Govt mulls merging Garuda, Merpati

Govt mulls merging Garuda, Merpati

Tantri Yuliandini, The Jakarta Post, Jakarta

Talks are continuing within the government on the plan to
merge flag-carrier PT Garuda Indonesia with state-owned PT
Merpati Nusantara to create a stronger airline industry, the
state minister of state enterprises said.

Laksamana Sukardi said on Thursday that discussions within the
government were continuing over whether or not to merge the two
state-owned airlines.

"It's still too early to speculate (on the outcome), but
discussions are ongoing ... everything is possible," he said on
the sidelines of the announcement ceremony of the finalization of
Garuda's debt restructuring.

He said that Garuda already owned a stake in Merpati and that
it would not be too difficult to combine the two.

Garuda owns 5.5 percent of Merpati while the government owns
the rest.

The final decision, Laksamana said, would entirely rest on the
recommendations of the management of the two airlines.

Meanwhile, Garuda Indonesia announced that it had reached an
agreement with creditors to reschedule some US$1.4 billion of
debt.

Director of finance Emirsyah Satar said that the successful
lobbying of Garuda's creditors had succeeded in rescheduling the
payments with a relatively lower interest rate lying between
London Inter Bank Offered Rate (LIBOR) plus 0.5 percent and LIBOR
plus 1.75 percent.

The debt rescheduling has resulted in a healthier balance
sheet for the airline, whose net worth increased from minus Rp
1.4 trillion in 1997 to plus Rp 1.6 trillion, improved current
ratio from 0.56 percent to 1.16 percent, and improved debt-to-
equity ratio from minus 2.3 percent to plus 2.8 percent, Emirsyah
said.

Garuda's president Abdulgani said that the airline could now
concentrate on its planned privatization, scheduled for 2003.

He said earlier that according to the calculations of Deutsche
Bank, by 2003 the estimated value of Garuda would be
approximately $1.1 billion.