Indonesia: Charter airline Pelita Air may take over Garuda

JAKARTA, Oct 24 (Jakarta Post/ANN): The government is preparing a plan for state-owned charter airline PT Pelita Air Service to take over Garuda Indonesia’s domestic routes as courts pass decisions, both favourable and unfavourable, over the financially-ailing national air carrier.

The plan entails turning Pelita Air into a full-service airline in helping meet domestic flight demand once the government lifts travel restrictions, according to State-Owned Enterprises (SOE) Deputy Minister Kartiko Wirjoatmodjo as reported by bisnis.com.

The government devised the plan in the event Garuda fails to renegotiate leases and restructure its Rp 70 trillion (US$4.94 billion) debt.

“It looks like the government wants to maintain a direct involvement in an airline,” aviation consultant Gerry Soedjatman told The Jakarta Post.“Even if Garuda survives, it appears that Pelita will be the main airline in the government’s ownership.”

Gerry said Pelita Air had five years' experience in operating scheduled flights between 2002 and 2007, but the company chose to focus on its core business of charter flights.

He added that because the Covid-19 pandemic had forced many airlines across the world to sell their aircraft, it would be relatively easy for Pelita Air to expand its fleet.

Pelita has 23 aircraft as of 2019, according to its latest annual report. However, the carrier will also face competition for those aircraft, including from the newly launched low-cost Indonesian carrier Super Air Jet, which already plans to buy between 20 and 30 planes, Gerry said.

The contingency plan surfaced at a time when Garuda’s board is weighing options on how to deal with the insolvent national flag carrier, whose net loss swelled 25 percent annually to $902 million in the first half this year after extended mobility restrictions curbed air travel demand.

Garuda’s insolvency also led to several lawsuits, including from foreign aircraft lessors AerCap Ireland Ltd, Helice Leasing SAS and Atterissage SAS, as well as Indonesian cargo company PT My Indo Airlines.

AerCap Ireland withdrew its lawsuit in July after signing a deal with Garuda to relocate and fly nine leased Boeing 737 800NG aircraft in certain approved locations.

Meanwhile, Helice Leasing SAS and Atterissage SAS won their court battle in September, which meant Garuda had to pay all aircraft renting and leasing fees, back payments, plus interest and court fees to the two lessors.

On Thursday, the Central Jakarta Court rejected a debt postponement petition (PKPU) against My Indo Airlines, although the debt remained. Garuda and My Indo Airlines launched a cargo freighter service in 2019.

“Going forward, Garuda will stay focused on efforts to restructure its obligations and operations, as well as guarantee that flight operations for passengers and cargo run normally,” the flag carrier reported in a statement.

Novie Riyanto, the director general of air transportation at the Transportation Ministry, told the Post in a text message on Thursday that the government had issued the permit for Pelita Air to operate full-service flights.

The government recently reopened Bali’s Ngurah Rai International Airport to international flights, signaling the start of plans to recover air travel in Indonesia.

Garuda itself was reportedly mulling over a plan to massively reduce its fleet, especially widebody planes, by removing nearly 80 aircraft and canceling orders of over 90. The flag carrier would instead focus on developing its low-cost carrier subsidiary, Citilink.

Garuda is also slated to receive a Rp 3.5 trillion capital injection (PMN) in 2022 through the newly formed state-owned travel holding PT Aviasi Pariwisata Indonesia (Aviata).

Pelita Air, a subsidiary of state-owned oil giant Pertamina, booked a 20.16 percent increase in revenue to US$58.47 million in 2019.

While an overwhelming majority of its revenue came from air charter, the maintenance business accounted for 14 percent of Pelita Air’s revenue that year.

The charter airline also booked an US$863,000 net profit in 2019, reversing the net loss it booked in 2018.

For 2020, Pelita Air projected revenue to grow by 17.99 percent to $68.99 million; 72 percent from air charter, 14 percent from maintenance and the rest from other businesses.

Pelita Air and the SOE Ministry did not immediately respond to requests for comment.