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Government Suspend Merpati's Tax Debt

Tax Payment Suspension Part of Overall Restructuring Program to Rescue Troubled State-Owned Domestic Carrier.

(8/18/2008) As reported on balidiscovery.com, the government is taking dramatic moves to save PT Merpati Nusantara Airlines (MZ) from imminent financial collapse. In addition to cash relief of US$32.6 million and plans to lay off 50% of the carrier's work force, the government has now agreed to delay the payment of Rp. 56 billion (US$6.1 million) in outstanding taxes due from MZ as part of the overall restructuring programming.

The State Minister for State-owned enterprises, Sofyan Abdul Djalil, told Bisnis Indonesia that the temporary tax reprieve has been agreed with the Minister of Finance.

According to Sofyan, the restructuring of MZ will be handled by PT Perusahaan Pengelola Asset (PPA), a government-owned asset management company. The taxes owed by MZ have been placed in abeyance to allow the airline the opportunity to complete the termination of 1,300 workers, a central core of the airline's restructuring. When the terminations are completed, MZ will be left with 800 employees; 500 dedicated to airline operations and 300 at the Merpati Maintenance facility.

A Shift from Jets to Turbo-props

MZ plans to stop operating jets and focus its future operations on less-expensive-to-operate tubro-prop equipment flying on pioneer routes.

How Much Debt?

MZ's recently appointed managers are busily trying to asses the true extent of the airline's indebtedness. Meanwhile, some observers place MZ's debt at Rp. 2.2 trillion (US$239 million) against an asset base of only Rp. 1 billion (US$108,000). In its current un-restructured state it is estimated that MZ is losing Rp. 20 billion (US$2.2 million) each month.

Related Article

[Merpati Nusantara Airlines: Struggling to Survive]