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Indonesia's Pertamina demands debt-laden airline Merpati pay cash for fuel
January 29, 2014 / 5:01 AM / 4 years ago

Indonesia's Pertamina demands debt-laden airline Merpati pay cash for fuel

JAKARTA, Jan 29 (Reuters) - Indonesian state-owned energy company Pertamina will only supply jet fuel to debt-laden PT Merpati Nusantara Airlines if it pays in cash, throwing into question the airline’s ability to remain operational.

Merpati has twice breached its maximum debt limit allowed by Pertamina and now owes around 165 billion rupiah ($13.5 million), the oil and gas company said in a statement late on Tuesday.

“The maximum debt limit commitment was breached again, which shows that there has not been an improvement in the debt payment efforts,” Pertamina said.

Merpati has had to pay for jet fuel in cash from Jan. 15, the company added.

Merpati had total debt of more than 6 trillion rupiah ($492.2 million), owed to Pertamina as well as other companies including airport operators PT Angkasa Pura I and PT Angkasa Pura II, local media reported late last year.

The Indonesian government tried last year to sell the struggling state-owned airline to strategic investors and is currently overseeing a restructuring of its operations.

Merpati, which has also seen a change in management, mainly plies domestic routes to the eastern regions of Indonesia.

Merpati was Indonesia’s seventh largest domestic carrier by seat capacity, industry consultancy CAPA said in November. Its troubles show how smaller airlines in Asia are finding it hard to operate in an extremely competitive market. ($1 = 12,190 rupiah) (Reporting by Eveline Danubrata in JAKARTA; Additional reporting by Anshuman Daga in SINGAPORE; Editing by Tom Hogue)

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