Indonesian State Owned Merpati Deals for Future Profit

Tito Summa Siahaan

Ailing state-owned airline Merpati Nusantara enlisted the help of other state-enterprises in an attempt to push itself back into profitability.

Merpati on Wednesday inked a memorandum of understanding with state-controlled Bank Mandiri, the country’s largest lender, offering a “buy two get one free” package for customers who use Mandiri credit cards for the transactions.

Sutan Banuara, the airline’s vice president for commercial affairs, said the MoU will help Merpati to be aggressive in penetrating the market.

“We estimate that Rp 5 billion [$522,000] of additional revenue can be generated from this deal,” he said. “That’s 20 percent more than in a regular month.”

The most lucrative point from the deal, according to Sutan, was access to about 2.4 million of Mandiri’s credit card holders, thus booting the amount of non-cash transactions in the airline.

“Our non-cash transactions accounted for only 10 percent of our total transactions,” he added.

The upside for Mandiri is Merpati’s pioneering routes, which Sutan labeled as “exotic destinations.”

“Our planes fly regularly to these destinations including Raja Ampat, Wakatobi and Komodo Island. These exotic destinations account for 30 percent of our routes,” he added.

Mansyur Nasution, Bank Mandiri’s executive vice president for consumer finance, concurred, saying that this cooperation is expected to expand the bank’s credit card business in the travel industry.

“Our credit card holders post Rp 1.5 trillion worth of transactions every month,” he said. “Travel expenses account for 25 percent of our credit card transactions.”

Merpati is also looks to develop the logistics side of its business. Last month, the airline signed an MoU with state postal company Pos Indonesia.

“The MoU stated that Pos Indonesia has assigned Merpati to be the operator of its future cargo planes,” said Sutan, adding the postal company will complete the procurement of its first cargo plane by November.

Pos Indonesia will, in return, sell Merpati tickets at its branches, though not until next year.

The airline incurred a Rp 300 billion loss last year and managed to keep itself afloat with a Rp 561 billion capital injection from the government.