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Indonesia's Merpati Airlines hopes to resume operations in 2019

Restart depends on reaching agreement on $734 billion debt

Merpati Nusantara Airlines suspended operations in 2014 after running out of cash to pay its employees.   © Reuters

JAKARTA -- Indonesia's state-owned Merpati Nusantara Airlines, which stopped flying in 2014 due to financial problems, hopes to resume operations next year, the company's president said Monday, revealing that the airline has received a promise of financial backing from a domestic investor.

But whether the carrier can take to the air again will depend on settling with creditors over its 10.95 trillion rupiah ($734.2 billion) in debt.

"We are well-assured and optimistic that we will operate again next year," Asep Ekanugraha, Merpati's president director, told local media. He said the company has received a commitment for 6.4 trillion rupiah from Intra Asia Corpora, an investment group.

Asep also said that if the airline does start operating again it will not fly planes made by Boeing and Airbus, but will instead "use Russian-produced aircraft, but... not the ones that crashed on Mount Salak." In 2012, a Sukhoi Superjet 100 crashed into a mountain in West Java Province during a demonstration flight, killing all on board.

Merpati, founded in 1962 as Indonesia's second state-owned airline, after Garuda Indonesia, operated domestic flights, as well as international flights to East Timor. But it suspended service in 2014 after failing to pay its employees and encountering cash-flow problems.

The airline is currently seeking a deferment of its debts at the Surabaya Commercial Court. Should an amicable resolution be reached with its creditors on the 10 trillion rupiah debt, Merpati will be free to move ahead with the permitting process, and resume flying once it is complete.

At the previous court hearing in October, four out of 85 creditors opposed a resolution. The Finance Ministry, which is owed 2.66 trillion rupiah by Merpati, according to local media, is also opposed. A ruling by the court is expected November 14.

"Merpati has tried its best to convince creditors to approve the restructuring proposed by the company," said Asep. "It is our hope that the panel of judges can decide ... because the restructuring proposal that we are going to run depends on the acceptance of peace by the creditors."

Finance Minister Sri Mulyani Indrawati told reporters that anyone who wanted to inject capital into the airline needed to have a clear background, as well as the expertise to help Merpati.

"Of course I hope that they have credibility, because what I want is always a track record," she said, adding that she did not want investors without expertise, adequate technology, funds, or those hoping only to raise their public profile.

Merpati, like its Indonesian peers, has a patchy safety record. A crash in 2011 killed 25 passengers, while a hard landing in 2013 left five people with serious injuries.

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