Indonesian Airliner Merpati Nusantara Offers 35% of its Shares to Investors
State-owned airline Merpati Nusantara Airlines will sell between 30 and 35 percent of its shares to domestic or foreign investors. The government feels the need to sell a stake as the airline has a debt of about IDR 6 trillion (USD $603 million). Most of this debt, about IDR 4 trillion, is held in Indonesia (government and state-owned enterprises). As such, the company is in need of new funds to restructure its business model. Last year, the airline carried 2.1 million passengers.
Although Merpati fails to carry a large quantity of passengers such as other top airlines in Indonesia - Lion Air (23.9 million), Garuda (14.1 million), Sriwijaya Air (8.1 million), and Batavia Air (6.0 million) - the company does have a strong brand in Indonesia. Moreover, it is the airline that services the most routes in Indonesia (including the more remote areas).
Merpati Nusantara Airlines:
| 2010 |
2011 | 2012 | 2013F | 2014F | 2015F | |
| Air Passengers (million) |
2.36 | 2.19 | 2.11 | - | - | - |
| Revenue (in billion IDR) |
- | 3,001.7 | 4,277.0 | 5,028.9 | 6,070.5 | 6,822.0 |
| Net Profit (in billion IDR) |
- | -164.3 | 30.6 | 104.2 | 22.9 | 192.0 |
Source: Investor Daily
The aviation industry in the Asia-Pacific region has shown robust growth in recent years. This region is one of the world's fastest growing regions regarding air travel. In the next 20 years, an average annual seven percent growth of air traffic is expected. Indonesia, the current engine of economic growth in Southeast Asia and one of the largest economies in the Asia-Pacific, contains a burgeoning middle class that is increasingly using airplanes for domestic and international transport. Being the world's largest archipelago (containing thousands of islands), air travel is a logical option for fast travel across the country. Moreover, Indonesia's investment grade status makes it cheaper for domestic companies to finance expansion.
| 2010 | 2011 | 2012 | |
| Airline Passengers Indonesia |
58.3 | 66.0 | 72.5 |
| - Domestic (in million) |
51.7 | 58.8 | 63.6 |
| - Foreign (in million) |
6.6 | 7.2 | 8.9 |
Source: Ministry of Transportation
Moreover, a political development will provide new opportunities in Southeast Asia's aviation sector from 2015 onwards. The establishment of the ASEAN Economic Community, which aims for the member countries to become a more cohesive political and economic unity, stipulates the liberalization of air travel between its member countries starting from 2015. As other ASEAN countries contain competitive airline companies, such as Malaysia's AirAsia and Singapore Airlines, it will be vital for Indonesian airlines to be fully prepared to meet this competition.
Matters that are frustrating efficiency of Indonesia's aviation business are shortages of human resources (for example pilots), inadequate air traffic management as well as facilitating infrastructure for air travel. The latter includes the lack of appropriate sized airports (including runways) and tollways/railway tracks to and from the airports.
Another stumbling block is that fierce competition has seriously reduced profit margins for all airlines, while capital investments remain high. In combination with poor management, this has taken a few victims in recent years: Mandala Airlines (a takeover by private equity firm Saratoga Capital and Tiger Airways eventually saved the company), Pacific Royale, and Batavia Air.
Those who are interested to invest in Merpati Nusantara Airlines can contact Indonesia Investments here for more information or for proposals.