Merpati seeks cooperation with regional govts to expand services

The Jakarta Post, Jakarta

Ailing state-owned air carrier PT Merpati Nusantara Airlines plans to expand its services in remote areas around the country by cooperating with local administrations to provide airplanes that can be operated by the airline.

Merpati president director Hotasi Nababan said the airline had already inked a deal with Merauke regency in Papua to operate an airplane to link people in the area to other cities in Papua and other islands.

Merauke is the country's easternmost regency, located along the southern part of the border with Papua New Guinea.

"We have begun a revenue-sharing scheme with the Merauke administration. They provide the airplane and we operate it. We expect to cooperate in a similar manner with other local administrations," said Hotasi on Monday.

Hotasi said the Banyuwangi administration, along with some others, on Sumatra were expected to finalize such a deal soon.

Merpati is having difficulties expanding its fleet using their own funds, due to a lack of working capital amid soaring debt.

At present, Merpati has Rp 1.3 trillion (US$144 million) in debts and assets worth about Rp 775 billion. Its major creditors include the government (Rp 225 billion), Bank Mandiri (Rp 230 billion) and Garuda (Rp 246 billion).

The new government is currently in the process of seeking the best options for restructuring Merpati. The previous government and lawmakers had already decided on a "life-saving" scheme, which consists of strategic sales of assets, an initial public offering and a debt-to-equity conversion.

The current government is unlikely to continue with that scheme, however, as the policy of President Susilo Bambang Yudhoyono, in general, is to refrain from the sale of state assets, especially those that have strategic value, such as Merpati.

Aside from making profit for the state, Merpati also has an obligation to serve remote areas of the country, which are typically shunned by private airlines due to the low profitability. -- JP