar said.

A Boeing 737-800 costs as much as $75 million, according to the company's Web site.

Garuda is still in talks with creditors to work out the repayment of about $748 million of debt, Finance Director Alex Maneklaran said today. A debt repayment proposal in January was rejected by foreign creditors, he said. ``They ask for a government guarantee and we told them we can't,'' he said.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

Last Updated: March 26, 2007 06:10 EDT