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.