Merpati is technically bankrupt: Official

JAKARTA (JP): State-owned Merpati Nusantara Airlines has technically tumbled into bankruptcy due to huge debts and the country's economic crisis, and will need a foreign investor to bail it out, according to a senior official at the airline.

Merpati chairman Muchtaruddin Siregar said that the country's second state airline had a massive Rp 1.8 trillion (about US$212 million) debt compared to its assets of only Rp 830 billion.

"This means that Merpati is already technically bankrupt," he said as quoted by Antara.

He explained that Merpati had suffered a drastic drop in load factor due to the current economic crisis, which had slashed people's purchasing power.

He said that Merpati had stopped flying to Singapore and Australia as well as to many domestic locations in a cost saving measure.

Muchtaruddin said the government had invited foreign investors to enter airlines, but only International Aircraft Financial (IAF) had submitted a proposal.

He said the Merpati management turned down the IAF offer, which would only provide a US$20 fee per passenger in return for complete control over Merpati's international routes.

Over 70 percent of Merpati's routes are unprofitable.

Muctharuddin said Merpati had to compete with the country's flagship carrier Garuda Indonesia on certain routes.

The State Minister of the Empowerment of State Enterprises Office is preparing restructuring plans for the ailing Merpati in a bid to create a sustainable business.

The government is searching for strategic partners, either foreign or domestic.

One alternative is to remerge the airline with Garuda. Merpati was a unit of Garuda prior to its separation in 1995. (rei)