Govt refuses to bailout ailing Merpati airline

Govt refuses to bailout ailing Merpati airline

The Jakarta Post, Jakarta

The Ministry of Finance has turned down a request from state-
owned airline Merpati Nusantara for the disbursement of a low-
interest loan from the government's investment fund account (RDI)
to help the ailing company.

Director general of financial institutions at the Ministry of
Finance Darmin Nasution said on Friday there was no way that the
loan could be disbursed, as both the government and House of
Representatives had yet to decide on the matter.

"Currently, the government is discussing RDI with the House of
Representatives; if the latter gives no decision, disbursement of
the funds is canceled," he said.

Recently, Merpati president Hotasi Nababan called on the
government to disburse up to Rp 200 billion (US$24 million) in
low-interest loan from RDI to improve the company's financial
performance.

The executive said that the loan would be used to overhaul
Merpati's fleet and open new routes that would be most beneficial
for the airline. It would also be used to cover the bulk of
severance payments for Merpati employees in the wake of planned
major layoffs.

Merpati has long been struggling to overcome poor financial
performance. As of the end of the first quarter of 2003, the
company's assets stood at Rp 879 billion, having dropped from Rp
929 billion at the end of 2002.

For the first quarter of 2003, Merpati recorded a loss of Rp
40 billion, whereas it posted a total profit of Rp 43 billion in
2002.

As of the end of 2002, Merpati's total debt stood at Rp 1
trillion, mostly owed to the Indonesian Bank Restructuring
Agency.

Merpati's president attributed the decline in the company's
revenue to fierce competition between airlines in the domestic
market.

Darmin said that the government could extend part of its RDI
as loans to state- or city-owned enterprises for paying their
debts. Thereafter, the government could swap the loans into
equity.

But he was quick to add that a large number of state- and
city-owned enterprises had failed to repay their debts derived
from RDI. The government therefore planned to impose more severe
penalties on such bad debtors, Darmin said.

Merpati is striving to achieve sound financial performance in
2004 to boost its market value ahead of its privatization
program.

As part of its efforts to achieve positive equity, the
domestic flag carrier plans to fly routes most airlines consider
unprofitable. Most of the routes are in eastern Indonesia.