Local airlines await financial aid from government

JAKARTA (JP): The Indonesian National Air Carriers Association (INACA) said Monday it was still waiting for the government to provide financial assistance to the country's ailing airline industry.

INACA chairman Soelarto Hadisoemarto said the airline industry needed financial aid from the government to help ailing local carriers speed up their recovery.

"The local airline industry needs government assistance as much as the collapsed banking industry does. And, after all, it requires less funds to rescue air carriers than banks," he told The Jakarta Post.

The government set up in October last year a team of industry representatives and officials from relevant ministries to facilitate the establishment of a special agency to help local airlines. However, there has been no action since.

"INACA members have asked about the possibility of getting loans through the agency, but I couldn't give them a clear answer because no details on the arrangements or requirements regarding the planned agency and loans are available," he said.

He declined to reveal the exact amount of debt currently carried by the local airline industry, but said the figure was around US$300 million, excluding the debt of national flag carrier Garuda Indonesia and the already defunct private carrier Sempati.

An executive at the Ministry of Communication told the Post that the special agency, to be called the Agency for National Air Carrier Industry Recovery, was expected to play a role similar to the Indonesian Bank Restructuring Agency (IBRA) in helping troubled airlines settle their debts and financial problems.

The official, who asked for anonymity, said the entire plan, however, had not been finalized.

"It is still a proposal. But it has already been discussed by the minister with the legislature and soon will be submitted to the President for final approval," he said.

He said the agency's principal goal was to help local airlines secure loans for specific purposes, including to cover maintenance and operational costs.

"The proposed budget (for the agency) is around $200 million. Interested airlines should submit a proposal and working plan," he said.

All applicants will be thoroughly examined to ensure they are capable of repaying their loans, he said.

Minister of Communication Giri Suseno recently said the government would allocate around $345 million to assist local airlines.

He said of the $345 million, some $182 million would be allocated for scheduled airlines, excluding Garuda Indonesia, $40 million for chartered carriers and the rest for aircraft procurement.

However, Giri did not state when the funds would be made available.

INACA recently estimated that it needed around Rp 5 trillion ($714 million) to help local airlines recover from the economic crisis.

The sharp depreciation of the rupiah against the U.S. dollar since late-1997 severely damaged the industry. Airlines' rupiah earnings were eaten away by overhead costs, which were quoted in U.S. dollars.

The rupiah, which hit a low of Rp 17,000 in January last year, climbed to above Rp 8,500 earlier this year before stabilizing at around Rp 7,000 this month.

The economic crisis has also cut the purchasing power of most Indonesians, resulting in a drastic decline in the number of air passengers, the airlines' largest source of income.

INACA, which currently groups 16 chartered carriers and six scheduled airlines, said the national average load factor fell by more than half to only 30 percent in 1998.

Soelarto said the current load factor stood at between 60 percent and 65 percent. (cst)