Indonesia considering terminating debt-ridden domestic carrier

JAKARTA, Malaysia — State-owned domestic carrier PT Merpati Nusantara Airlines (Merpati) is on the verge of losing its wings as the government ponders whether to terminate the debt-ridden airline’s operations.

State-Owned Enterprises Minister Dahlan Iskan said on Wednesday that scores of proposals had been received by his office to close down Merpati following the poor performance of the Jakarta-based airline.

With that, he said, the State-Owned Enterprises Ministry, as Merpati’s sole shareholder, would consider terminating the airline — known for pioneering flights to eastern regions of the archipelago

“For so long there have been recommendations to shut down Merpati,” Dahlan said on the sidelines of a press briefing in Jakarta. “I will check those recommendations one by one before making a final decision.”

The debt-ridden Merpati has yet to show progress in clearing its debts, despite the abrupt change of leadership in May last year.

In May 2012, Dahlan fired then Merpati President Director Capt. Sardjono Jhony Tjitrokusumo for his inability to rescue the company, replacing him with Rudy Setyopurnomo, previously president commissioner of the company.

Rudy, who is also a former president of private carrier Indonesian Airlines Aviapatria, was recently quoted by Antara news agency as saying that he hoped the government would persuade the airline’s creditors to write off the company’s debts.

The top executive said he would not lose sleep over Merpati’s debts as most of the lenders to the company were also state-owned firms, although he did say the debts presented problems to the airline’s management in their daily operations.

Reportedly, Merpati’s debts currently total 3.14 trillion rupiah (US$32.70 million), which include the airline’s debt to state-owned oil and gas firm PT Pertamina for fuel purchases plus debts to state-owned lender Bank Mandiri, state-run airport operator Angkasa Pura II, state asset manager PT PPA and state-owned insurance company PT Jasindo.

In order to reduce its operational costs, Merpati had closed more than 10 percent of its 124 routes, including the Jakarta — Bandung route, as previously reported by The Jakarta Post. The company’s data shows that 112 of 124 of Merpati’s routes are operating at a loss because their passenger-load factors, which represent flight occupancy, are less than 60 percent.

Separately, aviation expert Dudi Sudibyo said the government should have temporarily suspended Merpati’s operations after dismissing Capt. Sardjono Jhony Tjitrokusumo.

“Merpati needed time to recover after suffering such severe financial problems that were affecting their operations,” he said.

Dudi also referred to the case of Mandala Airlines, which made a comeback last year after financial woes had forced them to close down operations a year earlier.

Merpati, he said, was the pioneer airline that opened up flight routes to the eastern half of the archipelago, particularly Papua. However, the chief editor of air travel magazine Angkasa said Merpati had become faced with financial woes after becoming a cash cow.

“It will be very sad if Merpati is closed completely as it is endeavoring to compete in a market that, ironically, it helped to pioneer,” he said, adding that the government should provisionally suspend Merpati’s operations instead.

Contacted separately, Transportation Ministry spokesman Bambang S. Ervan said the ministry had offered several recommendations to Merpati to improve the firm’s operations, flight safety and to expand its routes.

“However, we do not recommend that Merpati be closed down. It is a state asset that must be maintained,” he said via text message.