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A Pigeon Looking for a New Roost

Overburdened with Debt, Government Seeks to Divesting Itself of Merpati Nusantara Airlines

(7/14/2013) Indonesia’s Minister of State-Owned Enterprises Dahlan Iskan has confirmed the Government’s intention to sell off the shares of Merpati Nusantara Airlines as a last-ditch step to save the debt-ridden airline.

Quoted in Bisnis.com, Dahlan said before meeting the National House of Representatives (DPR) on Thursday, July 11, 2013, “The option of releasing shares by inviting a strategic investor is being done because efforts at restructuring the company have not yielded satisfying results.

The decision by the government to divest itself of the troubled airline remains one of the few remaining steps available to save the air carrier. Candidate investors are invited declare their intent and submit proposals to the Ministry of State Owned Enterprises (BUMN) – the agency that holds Merpati’s shares on behalf of the Government.

He went on to explain that in addition to simply declaring an interest in acquiring Merpati investors should also summarize their vision for rescuing the national flag carrier.

The BUMN has tried repeatedly to restructure the Airline’s business through cash injections, staff reductions, relocation of the carrier’s head office and rescheduling the debt of Merpati through a debt to equity swap.
In December 2011, Merpati received a cash injection from the government totaling Rp. 561 billion (US$5.6 million). A 2012 request for an additional cash injection of Rp. 250 billion (US$2.5 million) remains unanswered by the government to this day.

A restructuring team has been unsuccessfully trying to deal with major creditors that include PT Pertamina (fuel), PT Angkasa Pura I and PT Ankasa Pura II (airport charges) and PT Perusahaan Pengelola Asset. There are the additional complication of subsidiary loan agreements owed to the government, debt to the private sector and to aircraft leasing companies.

Dahlan freely admits that Merpati Nusantara’s financial condition has become critical with debts now approaching Rp. 6 trillion (US$600 million).

Earlier, it was reported in the press that a toll road company was interested in purchasing Merpati’s shares. “But, after we investigated there is apparently no letter or proposal that has been submitted to that effect,” said Dahlan.

Dahlan now waits for a serious expression of interest from a party interested in acquiring Merpati Nusantara Airlines. “Whoever that may be, whether it be a foreign or domestic company, please let us know. The new investor can be from any sector and does not necessarily need to be an airline,” urged the Minister. 

Minister Dahlan’s invitation to foreign investors is apparently preconditioned on the understanding that foreign ownership of any Indonesian airlines cannot exceed 49% of all shares.