Both Garuda Indonesia and Merpati Nusantara Airlines hope to benefit from their separation, which now awaits final approval from Indonesia's President Suharto. Pushed together by government edict 18 years ago, the two carriers have apparently agreed on the terms of a divorce, allowing Merpati to regain its independence by the end of the year.
Now Garuda appears to be on the fast track toward privatisation, it is looking forward to cutting loose from a subsidiary that lost nearly US$40 million last year and US$38 million the year before. Not only will separation give a big boost to Garuda's balance sheet, but it can focus on building dedicated domestic feed.
In the original scheme, Garuda was to ply global routes and leave domestic service to Merpati. In fact, Garuda had slowly been building up its own domestic services before the split with Merpati was finalised, and further underlined its intentions in June when it replaced an order for one B747-400 and nine B737-400s with 17 B737-300/500s.
Conversely, Merpati looks forward to when it is no longer Garuda's dumping ground for old aircraft and is can rationalise its fleet from a ragtag of 10 different types. The carrier will also want to expand its own infant international network beyond its recently launched Hong Kong and Melbourne services. Its biggest worry now is growing domestic competition from Garuda and private carrier Sempati. If Garuda's privatisation goes ahead, Merpati could be the only state-owned airline left with unprofitable missionary routes.
Source: Airline Business