Lift restrictions in airline industry: INACA
JAKARTA (JP): The Indonesian National Air Carriers Association (INACA) has called on the government to lift restrictions disallowing foreign equity investors to acquire a majority stake in local chartered airlines.
INACA secretary-general Benny Rungkat said on Monday the removal of the policy on foreign investment was essential to help the country's ailing unscheduled airline operators.
"Chartered airlines seriously need foreign equity partners to finance the expensive leasing or purchasing of aircraft. But no foreign investors are interested in investing when the regulation does not allow them to acquire more than a 50 percent stake in an airline," he told The Jakarta Post.
He said the government should also introduce a simpler and more transparent regulation that would attract foreign investors to collaborate with existing local chartered airlines, if they were not allowed to open their own chartered fleets here.
"The government should also allow foreign investors to form joint-venture companies with local chartered airline operators and hold a majority stake if they want to. The government should liberalize the local chartered airline sector the way it has liberalized the banking sector," he said.
According to existing regulations, multinational joint-venture companies are restricted from undertaking business in fields considered to be vital to the country and to the livelihood of the population at large, including airlines, drinking water supply, shipping, public railways, electricity transmission and distribution, telecommunications and mass media.
The government, however, has lifted the restriction in some fields, such as telecommunications and drinking water supply, by allowing foreign investors to form joint-venture companies, but only with state-owned companies.
Benny said chartered airline operators could not really utilize the opportunity given by the Ministry of Communications -- which recently liberalize the sector by issuing more licenses to new operators and allowing chartered airline operators to fly routes usually managed by scheduled commercial airlines -- because they had no funds to lease or buy aircraft.
Between four and six operation licenses were issued this year to increase the number of chartered airline operators to 37. They hold licenses to serve mostly remote areas and islands across the country.
Benny said the new chartered airline operators needed at least US$8 million to obtain a secondhand aircraft, such as a Boeing, a Fokker 28 or a DC9.
He said chartered airlines now had a broader chance to expand their coverage since several scheduled commercial airlines had canceled their flights to less profitable destinations.
State-owned airline Merpati Nusantara, which dominated services to remote areas especially in Indonesia's eastern provinces, canceled most of its flights after grounding around 70 percent of its fleet.
National flag carrier Garuda Indonesia, which flies to 20 cities across the country, has not canceled any flights but has reduced the frequency of services to less profitable destinations.
The sharp depreciation of the rupiah since late 1997 has severely damaged the industry. Airlines' rupiah earnings were eaten away by overhead costs, which are quoted in U.S. dollars. The national average load factor fell by more than half to only 30 percent in 1998.
Benny also called on the government to stop delaying the implementation of its plan to rescue the country's ailing airline industry, the debts of which total around $300 million, excluding the debts of Garuda Indonesia and defunct private carrier Sempati.
He said there was no follow-up after the government announced earlier this year a plan to assist the ailing local airline industry by allocating some $345 million, around $40 million of which was earmarked especially for chartered airline operators. (cst)