Indonesia's Minister of State-Owned Enterprises has flagged the merger of state-owned airline entities PT Garuda Indonesia Tbk and PT Pelita Air Service, trading as Garuda Indonesia and Pelita Air. Also included in the mix is Garuda's low-cost subsidiary, Citilink.
Citing the need for fleet efficiencies and affordable airfares, Minister Erick Thohir told Jakarta-based media earlier this week that he wants to reduce what he termed the "logistics costs" in the sector. He said the recent success of an efficiency program at state-owned port and logistics operator PT Pelabuhan Indonesia had encouraged him to turn his attention to the aviation sector.
"(The ministry) continues to reduce costs," said Thohir. "Pelabuhan from previously four companies into one company, logistics costs can be reduced to 11% from the previous 23%. We will try to merge Pelita Air, Citilink, and Garuda to reduce the logistics costs." Thohir says driving operational efficiencies at state-owned enterprises is his top priority.
The President Director of Pelita Air, Dendy Kurniawan, told Reuters that he welcomed the plan, which he stressed was still just a plan. PT Pertamina, the state-owned oil and natural gas corporation, owns Pelita Air. At one stage, the airline was being prepped to take over as the national flag carrier if Garuda Indonesia was liquidated, which was a possible outcome during its recent multi-billion dollar restructuring. According to ch-aviation fleets data, the carrier operates 13 aircraft, including seven A320-200s, one ARJ85, one ATR42-500, one ATR72-500, and three ATR72-500(F)s. Pelita has spent decades operating on behalf of Pertamina, flying its personnel and cargo around the country, but in 2022, it also commenced scheduled passenger flights.
Indonesia's Tempo outlet quotes the CEO of PT Citilink Indonesia, Dewa Kadek, as welcoming any merger, saying the shared resources would bring obvious efficiency benefits, mainly for the smallest of the three carriers, Pelita. The CEO of Garuda Indonesia and the publicly listed Garuda Indonesia Group, Irfan Setiaputra, cautiously supported the minister's plan, adding that it was in its early stages.
"As for issues about the plan to merge Garuda with Pelita Air, we'd like to convey that the discussion on steps to explore this corporate action is still ongoing," Setiapura said in an August 22 statement, adding that he welcomed any move that would strengthen Garuda's balance sheet following its restructuring. "We will certainly continue to communicate the projections of this merger process on an ongoing basis in case there is a more specific follow-up assessment of the realization of the strategic plan."
The Garuda Indonesia Group's fleet comprises 127 aircraft, including 69 (52 active) at Garuda Indonesia and 58 (41 active) at Citilink. Setiapura has previously said that after the restructuring, the low-cost Citilink would play a bigger role within the Garuda Group while the legacy carrier consolidated its operations and network.
Separately, the Garuda Indonesia Group had advised the Indonesian Stock Exchange (IDX) that a bid by Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446 Designated Activity Company to force a judicial review of Garuda has failed.
The two entities, which are Avenue Capital Groupontrolled special purpose vehicles, had placed an A330-300 and A330-200 at the airline and have proved outliers among the airline's creditors, consistently resisting the restructuring effort, which involved creditors, including lessors, taking a fraction of what they were owed as Garuda wiped USD9 billion worth of debt from its books.
According to the August 21 IDX filing, the Central Jakarta District Court dismissed the application by the two Greylag entities. The court said there is no legal remedy against an appellate court's decision connected to a court-supervised restructuring process, so the Greylag application must fail.
