JP/13/RDI
Govt refuses to grant bailout for ailing Merpati
The Jakarta Post Jakarta
Please see editing notes in yellow
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 severance payments for a bulk of this means most (ie. more than 50 percent) of its employees will be laid off. Do you mean "used to cover the bulk of severance payments for Merpati employees"? 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. If the routes are unprofitable, how does that boost the share value?