Merpati Could Be Getting Its Wings Back


NOVEMBER 15, 2018

Jakarta. Merpati Nusantara Airlines has secured a vital court ruling and a commitment from a prospective investor that may allow it to resume operations as early as next year.

The Surabaya Commercial Court in East Java on Wednesday granted Merpati's proposal to delay debt repayments to its three main creditors, allowing the airline to avoid bankruptcy and liquidation of its assets.

Intra Asia Corpora, a company controlled by local businessman Kim Johanes Mulia, has meanwhile agreed to inject Rp 6.4 trillion ($434 million) into the now dormant state-owned airline to resume its business.

After having served some of the most remote parts of the archipelago for 52 years, Merpati ceased operations on Feb. 1, 2014 after it succumbed to Rp 7.9 trillion in debt it had accumulated over a decade of fierce competition against budget airlines, including Lion Air and AirAsia.

The company had since settled its obligations to employees and some debtors, but remained locked in a legal battle against state-controlled lender Bank Mandiri, state-asset manager Perusahaan Pengelolaan Aset (PPA) and the Ministry of Finance, to whom it owed Rp 3.3 trillion, to put the debt repayments on hold to buy time, find new investors and resume operations.

"The panel of judges approved the peace proposal submitted by Merpati," PPA corporate secretary Edi Winarto said on Wednesday.

The court's approval of the proposal allows Merpati to focus all its effort on regaining its operating license and procuring new aircraft, Edi said. Under Indonesian regulations, airlines automatically forfeit their operator certificates after 12 consecutive months of inactivity. The Ministry of Transportation said Merpati will get its license back if it submits a five-year business plan, pays the prescribed fees and fulfills other administrative requirements.

"We hope that by 2020, Merpati will be able to fly again," Edi said.

Merpati president director Capt. Asep Ekanugraha said on Sunday that the airline was confident that it could recommence operations in 2019.

"The company plans to start flight operations next year from Biak, Papua Province, which has been one of Merpati's main bases," Asep said, as quoted by state-run news agency Antara.

He said the airline plans to acquire Russian-made aircraft – which he declined to identify – and focus on serving routes in eastern Indonesia. Merpati will also avoid head-on competition with low-cost airlines, he said.

"We've learned from the company's downfall and it's time to look forward to a better future," Asep said.

However, at least one of Merpati's three creditors does not seem to share in the optimism.

"The Ministry of Finance is concerned about a credible work program and business plan. So the court's agreement to postpone debt repayment obligations does not mean everything is settled," Isa Rachmatarwata, director general of state assets at the ministry, said on Wednesday.

Isa said the finance ministry is currently neither for, nor against any investors who plan to inject funds into the airline. "We just want to see a proposal from more credible investors," he said.

Intra Asia Corpora and Merpati signed a conditional capital increase agreement in August for a Rp 6.4 trillion cash injection over the next two years, as part of the airline's efforts to settle its debt.

Intra Asia owner Kim, who has airline, insurance and general trade interests, has been involved in some controversy over the years. In 1994, he acquired ailing textile company Detta Marina and used it as a vehicle to obtain a subsidized export loan facility from a state-owned lender.

It later emerged that the companies to which Detta Marina claimed to have exported its goods had been fictitious. He was subsequently prosecuted and imprisoned for fraud, but released after his lawyer, the late Adnan Buyung Nasution, argued that the state had not suffered any losses, as Kim had repaid the loan in full.

Kim was also behind now-defunct Kartika Airlines, which ceased operating in 2010, not long after it announced the $840 million purchase of 30 twin-engine regional jets from Moscow-based Sukhoi Civil Aircraft.