Pelni in troubled waters, sends SOS for life raft

Indra Harsaputra, The Jakarta Post, Surabaya

State-owned shipping company PT Pelni, currently navigating some stormy fiscal waters, renewed calls for financial help, warning that unless the government floated them more money, the company would have to lay off many workers.

The shipping line is now suffering losses of Rp 4 billion per month due to the decrease in the number of passengers and rising costs, particularly fuel costs.

"Unless the government subsidizes us, we will have to cut the number of our workers," Chaerul Djamal, the head of Pelni's branch office in Surabaya, said on Wednesday.

Chaerul said Pelni had asked for Rp 220 billion in government subsidies.

For decades, the shipping line has been the major transportation means for thousands of people traveling across the archipelago, particularly low-income travelers. However, business has taken a plunge following the liberalization in the airline sector, which has resulted in the emergence of many private airlines and much cheaper air fares.

Chaerul said Pelni's revenue now averaged around Rp 16 billion per month, while operating costs averaged some Rp 20 billion.

In the first quarter of the year, it booked Rp 97 billion in losses, which forced it to cut the number of its destination ports by 25 to 65 as part of cost cutting measures.

He said the decrease in airline fares as a result of greater competition had cost many potential customers, who previously cold not afford air tickets.

"For instance, Pelni sells tickets for business class on the Surabaya-Bitung route for Rp 1.45 million per person. In comparison, an airline ticket on the same route only costs Rp 1 million," he said.

According to Chaerul, Pelni was unable to offer lower prices than the airlines, "because our operating costs are higher than the airlines." He said it was because the volume of fuel consumed by a Pelni ship for most routes was four times higher than the consumption by an aircraft traveling on the same route.

Fuel costs have become quite a burden for Pelni after state- owned oil and gas company Pertamina raised the price on diesel from Rp 500 per liter to Rp 1,600 per liter at the start of the year, Chaerul said.

Separately, Tjuk Sukardiman, the director general of sea transportation at the Ministry of Transportation, said the government was studying Pelni's subsidy request and planned to discuss it with the House of Representatives at the end of this year.

According to the company's website, Pelni has 43 ships, including 23 luxury types. But, no information is available on the number of its workforce.