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Cash Crisis Haunts National Air Carriers

As Cash Crisis Worsens, Merpati Uses Shift Work to Cut Payroll Costs. Garuda Manages to Meet Debt Repayment Schedule.

(1/10/2005) Merpati Nusantara Airlines (MZ) unable to obtain a Rp. 400 billion (approximately US$ 43.5 million) much-needed cash injection has been forced to assign staff to shift work in order to conserve cash flows.

Reported in the Indonesian-language Bisnis Indonesia, the 3,400 employees are being put on rotating shift work at least for the duration of the current low season January March.

The Office of the Ministry of State Owned Enterprises has asked MZ to reposition itself as a low cost carrier in order to compete in Indonesia's deregulated airline market.

MZ serves 332 cities flying 102 domestic and 7 regional destinations and achieved a total turnover of Rp. 1.57 trillion (approximately US$170.7 million) in 2004.

MZ's total current debt totals 1.5 trillion (Approximately US$160 million).

Garuda Meets Debt Repayment Schedule

The payment of an additional US$65.8 million dollars to creditors in November satisfied a total US$105.34 million in principal and interest payments scheduled for payment by Garuda in 2004.

Garuda's outstanding debt now stands at US$827.9 million.

Garuda's continuing ability to meet its debt obligations has been greeted optimistically in banking circles who point to the National Carriers success at streamlining and cost efficiency programs introduced over the past few years.

First Book Loss For Garuda Since 1998

Meanwhile, Garuda is widely expected to record its first operating loss since 1998 when final figures are released for 2004.

Despite higher revenues than 2003, escalating fuels costs and lower ticket prices necessitated by intense inter-regional competion will likely result in a loss of billions of Rupiahs for the Airline in 2004.

Hoping to improve their financial reports in 2005, Garuda is budgeting a 15% growth in sales revenues and a 10% growth in passenger loads in 2005.