The Indonesian Ministry of Transportation (MOT) has granted Indonesia AirAsia (QZ, Jakarta Soekarno-Hatta) and several other carriers an eight week extension to meet new recapitalization requirements following the expiration of a July 31 deadline.
The Jakarta Globe reports the MOT gave its consent after Indonesia AirAsia president director Sunu Widyatmoko assured government of their commitment of securing approval for a capital injection from shareholders by September 30. The AirAsia (AK, Kuala Lumpur International) unit has announced plans to sell perpetual bonds in a bid to raise over USD200 million.
The MOT, however, has barred the affected carriers from opening up any new routes for the duration of the extension.
In the wake of an industry-wide audit, the MOT last month gave thirteen local carriers - Indonesia AirAsia, Batik Air (a subsidiary of Lion Air), Cardigair, Transwisata Air, EastIndo, Survai Udara Penas, Air Pacific (Indonesia), Jhonlin Air Transport, Asialink Cargo Express, Ersa Eastern Aviation, Tri-M.G. Intra Asia Airlines, Nusantara Buena Air, and Manunggal Air - until July 31 to exit negative equity (debts are greater than the value of assets) or risk losing their operator's licences.
Batik Air has reportedly been able to meet the requirement by converting some of its debt to equity.
In a bid to improve aviation safety, Jakarta this year promulgated a new law - No. 45/2015 - which defines the minimum prescribed capital airlines operating with various capacities must have.
Under the legislation, scheduled airlines operating planes with a capacity of 70 seats or more are required to have a paid-up capital of at least IDR500 billion (USD37.5 million) while those with aircraft with 30 seats or less must have a paid-up capital of at least IDR300 billion (USD22.5 million). Cargo operators are required to be capitalized to at least IDR100 billion (USD7.5 million).
