Debt Woes May Down Batavia Air

By webadmin on 09:24 am Jan 30, 2013
Category Archive

Muhamad Al Azhari

Batavia Air, once the target of an acquisition bid by AirAsia, the continent’s largest low-cost carrier, has encountered troubled waters following the filing of a bankruptcy petition against it by an overseas company.

The petition against Batavia is the second in Indonesia’s airline industry in two years, and it underscores the stiff competition this business faces. The country is home to more than 11 scheduled airline operators, including Batavia.

In Batavia’s case, the International Lease Finance Corporation, an aircraft leasing company headquartered in the United States, lodged a bankruptcy petition against it concerning a $4.68 million debt. The nature of the debt was not clear.

Batavia spokeswoman Elly Simanjuntak acknowledged the bankruptcy petition but said the airline was now working on various measures to resolve the impasse.

“As a national airline operator, we will defend and seek the best solution,” Elly told the Jakarta Globe on Tuesday.

Elly said the Jakarta commercial court will hold a meeting to hear the case today.

Officials at ILFC were not available to comment.

The bankruptcy petition against Batavia echoes a similar ordeal undergone by Mandala Airlines, which is now controlled by Singapore’s Tiger Airways and Indonesia’s Saratoga Capital. Last April the company finally resumed its operations after 15 months of having them suspended.

Authorities allowed Mandala to restart its business after the airline’s suppliers agreed to its debt restructuring and Saratoga, which now controls 51 percent of Mandala, pledged to invest in the airline along with Tiger.

AirAsia, controlled by Tony Fernandes, a Malaysian entrepreneur, was to acquire Metro Batavia, Batavia’s operator, for about Rp 750 billion ($80 million).

Based on the share sale agreement signed in July last year, AirAsia was to buy a 49 percent stake of Batavia, while its local partner, Fersindo Nusaperkasa, would acquire the majority 51 percent.

For reasons that remain unclear, the proposed acquisition was dropped. AirAsia opted instead to set up a joint venture in ground handling, distribution and pilot training with Batavia.

If the acquisition had gone through, it would have been AirAsia’s first major air carrier acquisition and would have placed the Malaysia-based airline in a better position to intensify competition against other Indonesian low-cost carriers like Lion Air and flag carrier Garuda Indonesia’s Citilink unit.

Batavia was founded in 2001. In 2002, the company earned an Air Operating Certificate, required for operating its fleet in Indonesia.

Investor Daily reported on May 31 that Batavia had 33 planes that consisted of 15 Boeing 737-300s, nine Boeing 737-400s, one Boeing 737-500, one Airbus 321, five Airbus 320s and two Airbus 330s.

Of the 33 planes, 15 of them were reportedly owned by Batavia itself.

Its fleet size had been reduced from 37 previously. Last March, Batavia sent back four planes to lessors. Those were two Boeing 737-400s and two Airbus 320-200s.