JP/12/Merpati

JP/12/Merpati

Overmanning drags Merpati down

Debbie Lubis
The Jakarta Post
Jakarta

Carrying excess baggage of 1,500 employees, PT Merpati
Nusantara Airlines has trouble lifting off from its current low
of unresolved debt problems, tight competition and soaring costs,
but its chief executive said layoffs were not the answer.

Merpati president director Wahyu Hidayat said Merpati had been
suffering from overmanning since before he became chief there in
1999.

Still, he said, the company did not plan mass layoffs.

The policy still stood despite concerns over the viability of
the airline that once pioneered routes into eastern Indonesia.

Now tighter competition is eating into revenue, as operational
costs remain high, and as the company scrambles to repay some Rp
331 billion (about US$33 million) in debts maturing next month.

"We are trying hard to fix the company's condition, so that we
don't have to ask the government to bail us out," Wahyu told The
Jakarta Post on Thursday.

To this end, he said, Merpati would like to cut loose those
employees it did not need.

But the cost of compensating dismissed workers, and their
government-backed opposition to such a move, he said, made any
layoff plan impossible.

Dismissing the 1,500 workers meant cutting Merpati's work
force by a hefty one-third of its total 4,539 workers.

Wahyu said he had considered tough measures to reduce
overmanning but feared such a move would draw the government's
ire.

For their part, Merpati employees laid the blame for the
airline's poor performance on mismanagement.

They charged that Merpati's financial management was a mess,
which had led the company to the current state of near collapse.

Plans to merge Merpati with the country's national flag
carrier PT Garuda Indonesia fell through as the latter rejected
the offer. Garuda already owns a 6.5 percent stake in Merpati
with the government controlling the other 93.5 percent.

In main reason for Garuda's refusal to merge was Merpati's
financial woes.

After returning to black in 1999 with a pretax profit of Rp 72
billion compared to a pretax loss of Rp 657.7 billion a year
before, the company slid back into the red in 2000, recording a
pretax loss of Rp 187.9 billion.

Now Merpati owes the Indonesian Bank Restructuring Agency
(IBRA) some Rp 331 billion that it must pay by April 11.

IBRA took over Merpati's debts from local banks that the
agency bailed out in the wake of the late 90s financial crisis.

Merpati has yet to secure funds to pay off the Rp 331 billion
owed to IBRA, which has offered to slash Rp 230 billion off the
amount if the company can beat the April deadline.

To raise cash, the company plans to issue medium term notes
but government approval for the plan has yet to come down.

"We have no money to repay the debts. So this plan to issue
notes is the only way out," said Merpati's controller and
insurance and tax manager Setyo Wisnubroto last week.

Recently, increasing competition from new airlines serving
local routes has forced Merpati to ground 11 of its locally
assembled CN-235 aircraft.

It has also returned three of the aircraft to repay debts it
owed to aircraft manufacturer PT Dirgantara Indonesia.

Merpati was founded in 1962 as a state-run airline to serve
the country's domestic routes, and started off with six aircraft
that were owned by the Indonesian Air Force.

When Irian Jaya was handed over by the Netherlands to
Indonesia in 1963, Merpati started to serve the eastern province,
although it found that passengers were scarce while the cost of
flying there was high.

The airline then went on to serve local routes in Irian Jaya
and some short-haul destinations such as Jakarta to Semarang,
Jakarta to Tanjung Karang, and Palangkaraya to Balikpapan.

Merpati became a subsidiary of Garuda in 1978, providing
flights on pioneer routes, cross-border flights, transmigration
flights, and international and domestic charter flights, all of
which were costly operations that yielded little revenue.

In 1986, the government insisted that Merpati purchase 14
locally made CN-235 aircraft despite criticism that the planes
were too costly to purchase and later to operate.