Sempati Air ceased operations in early June, becoming the second airline casualty of the Asian currency crisis and the first in Indonesia.

Transportation minister Giri Suseno broke the news about the shutdown. 'It is impossible for Sempati to continue operations in the current difficult situation,' he told the Jakarta Post. Suseno says the government had offered Sempati what help it could, 'but its problem is so complicated that there is no other choice for it but to stop operations.'

Sempati's shareholders decided to return the airline's remaining five Boeing 737s to lessors and lay off most of its 700 remaining staff. Administrative personnel are staying on to wind up the airline's affairs. No decision has been announced about whether the carrier will apply for reorganisation, receivership, or liquidation. One of former President Suharto's sons, who controls 15 per cent of Sempati, vowed several months ago that he would not liquidate the company. The airline has been operating for 30 years.

Sempati's skies have been turbulent for the past three years, but grew much worse when Indonesia's rupiah started to tumble last July. Since then the airline has laid off 190 cockpit crew and 355 flight attendants, reduced its fleet, and suspended all overseas routes. In April it further trimmed domestic routes, closed lounges and city check-in counters, and reduced the size of its terminal space at Jakarta airport. At that time airline officials conceded those cuts would only keep the airline flying another four months. Since then Indonesia has experienced riots that brought down the government.

Sempati was hit hard by the 79 per cent devaluation of the rupiah last year. Almost all its earnings are in rupiah, but 80 per cent of its costs have been in US dollars.

Not only has Sempati, once Indonesia's largest private carrier, gone under but the prospects for other Indonesian airlines, including flag carrer Garuda, are also looking bleak. It is unclear at this stage what implications the change of government has for the Indonesian aviation industry according to Indonesian Air Traffic Association president Hadisoemarco Soelarto. The new government was due to meet with the surviving airlines for emergency talks at the beginning of June. However, Soelarto predicts the meeting is unlikely to bring about any changes in aviation policy. 'If the policy is right, why change?' he says.

Garuda is still trying to keep itself afloat although the sale and leaseback deals it was pursuing in May on four B747-200s and five Airbus A300s are unlikely to come to fruition. Taufik says the aircraft had been returned to service in a bid to maintain cashflow and that Garuda received no satisfactory offers for the aircraft.

Garuda is heading for privatisation as the International Monetary Fund leans on Indonesia, but it is not on the list of companies for immediate sale. One airline source says the government has missed the boat on privatisation - two years ago, Garuda's profile in the industry was higher and the government would then have been able to sell off part of the airline in a controlled privatisation, the source claims.

Other Indonesian carriers have suspended a large number of staff. Bouraq and Mandala are 'still trying to exist', says Soelarto. Both carriers have eight aircraft and limited services in place.

Malaysia's Saeaga Airlines was the first airline grounded by Asia's crisis when it stopped flying in March.

David Knibb/David Mann

Source: Airline Business