Indonesian government reiterates support for ailing Merpati

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The Indonesian government has reiterated its support for Merpati Nusantara Airlines, despite mounting losses at the company.

"We have received confirmation and assurance from the government, through the minister of state-owned enterprises Dahlan Iskan, that Merpati will continue to operate," the airline's president director Rudy Setyopurnomo says in a statement.

The government intends to convert Merpati's debt into shares and has formed a team to implement the plan. The team will also lobby members of the country's house of representatives to approve the measure.

Merpati's business plan is being analysed by a separate "restructuring and revitalisation" team from the state's asset management company. Future cash and capital injections from the government will be given based on the analysis done.

In recent months, the airline has signed several memoranda of understanding (MoU) with unspecified domestic and international companies. The MoUs are now being studied by the carrier in hopes of implementing them as formal cooperation agreements. This includes the delivery of Airbus aircraft as well as human resource training.

Setyopurnomo adds that the airline was able to achieve a load factor of 85% during the low season and reiterated that shutting it down will require approvals from various ministries and the house of representatives itself.

Merpati posted losses of Indonesian rupiah (Rp) 750 billion ($77 million) in 2011, and received an equity of infusion of Rp516 billion from the government in the same year to repay part of its debt, reduce cashflow deficit and improve its competitiveness.

Plans to acquire up to 40 Comac ARJ21s and 10 Sukhoi Superjet 100 regional jets remain uncertain after the appointment of Setyopurnomo in May 2012, who mandated that all new aircraft purchases will be put on hold until the airline's load factor hits 90%.

The carrier has faced intense competition in recent years from fast-growing, privately-owned airlines. To cope, it has tried to shift its focus to operating regional services in the remote eastern regions of the country.