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Bali News

Merpati Cash Crisis Continues

State-owned Airline Need for Significant Cash Injection Deepens.


Bali News: Merpati Cash Crisis Continues
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(5/10/2004)

Merpati Nusantara Airlines (MZ) - the state-owned carrier that provide the only air link to many of Indonesia's most remote regions, is in serious need of a cash injection to continue to operate. That was the picture painted by the Managing Director of MZ, Mr. Hotasi Nababan, in recent testimony before Commission IV of the National Parliament in Jakarta.

The Airline faces debts of Rp. 1.3 trillion (approximately US$153 million) and difficulties in securing capital to upgrade their armada and keep apace of growing competition in the domestic air travel market.

Mr. Nababan warned the legislators that if current conditions continued and the airline did not get an injection of capital, the economic condition of the carrier will continue to worsen.

He told the officials attending the hearing, "Merpati needs support to convert government debt into share equity. We are also taking steps to make a share offering to secure new funds. Beside those steps, we hope that the company can eventually go public, but for now the priority it loan restructuring and the need for fresh cash."

Against its debt load of Rp. 1.3 trillion on its balance sheet MZ only has Rp. 500 billion (approximately US$58.8 million) of assets. Because of its negative equity position and limited working capital, Mr. Nababan feels that privatization of the Airline is the only realistic solution for the Airline.

The Airline's Managing Director went on to explain that while in 1993 MZ controlled 41% of the domestic air market, that figure has decreased to only 18% today.

Legislators, meanwhile, were less than receptive to Mr. Nababan's call for privatization. Eager to net money for the cash-starved treasury, lawmakers said they would only support privatization when MZ's equity position improved sufficiently to ensure a higher price for the Government in any eventual sale.


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