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Merpati to Dismiss 500 Employees

Government Cash Injections to be Used, in Part, to Reduce Bloated Staff Rosters.

(12/30/2006) Government-owned Merpati Nusantara Airlines has declared its intention to dismiss 500 employees early in 2007, once a promised cash injection of Rp. 450 billion (approximately US$49.45 million) is received from the State Treasury.

Quoted in the Indonesian-language Bisnis Indonesia, the Secretary to the Ministry of State-owned Enterprises (BUMN), Said Didu, confirmed that promised dismissals were part and parcel of the ongoing streamlining and rationalization for both Merpati and its counterpart Garuda Indonesia.

The cash injection, scheduled to occur on December 29, 2006, will be divided in several key areas of the Airline's urgent restructuring. 26% of the Rp. 250 million would be used in productivity-building steps; 40% would be use to service debt; and remainder for the "revitalization" of the company.

According to a Merpati spokesman, the 500 employees to be retrenched would be done on a "voluntary" basis by accelerating the pension period for some of the airline's workers.

The Airline's current payroll is painfully bloated, with 3,100 employees supporting a air fleet of only 24 airplanes serving 120 destinations.

Of the Rp. 450 million in emergency funds coming from State coffers, Rp. 120 million will be dedicated to staff reductions steps, with the remainder for debt retirement and armada renewal.