Government comes to the rescue of ailing Merpati

The Jakarta Post, Jakarta

The government will soon disburse Rp 75 billion (some US$7.5 million) in fresh funds to bail out ailing state-owned domestic airliner PT Merpati Nusantara to speed up its financial restructuring program, a top official says.

"If Merpati requests the funds today, then we will disburse it today as well," the Ministry of Finance's director general of the treasury, Mulia P. Nasution, said on Monday.

Mulia, however, expected Merpati's management to immediately use the bridging funds -- part of Rp 450 billion in total funds needed to rescue the airliner from bankruptcy -- for their planned debt restructuring program, as soon as it was disbursed.

"We expect Merpati to completely restructure its debts, so that it will no longer need funding injections in the future from the government," he said.

The House of Representatives had earlier approved the Rp 450 billion figure for Merpati, which will be used to reschedule Merpati's whopping Rp 1.6 trillion worth of outstanding debts to creditors and business partners, as well as to implement a debt- to-equity swap of its obligations to the government, state banks and state-owned enterprises.

Among Merpati's major creditors are Bank Mandiri (Rp 164 billion), Bank Danamon (Rp 95 billion) and the government (Rp 92 billion).

Due to the government's own cash-strapped situation, however, the House also agreed that the funds be disbursed in installments, starting with Rp 75 billion in bridging funds for the next two months' operations.

Merpati, which currently has a cash flow deficit of some Rp 40 billion a month and a negative equity position of Rp 800 billion, had previously requested Rp 93 billion to support its cash flow for the next three months.

The government, Mulia added, also expects Merpati's management to continue deliberating the option of a privatization scheme for the airline, whose proceeds could be used as additional operating and restructuring funds.

Merpati's management had said that the privatization proceeds could allow the carrier to buy 20 new planes worth some Rp 600 billion over the next two years to meet growing competition. The privatization plan has, however, yet to receive approval from the House.

Meanwhile, on the option of merging Merpati with national flag carrier PT Garuda Indonesia, Mulia said that there has not been any further discussion, and that it would be better to leave such matters to the Office of the State Minister of State Enterprises.

Merpati was a subsidiary of Garuda before it was separated in 1997. Aside from running its business like any other airline, Merpati is also assigned to serve remote areas in the country that private airlines typically shy away from due to their low profitability.

Besides Merpati, Mulia said that the government would also provide Rp 50 billion in bridging funds to state railway company PT KAI, and Rp 20 billion to state-owned paper mill PT Kertas Kraft Aceh within this budget year.