State airlines may get subsidy for quiet routes

State airlines may get subsidy for quiet routes

JAKARTA (JP): The government plans to subsidize state airlines
to allow them to continue flying unprofitable routes abandoned by
private airlines due to the current monetary crisis, a government
official said yesterday.

Director General of Air Communications Zainuddin Sikado said
the planned subsidy was of national importance to provide a fast
means of transportation to connect the vast archipelago.

"The government is currently studying how much of a subsidy
will be given to continue the services," Zainuddin said after
addressing a seminar on air safety.

He acknowledged that the monetary crisis, in which the value
of the rupiah has been slashed by about 70 percent since early
July, has dealt a big a blow to the country's ailing industry,
but he said the continuation of the services was important.

He said the crisis had forced both state and private airlines
to abandon less profitable routes, especially to eastern
Indonesia.

"Flights on these routes have dropped by more than 50
percent," he said, adding that even state airlines which normally
offered daily flights on some of the routes had to restructure
their schedules to twice-weekly services.

He expects, however, that Garuda and Merpati will continue
servicing less profitable and low in demand routes, at least
servicing Jakarta-provincial capital routes.

He gave no indication of what would happen if there was no
foreseeable solution to the monetary crisis, but pointed out that
private airlines would stop flying to many parts of the country.

Indonesia has six scheduled airlines: state companies Garuda
and Merpati, and private airlines Sempati, Bouraq, Mandala and
Dirgantara Air Service.

Sikado also said the minister of communications would hold
discussions with the country's Economic and Monetary Resilience
Council on domestic airlines' request for a postponement in their
payments for their leased aircraft.

The council was formed by President Soeharto in January to
deal with the economic crisis.

The Indonesian Air Carriers Association (INACA) earlier called
for the postponement and urged the government to play mediator
between the creditors and the airlines.

"This is a big problem that should receive immediate
attention. We are currently collecting the necessary data, like
monthly installment figures," Sikado said, adding that the
situation faced by the airlines is considered a force majeure, a
crisis beyond the control of anyone.

Five of Indonesia's six airlines are paying off their
airplanes. Only the small Dirgantara Air Service outright owns
its planes. Sempati is believed to own six of its 21 planes,
while Merpati is paying off 54 of its 90 aircraft.

Bouraq reportedly made arrangements to return two of its nine
Boeing 737 jets to Indigo, a Sweden lessor, by the end of this
month.

The monthly installment for a Boeing 737 is more than
US$100,000, while domestic monthly revenue only averages $4,000.

Indonesia has been the hardest hit by the region's monetary
crisis, which started in Thailand in July. The rupiah sank to its
lowest level of Rp 17,000 per U.S. dollar in January, compared to
its precrisis level of Rp 2,450 in July. The Indonesian currency
gained ground yesterday to break through 9,000 against the U.S.
dollar.

Sikado also indicated that the monetary crisis was one reason
for the delay in the implementation of a new satellite-based
system for communications, navigation and surveillance/air
traffic management, which was scheduled to be implemented this
year. It has been postponed to 2000.

He said today's traffic at domestic airports could still be
handled by the old system, pointing out that the daily traffic at
Soekarno-Hatta International Airport, the country's busiest
airport, was 150 flights.

"But we have to anticipate the traffic in the next two to
three years," he said, adding that yesterday's seminar was part
of preparations in applying the new navigation technology.

The seminar was sponsored by Japan International Cooperation
Agency. Japan is a leading country in developing navigation
technology. (08)