Indonesia’s Minister for State-Owned Enterprises (SOEs) Erick Thohir revealed intentions to merge the country’s three state-operated airlines to enhance services and reduce expenses.
The inspiration has been drawn from the success of four state-owned port operators, Pelindo 1, 2, 3, and 4 resulting in a 50 per cent reduction in overall costs.However, many industry insiders have a different opinion, as they doubt on the success of the idea.
If the proposal goes to the next stage, the government would merge the state-owned carriers, national flag carrier Garuda Indonesia, its low-cost subsidiary Citilink and Pelita Air, the airline arm of state-owned oil giant Pertamina.
As per the Garuda Indonesia President Director Irfan Setiaputra , the merger initiative is still in the discussion stage and has not yet come to a conclusion. Because, everything is being analyzed and studied carefully.
Irfan said, they are exploring in depth the various business synergy opportunities that can be presented together.
Then, it can optimize the profitability aspect of performance while strengthening the business ecosystem of the air transportation industry in Indonesia to bring sustainable benefits to the community.
He added that this was also a positive signal for efforts to strengthen the company's fundamental performance, especially after restructuring.
“SOEs need to keep bringing down costs. Pelindo has been merged from four companies into one. We are also pushing for Pelita Air, Citilink and Garuda Indonesia to do the same to bring down costs as well,” Erick said in a statement.
In 2021, Garuda Indonesia and Citilink together commanded a third of the domestic passenger aviation market, according to the Indonesia National Air Carriers Association (INACA).
Erick mentioned the plan during a discussion with members of the Indonesian diaspora in Tokyo, organised by state-owned lender Bank Negara Indonesia.
He added that Indonesia’s state-owned airlines had 550 airplanes, 200 short of the official target. Merging the airlines, he said, could help the country meet the target figure.
Citilink President Director Dewa Kadek Rai told The Jakarta Post that there was a plan to merge the three state-owned airlines and that a team at the SOEs Ministry was handling it. He noted that the merger was expected to happen this year.
In June of last year, Garuda Indonesia acquired creditors’ approval to restructure IDR142 trillion, about USD9 billion, of liabilities. Garuda had previously been declared technically bankrupt by the SOEs Ministry for its inability to service its debt. In June of this year, Garuda reported a net loss of USD76.5 million.
As per SOE Minister Erick Thohir. This effort is made to reduce logistics costs and ease the business world in Indonesia. Including efficiency which is currently the main agenda of these state-owned companies.
"SOEs continue to reduce logistics costs. Pelindo from 4 (companies) to one. Previously, logistics costs reached 23 percent, now it is 11 percent. We also strive for Pelita Air, Citilink, and Garuda to merge to reduce costs," he said through an official statement, Tuesday, August 22, 2023.
