Ailing Merpati seeks up to Rp 200b bailout from govt

Ailing Merpati seeks up to Rp 200b bailout from govt

M. Taufiqurrahman, The Jakarta Post, Jakarta

State-owned domestic airline Merpati Nusantara has appealed to
the government to salvage it by disbursing funds to improve the
ailing company's financial performance.

Company president Hotasi Nababan said on Wednesday that an up
to Rp 200 billion (US$24 million) low-interest loan from the
government's investment fund (RDI) was the most plausible
solution for Merpati's woes, as it had failed to secure loans
from banks due to its negative equity.

"We are striving to reach a positive equity in 2004, and a
capital injection will be crucial to improve the company's
performance. Even for laying off personnel, we need money for
severance pay," he told reporters after a hearing with House of
Representatives Commission V on trade and industry.

He also said that the fund would be allocated to overhaul
Merpati's fleet and to open new routes serving Indonesia's remote
regions.

Merpati has long been struggling to overcome poor financial
performance. The company's assets as of the end of the first
quarter of 2003 stood at Rp 879 billion, dropping from Rp 929
billion as of the end of 2002.

The decline is attributed to losses suffered by the company.
In the first quarter of 2003 Merpati posted a loss of Rp 40
billion. The company's current financial condition is apparently
deteriorating, as in 2002 Merpati recorded a total profit of Rp
43 billion.

Nababan said that fierce competition among airlines in the
domestic market had taken its toll on Merpati's revenue.

"The cutthroat competition among airlines offering lower
airfares has reduced our company's yield, from Rp 713 per seat
per kilometer in 2002 to Rp 507 per seat per kilometer in 2003,"
he said.

Given the hostile environment, Merpati has revised downwards
its profit target for 2003 from Rp 136 billion to Rp 50 billion.

The company's top executive asserted that Merpati's woes
needed to be resolved soon, as a belated recovery effort could
worsen the airline's condition.

Nababan said that if the government declined to provide the
bailout fund, a privatization program should not be ruled out as
a last resort.

"Although we haven't found any interested party to take over
Merpati, such an option should be given serious consideration,"
he said.

Asked if Merpati's poor financial record would influence the
airline's selling value upon privatization, Nababan said: "What
we are doing now is trying to improve the company's performance,
so by the time the privatization drive begins, Merpati will be
attractive."

Later in the day, House Commission V endorsed Merpati's
proposal saying that the company was in dire need of fresh funds
from the government.

"As soon as possible, the government must disburse the RDI
loan for Merpati, so that it can embark on a recovery program,"
the hearing chairman Irmadi Lubis of the Indonesian Democratic
Party of Struggle (PDI Perjuangan) said.