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1. Merpati needs an injection of US$ 10 million. (Communication).

State-owned PT Merpati Nusantara airlines (MNA) needs an additional capital fo US$ 10 million to improve its performance. The country's second largest airline company after Garuda Indonesia has a debt of Rp 1.7 trillion and Rp 800 billion of which have been restructured, but it still has short term debt of Rp 1.1 trillion.

The company is considering to close a number of money losing routes to be able to compete in the tighter market, company. In the past the company was assigned to serve routes not on profitability basis, but now it has to operate as fully commercial company. The company said it will give priority to profitable routes like the Surabaya-Ampenan route. The route is considered highly profitable and it has no competitor in the route in most of other routes in eastern Indonesia.

In the past Merpati served all routes required by the government including pioneer routes which were subsidized by the government. Most or 74.2% of the routes served by Merpati so far are categorized as poor, 14.3% fair and 11.% highly profitable. Averagely 50% of the routes served by its jet planes are profitable and 50% money losing and 75% served by its propeller planes were money losing and 25% profitable

In the next three months Merpati plans to make consolidation to evaluate and determine its position. The management will improve basic operation, employee income and corporate culture and cash flow.

Old aircraft

Currently MNA has 35 aircraft including F-100, F-28, F-27, Casa 212, Twin otter and Boeing 737-200. They are all more than 10 years old. The management plans to reduce the type to only four for efficiency, and with the additional investment it hopes to replace some of the aircraft.

Merpati to avoid unhealthy competition

MNA has decides not to serve crowded routes to prevent unhealthy competition such as the Jakarta-Medan and Jakarta-Surabaya routes. Competition has forced some operators to cut tariff by 50%.

MNA has served the routes before, but lately it decided to give up competing in those routes after the government issued license for a number of new airline companies to serve the routes.

MNA president Hotasi Nababan said the risk is too high in the routes. Among five airline companies serving the Jakarta-Surabaya route none has reported profit with discount as high as 50% New operators like Lion Air, Bayu Air, Kartika Air, etc. serve the Jakarta-Surabaya and Jakarta-Medan routes more for prestige than for profit.

In mid July Merpati started serving a new route from Pekanbaru to Malaka. It plans to serve the route three times a week in the first three months. It has set a target for load factor at 70%. The passengers in the routes include students 35%, holiday makers 30%, medical visitors 25% and business visitors 20%.

Earlier Malaysia's Pelangi Airways served that route but quit last year after failing to reach a load factor target.

Merpati uses 50-seater Fokker to serve the route. The route is considered potential by Merpati especially after the signing of cross border trade cooperation agreement between Malaysia and three neighboring provinces, North Sumatra, West Sumatra and Riau.

Flying to Malaysia is not new for Merpati. Earlier it has opened routes between Medan and Pahang and between Medan and Ipoh. Merpati is considering opening new routes such as Pekanbaru-Johor and Padanf-Maalaka routes.

The opening of the new routes to neighboring countries is also in preparation for the the full implementation of the free trade area scheme of AFTA in 2003 that will need more frequent flight services between Indonesia and its neighboring countries like Malaysia, Singapore and Thailand.
Aircraft operated by MNA

Type of aircraft Total

F-100 3 units
F 28 7 units
F-27 5 units
Casa-212 5 units
DHC-6 5 units
B 737-200 6 units
Total 31 units

Source: Department of Communication
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Title Annotation:Merpati Nusantara Airlines
Comment:1. Merpati needs an injection of US$ 10 million. (Communication).(Merpati Nusantara Airlines)
Publication:Indonesian Commercial Newsletter
Article Type:Brief Article
Geographic Code:9INDO
Date:Aug 13, 2002
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