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The Eve of Adam Air?

A World of Woe for Adam Air from Regulators and a Major Shareholder. Is the Party Over for the Indonesian Low Cost Airline?

(3/16/2008) Following the latest safety incident involving an Adam Air flight that slid off the runway at Batam's Hang Nadim Airport on March 10, 2008, the Indonesian Department of Civil Aviation has threatened to "freeze" the airlines Air Operating Certificate if the carrier's management is unable to quickly correct its safety management shortcomings.

Several passengers suffered injuries in the Batam mishap, but no fatalities were reported.

The Minister of Transportation, Jusman Syafii Djamal, told Bisnis Indonesia that if improvements are not made soon, he will lower their safety rating of Adam Air to "category III" the lowest safety rating which could lead to a closure of the airline.

In reviewing the latest mishap of Adam Air the Minister directed his safety inspectors to focus on the pilot's role in the bad landing who reportedly landed his aircraft with less than 1,000 meters of visibility.

Adam Air currently operates a fleet of 23 aircraft composed entirely of Boeing 737 aircraft.

Findings on January 1, 2007 Crash Expected Soon

Members of the National Transportation Safety Committee have announced that the final results of their investigation into January 1, 2007 crash of an Adam Air flight will be released sometime in the next two weeks. That crash, which saw an airplane disappear into the ocean near South Sulawesi, claimed the lives of 102 passengers and crew.

The plane's location was not determined until many days after the plane was reported lost and the black box recorder was only recovered and read 9 months after the crash.

In compiling the final crash report Indonesian authorities have received assistance from the U.S. National Transportation Safety Board.

Deeper Troubles Ahead for Adam Air?

Amidst the threat of a government crackdown, it now appears that Adam Air problems have now worsened with the carrier facing a severe cash crunch due to the "resignation" of a 50% partner in the business - PT Bhakti Investama.

Bhkati Investama, which owns its investment in the airline through Global Transport Services, have told the press that they have seen little improvement in the airline's safety performance and operational transparency.

Press reports state that lack of new cash injections by Global Transport are causing payments to suppliers to be missed and precipitating demands from aircraft leasing companies for their planes to be returned.

Bhakti's decision to cease financial support to Adam Air may also be connected with recent announcements by the investment bank to create a new full-service airline Eagle Air operating 25 planes on regional and Asian routes.

Bhakti Investment is a large investment bank with substantial interests in the Indonesian media.

Airline Denies Imminent Shutdown

The Head of Corporate Communications for Adam Air, Danke Drajat, has issued a statement denying the airline is on the verge of a shutdown due to financial difficulties. Drajat did, however, confirm that only 14 of the airlines's 23 aircraft are currently operating, with the remaineder undergoing "routine" inspections. Speaking to Bisnis Indonesia, he said: "If there are those who say we (Adam Air) will stop operations next week, that is only gossip. The turth is that we have indeed reduced flight frequencies to several destinations because several of our planes our undergoing routine inspections."

He denied that reports that some agents have stopped selling Adam Air tickets from March 16th.