Debt restructuring meassure will save Merpati, pilots say

Debbie A. Lubis, The Jakarta Post, Jakarta

Pilots at state-owned PT Merpati Nusantara Airlines are calling for the restructuring of the company's debt to reverse a decade-long slump, in the latest move ahead of an imminent management reshuffle at the airline.

Chairman of the Merpati Pilot Association (APM), Sardjono Johni said the airline's new management should restructure the company debts. They amount to Rp 1.713 trillion as of Dec. 2000.

"They (new management) should convince creditors to reschedule the debts if they want to revive Merpati," Sardjono told The Jakarta Post on Saturday.

Merpati, which once pioneered routes into eastern Indonesia, has been seeing red over the past 10 years, with the exception of 1999 when gross profit was Rp 72.47 billion (about US$758,000).

The company plans to issue medium term notes to repay Rp 256 billion in debts maturing this Thursday to the Indonesian Bank Restructuring Agency (IBRA).

The plan requires government approval which is not yet forthcoming.

APM has laid the blame for the company's financial woes on on its current management, whom they charge are incompetent.

Sardjono said Merpati invested in a new reservation program which failed to meet expectations, causing a potential loss of up to Rp 10 billion last month.

Merpati rented a Boeing but could not fly it to Singapore next year because there the plane was considered too noisy.

APM's call for the restructuring of Merpati's debts comes amid questions over who would be the airline's new president director.

The government plans to reshuffle the management, having completed a fit and proper test for its top position in February.

As yet there has been no follow up on the tests, despite the promise to complete the reshuffle by February, according to Sardjono.

"We have sent our fifth letter to the Office of the State Minister of State Enterprises, but we have not received any reply," he said.

Numbering 620 pilots, APM has been demanding the dismissal of Merpati's board of directors since last January.

Sardjono said the new management should be able to persuade the government to let Merpati tap fresh capital.

Merpati is 93.5 percent owned by government and 6.5 percent by national flag carrier PT Garuda Indonesia.

There are about six candidates vying for Merpati's top position with backgrounds in consulting, finance and engineering.

Among them is Harry Parjaman, a senior official at Merpati's asset management unit. Harry is believed to be APM's choice.

"He (the new president) should have been working in Merpati for years as we don't accept outsiders yet we also reject anyone from the current management; they have already failed," Sardjono said.

Harry has worked for the airline for 26 years and is not a member of the current board of directors.

Another candidate is Hotasi Nababan, the president of PT GE Lokomotif Indonesia.

He said Merpati needed a person who dared to take risks and make unpopular decisions when times get tough. Hotasi once worked for the national flag carrier Garuda .

He also saw no need to lay off workers, saying they brought "changes, and fresh and bright ideas."

This represented a different approach from Merpati's outgoing president Wahyu Hidayat who said earlier the airline needed to cut around 1,500 employees.

But Wahyu did not dismiss workers when he became president of Merpati in 1999. According to him, labor opposition had been be too strong.

Commenting on his replacement he suggested someone with credibility to help Merpati wade through tough debt negotiation talks.

"The company is already damaged; I'm afraid investors will withhold their money if they doubt the person's trustworthiness," he said in an interview last week.