Story ID: WDindonesia02112015
Indonesia Plans To Force Airline Mergers
By: William Dennis
Caption: Authorities cite need for more efficient oversight
Word Count: 328
As part of the plan to better monitor its aviation industry, Indonesia aims to compel local commercial carriers operating fewer than five aircraft to participate in mergers by March 2017.

The mergers will involve eight passenger, cargo and charter carriers with a total of 20 aircraft. The policy affects passenger carriers Aviastar Indonesia and Air Regional, each of which flies three airplanes, and Linus Airways, which operates two. It also covers cargo carriers Cardig and Manunggal Air Service, which operate three airplanes apiece, and Republic Express Airlines and Auvia Air, which fly one each. The one affected charter carrier, Sabang Merauke Raya Air Charter, flies four airplanes. Each merger must result in a fleet of at least five aircraft.

According to an official of the Ministry of Transport (MOT) in Jakarta, Liana Agus, the consolidation will reduce the number of airlines operating in the remote parts of the country but will create a bigger market for each merged carrier.

The exercise aims to reduce the number of commercial carriers operating in the sprawling archipelago from the current 42 to 38.

An earlier plan, initiated in 2009, called for airlines to operate a minimum of 10 aircraft, at least five of them owned, by January 2012. Aiming to reduce the number of airlines from 53 to 28, authorities extended the deadline by another year when the smaller carriers appealed for more time due to funding problems. Nine of the carriers have since gone out of business, while five others failed start-up attempts due to lack of funds.

Agus acknowledged that the original plan failed miserably. In 2007-2008 about 80 airlines operated across Indonesia. Many went bankrupt due to spiking oil prices while others saw their air operator certificates revoked due to safety issues.

The MOT has since made a concerted effort to not hastily grant AOCs to new applicants. Companies applying for an AOC now must submit their business plan and proof of financial standing.