Terminal times at Merpati

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

March 1st 2014

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Its management is in denial about the fate of their airline, but the Indonesia government appears to be more realistic about the future of fading carrier, Merpati Nusantara, when it did not rescue it from closure in February. Read More »

Last month, the state-owned carrier ceased flying after it admitted it could not pay several creditors, including fuel supplier, Pertamina. Merapti’s director of operations, Captain Daryanto, said the closure was “temporary” because Merpati could not meet Pertamina’s demands for cash payments for fuel last month.

The carrier has struggled for years to make a profit, but it is now facing ever more formidable obstacles for survival as several of the region’s low-cost carriers gain access to Merpati’s traditional passenger market.

With a reported US$609 million debt, owed to Pertamina, airport operators Angkasa Pura I and II, Bank Mandiri and insurance company Jasindo, Merpati came to a point where it “could no longer operate as it should”, said Daryanto. And this time around there was no handout from the government, which declined Merpati’s request for funding and confirmed it is continuing to search for a buyer for airline.

“Merpati,” Daryanto explained, also had experienced a “fall in customers trust”, which contributed to the shutdown. The airline had cancelled several routes, but the cutbacks failed to persuade Pertamina to extend additional credit to keep the airline flying.

Merpati has fallen behind in paying staff and did not have the funds to settle ticket refunds. Last month, 50 of the airline’s 178 pilots resigned because they had not been paid their salaries and other benefits for the last three months. Indonesia’s State Enterprise Minister, Dahlan Iskan, did not help build confidence when he said the airline’s losses would increase if it continued to operate.

Despite the dire situation Daryanto said: “The closure is only for the time being. We hope consolidation will be completed by the end of March at the latest.” However, analysts believe the carrier’s eroded political support points to a permanent shutdown - unless a permanent buyer comes to the rescue – and soon.