AirAsia, Citilink may bid for Mandala

Garuda Indonesia’s low-cost subsidiary Citilink and low-cost carrier Indonesia AirAsia have proposed buying stakes in Tigerair Mandala, following the budget airline’s huge losses last year, says a government official.

“Tigerair Mandala is seeking an opportunity for long-term investors,” the Transportation Ministry’s director for air transportation, Djoko Muratmodjo, told reporters on Wednesday.

“Two of the potential investors are Citilink and Indonesia AirAsia, which have submitted proposals [to Tigerair Mandala],” he continued, adding that the process would be finalized this month.

Sandiaga S. Uno — a founding partner of the equity firm Saratoga, the majority shareholder in budget airline Tigerair Mandala — refused to comment on the proposals, telling The Jakarta Post that he would reveal the information when it was all ready.

Separately, head of communications at Indonesia AirAsia Audrey Progastama said the airline was currently evaluating the plan to acquire Tigerair Mandala.

“It is true that we are now in a process of evaluating the possibility [of acquiring a stake in the airline]. The decision will be made soon,” Audrey said. She refused to reveal the number of shares Indonesia AirAsia had proposed to buy.

Citilink CEO Arif Wibowo could not be reached for comment.

Djoko said that Mandala currently held permits from the ministry to fly a total of 10 domestic and 10 international routes, with its five aircraft.

But the airline ceased operating nine of its routes, including Surabaya (East Java)-Hong Kong, Surabaya-Kuala Lumpur, Jakarta-Kuala Lumpur, Medan (North Sumatra)-Singapore and Jakarta-Hong Kong, in February.

It has also reduced flight frequency on two out of the 11 remaining routes it continues to operate.

Tigerair Mandala is one of several airlines in the country that have had to struggle in the past year.

Djoko said that airlines were labor-intensive businesses that were also highly vulnerable to fuel-price volatility caused by higher prices for avtur (aviation turbine fuel) and the depreciation of the rupiah against the US dollar.

He said that 2013 was a very difficult period for the airline industry, which saw a decline in growth from 18.65 percent in 2012 to 6.09 percent last year.

“The industry is still growing even though it is not as fast as it was in previous years. If the country’s economic growth improves, we are optimistic that the industry will recover soon,” he said, adding that the ministry was expecting 15 percent growth this year.

“According to our data, in January 2012, we recorded a total of 6.6 million passengers, an increase of 18 percent from the same month the previous year. We hope that the industry will pick up in the coming months,” he said.

In 2011, Mandala Airlines ceased operations after being suspended by the government due to debts totaling Rp 2.45 trillion (US$210.62 million).

Mandala took the skies again in 2012 under the new name, Tigerair Mandala, after financial restructuring in which Tiger bought a one-third stake, which was eventually increased to 35.8 percent in September 2013.

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