Indonesia's stock exchange halted trading in flagship carrier Garuda's shares on Friday after it missed a key bond payment, fanning fears that the virus-hit airline was headed for bankruptcy.

The Jakarta-based bourse cited Garuda's default on a $500 million Islamic bond, known as sukuk, for suspending share trading "until further notice".

"[The missed payment] indicates that there are problems in the company's business continuity," the Indonesia Stock Exchange said in a statement Friday.

On Thursday, Garuda closed at 222 rupiah (0.01 cents), down by about half since the start of the year.

Garuda Chief Executive Irfan Setiaputra said late Thursday the missed bond payment was a "difficult and inevitable measure that the corporation must take amid efforts to improve its performance".

The debt-swamped airline had hired an outside financial advisor to get its books in order, he added.

Garuda's chief warned last month that the airline may halve its fleet to survive.

The COVID-19 pandemic has ravaged the global aviation sector, sparking heavy losses, job cuts, bankruptcies and state rescue plans.

State-controlled Garuda has been posting mounting losses as it grounded dozens of its 142 jets due to travel restrictions and slumping demand. 

It received a government rescue package last year and has been offering early retirement to its employees as it scrambles to restructure.

The airline posted a loss of more than $1 billion in the nine months to September. It has yet to report its full-year financial results for 2020.