Sat, 22 Nov 2008
From: The Jakarta Globe
By Janeman Latul
The government has stepped in to try to renegotiate the terms of a $210 million aircraft-purchase deal between financially troubled state airline PT Merpati Nusantara Airlines and a Chinese aircraft maker in an attempt to head off a brewing dispute with the Chinese government over Merpati’s failure to honor the contract, a top official said on Friday.

Muhammad Said Didu, the secretary of the State Ministry for State Enterprises, said that the matter was being viewed with such urgency that President Susilo Bambang Yudhoyono had become personally involved.

The dispute is over a contract signed in 2006 between Merpati and China’s Xi’an Aircraft Industry to purchase 15 Xinzhou-60 passenger planes. Xi’an delivered one plane that year and a second in early 2007.

Merpati has since failed to take delivery of any more of the planes, prompting Chinese Ambassador Zhang Qiyue to register a complaint with top officials at the Ministry of Transportation during a meeting on Wednesday. The issue is particularly sensitive as cash-strapped Merpati had arranged to purchase the planes via a soft-loan agreement with the Chinese government without any formal notification to the Indonesian government.

“I did not realize [Merpati had signed the agreement] until I became the chief commissioner of Merpati,” said Didu, who assumed that position in August.

“We are in the process of seeking a renegotiation of the contract via a special restructuring team,” said Purwatmo, Merpati’s corporate secretary.

Merpati would like Xi’an to reduce the $14 million price tag for each plane, Purwatmo said. However, he did not say what price would be acceptable to Merpati.

“At this current time of economic crisis, who would want to renegotiate? But we’re hoping the government will be able to do something,” he said.

He also claimed that the two planes Merpati had already accepted delivery of were being leased as the company wanted to try the planes out before actually buying them. The company also wanted to clarify some clauses in the contract related to pricing and technical issues, he said.

Purwatmo said the government restructuring team, which would be headed by a Finance Ministry
official, would include representatives of the State Ministry for State Enterprises, the National Development Planning Board and Merpati.

The Xinzhou-60 passenger plane is a 60-seat model designed and produced by state-owned China Aviation Industry Corp., the parent company of Xi’an.

The purchases were intended to replace Merpati’s aging fleet of Fokker 27s and CASA-235s.

In a drastic effort to reduce costs, Merpati announced in August that it would slash its workforce by 1,309, leaving the carrier with only about 200 flight crew and roughly 850 ground staff.

The airline posted an average monthly loss of Rp 15 billion ($1.24 million) from March to July of this year.

Merpati currently has assets of only Rp 952 billion, compared with debts of Rp 2.3 trillion.



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