House responds to Merpati's rescue call

Urip Hudiono and Leony Aurora, The Jakarta Post, Jakarta

The House of Representatives has given its approval to the government to rescue ailing state domestic airline Merpati Nusantara from bankruptcy through the injection of Rp 450 billion (US$45.7 million) in funds needed to restructure the carrier.

In a hearing on Monday, the House's Commission V overseeing transportation, communications and public works, said the airline was among the nation's most important assets, particularly in providing transportation to the country's remote regions.

"We agreed to provide Merpati an initial fund of Rp 75 billion in August to tide it over for a two-month period," State Minister for State Enterprises Sugiharto, who attended the hearing with Minister of Transportation Hatta Radjasa, said after the session.

"The funds will be taken from the proceeds of other state enterprises and will be accounted for either in this year's next state budget revision or next year's budget," he added.

The rest of the required budget would be allocated from next year's state budget, the draft of which is currently being deliberated by the House.

Sugiharto said that Merpati needed some Rp 450 billion before the airline could commence a complete restructuring and reschedule a whopping Rp 1.6 trillion in outstanding debts to creditors and business partners.

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

The bulk of the capital injection, or Rp 300 billion, will finance downsizing, said Sugiharto. Another Rp 20 billion will be used as additional working capital, while Rp 100 billion and Rp 30 billion will pay off immediate debts to vendors and banks, respectively.

He also said that the funds for Merpati might also come from private investors, hinting at the government's intention to privatize the airline.

"There is also the option of getting the funds for Merpati from any interested investors," he said.

Besides injecting the Rp 450 billion fund to restructure Merpati, another life-saving option for the airline would indeed be to offer it through a strategic sale to investors.

The government had also mulled dissolving Merpati altogether, but it would need a whopping Rp 2 trillion in compensation for the airline's workers.

Sugiharto, however, rejected the proposal that Merpati be merged with national flag carrier Garuda Indonesia, as suggested by several legislators, and reiterated that the two state-owned carriers' restructuring would be conducted hand-in-hand.

"Garuda's Citilink flights, for example, should not compete with Merpati's routes," he said.

Merpati's restructuring could also include a possible layoff of thousands of employees to reach an ideal ratio to the number of its airplanes. At present, Merpati operates a fleet of some 30 planes, down from 58 aircraft in its peak period.