Fri, 20 May 2011

From: The Jakarta Globe
By Francezka Nangoy

After a five-month search for new investors, Mandala Airlines’ prospects for the future soared as two companies announced they planned to buy stakes in the struggling airline.

Singapore-based Tiger Airways Holdings and Saratoga Investama, an Indonesian strategic investment company, announced their plans in a filing to the Singapore Stock Exchange on Thursday. Tiger Airways will acquire a 33 percent stake, while the Saratoga Group will buy 51 percent of Mandala.

Neither investor disclosed the value of their acqusition.

Sandiaga Uno, co-founder of Saratoga, told the Jakarta Globe on Thursday that Mandala would return to Indonesian skies.

“We believe there is strong growth potential in the Indonesian aviation sector due to the robust economic growth and Indonesia’s characteristics as an archipelago,” Sandiaga said.

He also said he was optimistic that the partnership with Tiger, which is known for its low-cost carrier expertise, would help Mandala benefit from the established infrastructure in Singapore. He expects the airline to “resume flying quickly and offer reliable and affordable service to its customers.”

Mandala has been searching for investors since it halted operations in January under the weight of Rp 2.4 trillion ($281 million) in debt.

Its debts were converted into shares after a Jakarta commercial court ruling in March.

According to a release from Tiger Airways, Mandala plans to adopt a low-cost business model. That sector is already packed with competition, aviation analyst Alvin Lie said.

“Mandala has to compete with six big companies in that segment, while Garuda is the only provider of premium-class service in domestic flights,” he said.

Indonesia’s domestic aviation industry is dominated by low-cost carriers such as Batavia Air, Lion Air and CitiLink, Garuda Indonesia’s sister company.

Analysts have argued that Mandala’s failed attempt to enter the budget sector was one reason the airline’s collapse.

Lower income from the sector added to pressure from the high costs Mandala had to pay to lease its airplanes from Indigo.

Herry Bhakti Singayuda, the director general of civil aviation at the Transportation Ministry, said Mandala’s management had already reported the acquisition to the ministry. “Mandala’s president director reported to me that they are planning to announce it [today],” he said.

Tiger’s statement said Mandala would operate domestic flights as well as international routes within a five-hour flying radius of Indonesia.

It did not give any details about aircraft, but Indonesian civil aviation law states an airline operator must fly at least 10 aircraft, five of which it must own.