The government has agreed to inject some IDR 350 billion into the struggling airline. However, this is going to come at some significant cost to the workforce. The government is demanding productivity and efficiency measures be put in place that are to conceivably allow the airline to turn its business fortunes around. What exactly are these productivity and efficiency measure you ask? The government requires that Merpati shed some excess feathers, in this case some 1,300 employees of its current 2,590 employees. It is worth noting that some IDR 220 billion of the bail out fund is to be directed to fulfilling the company's obligations with regard to severance pay for those employees that are to be terminated.
Some of the pilots that are to be terminated will not be lacking for new employment as it is likely some, at least, will be picked up by Garuda which is currently short of qualified pilots.
Merpati was established in 1962 as a subsidiary of Garuda and was spun off in 1997. Merpati was conceived as an airline that would serve pioneering routes. Pioneering routes are defined in Indonesian legislation as routes that serve remote areas or areas where no other form of transportation is possible. The legislation also notes that these routes are likely to be less profitable and perhaps not even profitable at all. Nevertheless, with the idea of pioneering routes at the forefront of the government's thinking the base of Merpati's operations are going to be moved from Jakarta to Makassar in Sulawesi.
Merpati currently operates 19 aircraft. It could operate more but does not have the money available to repair all of the planes it has in its current fleet.
In order to try and make this attempt a successful one there has been a new President Director appointed to oversee the expected improvements in the management of Merpati.
It will be interesting to see how many more chances the government gives Merpati to revive its fortunes before trying to sell it off to an interested investor. There is great potential for well-managed regional and budget airlines in Indonesia. The key here is "well-managed" and that has not always been a feature of the airline industry in Indonesia.