http://www.thejakartaglobe.com/home/debt-forces-mandala-to-ground-all-planes/416672
Debt Forces Mandala to Ground All Planes Francezka Nangoy & Kanya Stira Sjahrir | January 13, 2011 Mandala planes parked at Soekarno-Hatta International Airport. Due to financial problems, the airline had been operating just five aircraft. (JG Photo/Jurnasyanto Beset by mounting debt and cut-throat competition in Indonesia's skies, budget carrier Mandala Airlines is ceasing its operations as of today. "Mandala Airlines will temporarily shut down its services as of Thursday, January 13, 2011. This action is taken to be able to concentrate on corporate restructuring in order to save the company," Mandala's president director, Diono Nurjadin, told a packed news conference on Wednesday. "We are having a management problem," he added. A grim-looking Diono said the airline on Wednesday had filed for a stay in the repayment of its debt at the Central Jakarta Commercial Court, which handles bankruptcies. He said it needed the stay to allow for the restructuring and now has 45 days to come up with a new business plan. "However, we expect that Mandala can get back to business before the 45 days are over," he said without elaborating. He also said Mandala was convinced it could attract new investors to inject fresh funds into the airline, without giving details on the company's debts or its creditors. Diono said he was sure the temporary suspension would not cost any jobs. "There will be no layoffs, the company will pay its employees' salaries,'' he said, adding that some of its pilots would be temporarily placed at other carriers, such as Tiger Airways. He also said passengers holding Mandala tickets would receive refunds. "Customers who have bought tickets to fly with Mandala will have their money returned,'' Diono said, without explaining how the tickets would be refunded. Analysts have said the country's aviation industry will need to consolidate through mergers and acquisitions in the near term as capital requirements and costs - most notably fuel prices - continue to rise. Dudi Sudibyo, an aviation observer, said Mandala had fumbled its marketing strategy. "They were late in positioning themselves in the low-cost sector," he said. "They were practically the last one to enter that market segment." "We might see more airlines collapse if they cannot properly read the market. Indonesia needs a hub-and-spoke model, where large and small airlines complement each other," he said. "Our airlines need to merge - something that will benefit the industry and, in turn, consumers." There are 17 scheduled airline operators in Indonesia including flag carrier Garuda Indonesia. Mandala served 25 domestic routes and had already closed its international routes. It employs fewer than 50 pilots, according to the airline's Web site. Mandala's unexpected announcement came amid plans by Garuda Indonesia to meet overseas investors this week to gauge demand for its planned initial public offering, which is expected to raise Rp 10.3 trillion ($1.14 billion) this month. Nurmaria Sarosa, a Mandala spokeswoman, said the company had stopped renting six aircraft in March last year because the operational costs were too high, and had been operating only five aircraft. "We're optimistic we can find new investors and meet the government's requirement of [operating] at least 10 aircraft by 2012," she added. Mandala was established as a military-owned airline in 1969. In 2006, Cardig International acquired the airline for $34 million and later sold 49 percent of its shares to Arizona-based investment firm Indigo Partners. With the future of the airline now in doubt, passengers will have to make new arrangements. Haeti, 57, bought two Mandala tickets to fly to Yogyakarta today. "I thought it was OK. But it's bad luck, I guess," she told the Jakarta Globe. "I am so disappointed because I thought I would be able to see my newborn grandson. He was born on Tuesday." She said she would try to switch to another airline. If that proved to be impossible, she said she would have to take the train or bus. Additional reporting by Dion Bisara. [Non-text portions of this message have been removed] ------------------------------------ Post message: [email protected] Subscribe : [email protected] Unsubscribe : [email protected] List owner : [email protected] Homepage : http://proletar.8m.com/Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/proletar/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/proletar/join (Yahoo! ID required) <*> To change settings via email: [email protected] [email protected] <*> To unsubscribe from this group, send an email to: [email protected] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
