Government to aid domestic airlines

JAKARTA (JP): The government is seeking ways to prevent ailing domestic airlines from becoming permanently grounded in the monetary crisis, a top air transportation official said yesterday.

Director General of Air Communications Zainuddin Sikado said immediate help was needed to ensure the five operational carriers did not suffer the fate of Sempati Air, which has decided to cease operation.

"If the government doesn't step in, there will be another failure in September," he told reporters following a meeting with officials of the airline industry and the Coordinating Ministry for Economy, Finance and Industry.

The government should provide immediate assistance and help the airlines to renegotiate with their foreign aircraft lessors about a temporary halt in lease payments, Zainuddin said.

But he stressed that airlines should be more transparent regarding their status.

A sharp plunge in the value of the rupiah against the U.S. dollar has caused serious turbulence for domestic airlines since 80 percent of their operating costs are in dollars, including for lease payments, spare parts purchases and airport service.

"Domestic airlines are already in a crisis," he said, adding that the cessation of Sempati Air's operations was an indication of a major breakdown ahead for other airline companies.

Indonesia has six scheduled airlines: state-owned carriers Garuda Indonesia and Merpati Nusantara, and private carriers Bourag, Mandala, Dirgantara Air Service, and Sempati.

Except for Dirgantara, the airlines lease many aircraft which, according to Zainuddin, total 50 planes at a cost of between US$90,000 and $100,000 per month each.

Sempati's promotion and scheduling manager Harry Priyono told government officials at yesterday's meeting that the airline would temporarily cease operating its seven domestic routes by June 6.

"The management and shareholders made the decision because it's impossible for the airline to continue flying amid the current sharp fall of the rupiah."

He added that since it was an abrupt decision, further details would have to be discussed at a shareholders meeting to be held Thursday.

The meeting would decide matters such as how many of its remaining 700 employees would be laid off, whether to return the company's five leased aircraft and debt issues.

Sempati is controlled by former president Soeharto's youngest son Hutomo "Tommy" Mandala Putra and longtime Soeharto associate Mohammad "Bob" Hasan.

It was considered the country's largest private airline at its peak in 1996, operating 25 airplanes and employing 3,500.

But firms linked to the Soeharto family have been thrown into the spotlight over the past few weeks due to allegations of cronyism, nepotism and unsavory business practices.

Zainuddin said it was impossible at the moment for the government to provide a financial bailout for Sempati.

There has also been no decision made on who would take over the airline's routes.

Private airlines have been abandoning routes with low load factors following the rupiah's depreciation. It sunk as low as Rp 17,000 to the U.S. greenback in January, compared to Rp 2,450 in July last year.

It was around Rp 12,000 yesterday.

The assistant to the coordinating minister for economy, finance and industry, Suryono Dikun, acknowledged yesterday that the domestic airline industry was in severe difficulty because the load factor on usually lucrative routes had decreased by more than 40 percent.

He added that Garuda was also planning to return many of its leased jets.

Although private airlines might have to stop operating due to the crisis, he said the government would try at all costs to serve provincial trunk routes.

"The cost to the economy will be too high to totally abandon these trunk routes," said Suryono, who oversees the industry and service sectors. (rei)