Government all set to sell Merpati stake

The Jakarta Post, Jakarta

The government said on Wednesday that it would press ahead with plans to privatize state-owned Merpati Nusantara Airlines but insisted it would retain a majority stake in the company.

Ferdinand Nainggolan, a deputy to the State Minister for State Enterprises, said that in order to remain as the majority shareholder, the government would only sell up to 49 percent of the airline based on a strategic sale mechanism.

He was speaking to reporters after attending a government meeting on privatization.

Earlier, the company's president had suggested the sale of up to a 51 percent stake to help finance the purchase of new aircraft and thus strengthen the firm's competitiveness.

By retaining a majority stake, the government would keep its right to influence any business decisions to be taken by the company.

He did not elaborate on the exact timetable for the auction, saying that a review was still underway. But he did say that a rights issue would precede the strategic sale process.

Merpati has been named as one of 14 state companies in which stakes are to be sold this year under the privatization program. The government is targeting proceeds of Rp 5 trillion (about US$588 million) from the program to help plug this year's budget deficit, which it is estimated will come in at Rp 24.4 trillion.

There are growing calls to postpone the sell-offs to next year as rising political uncertainty in the run-up to the presidential election could prompt investors to submit low bids.

However, the government in dismissing such concerns says that the sales would attract credible investors that would make Merpati more efficient and better able to compete with other airlines amid increasingly tight competition in the country's aviation industry, as reflected in the entry of many new players, both local and foreign.

The government also deems the move as crucial to speeding up the airline industry's recovery after it suffered various shocks over the past few years, including the terrorist attacks on the U.S. and Bali, the Iraq war and the SARS outbreak.

Merpati president Hotasi Nababan has said that there had been strong interest from both foreign and local investors in Merpati.

Imam Turidi, Merpati's spokesman, said the sale of a stake in the airline would be helpful to the company in ensuring the successful implementation of its business plan, particularly as regards responding to the rapidly-growing demand for short-haul routes, particularly in Java.

The company currently operates a fleet of 41 aircraft and serves 250 routes.