Garuda Finalizing Acquisition of Star Air

(6/22/2009)

Unsuccessful in its bid to reach an agreement that would allow the purchase of 100% of the shares of Linus Airways, the national air carrier Garuda Indonesia is reported to be near finalizing an agreement to purchase Star Air. Both Linus Airways and Star Air ceased operations in 2008. Garuda is seeking to purchase the operating licenses of an existing Indonesian carrier as a "fast track" solution to the lack of an airline operating license and other licenses needed for its low-cost subsidiary Citilink.

Quoted in Bisnis Indonesia, the Director General of Civil Aviation, Herry Bakti S.Gumay, said, "at this moment, Garuda is processing the purchase of Star Air, an airline deemed to fit the criteria set by Garuda."

In selecting Star Air over Linus Airways, Herry explained that the state-owned Garuda considered the purchase of Star Air as a cleaner purchase, less encumbered with debts and in possession of a route system that can be used by Citilink.

Herry told the press he supports the acquisition of Star Air, providing the purchase can be finalized before June 25, 2009. "Because on June 25th the Airline Operating License (Surat Izin Usaha Penerbangan) of Star Air will be automatically revoked after one year on non-operation," he explained.

The Civil Aviation Department is reportedly poised to finally revoke the operating licenses of 17 long-grounded Indonesian airlines, including the Bali-owned Air Paradise International.

Star Air was established under a license obtained by travel entrepreneur Ale Sugiarto together with PT Tri Pusaka Abadi and PT Habitat Saga Perkasa. Prior to its cessation of services in 2008, Star Air operated four Boeing 737 aircraft flying on routes between Jakarta – Pekanbaru, Jakarta – Balikpapan, Jakarta Medan, Jakarta – Surabaya, and Jakarta-Denpasar-Kupang.

Speaking to Bisnis Indonesia, the Chief Operating Office or Garuda, Emirsyah Satar, admitted that he is in the final process of acquiring one of Indonesia's grounded carriers, but refused to confirm if Star Air was the leading candidate for that purchase. He did explain to the press that whichever airline is finally purchased, it will offer legal, route and other business advantages to Garuda Indonesia.

Air Operating Certificate Soon to Be Revoked

Tri S. Sunoko of the Director General of Air Transportation told Bisnis Indonesia that Star Airs air operators certificate has already been revoked by the government. However, the airline's Operating License (SIUP) remains valid until June 25, 2009.

Another Garuda source confirmed that a deal was nearly done with Star Air who have put forth a lower price for its business than other possible candidates, such as Linus Airways.

Some airline observers are predicting that the new name of the subsidiary of Garuda will become Star Air Citilink, once the acquisition becomes final.