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Batavia Air acquisition cancelled

Publication Date : 15-10-2012


The acquisition of PT Metro Batavia, the owner of ailing carrier Batavia Air, has been called off.

Batavia commercial director Sukirno Sukarna confirmed the cancellation yesterday, saying that the company had failed to reach an agreement with the interested buyers, Malaysia-based low-cost carrier AirAsia Berhad and PT Fersindo Nusaperkasa.

Sukarna refused to further elaborate, saying that details of the failed negotiation would be disclosed by AirAsia and Fersindo today.

"This is not the end of the world for Batavia because we will still continue our business without the acquisition," he added.

AirAsia and Fersindo signed a memorandum of understanding (MoU) with the domestic carrier at the end of July to buy PT Metro Batavia, including its flying school, worth US$80 million.

Under the agreement, AirAsia Berhad would have owned 49 per cent of Metro Batavia, while its Indonesian partner would have held the remaining 51 per cent in order to meet Indonesian ownership rules.

Sukarna said the airline had decreased flight frequency on some of its routes, both domestic and international, to help increase efficiency.

"We have decreased frequency on routes that are not really profitable since Oct. 1 to better shape the company," he said.

He said that Batavia's routes were being reassessed because the business must continue for the best of Batavia and its customers. The Jakarta–Medan and Bandung–Singapore routes are among those being reduced.

The airline currently operates 20 of its 33 aircraft to help improve efficiency.

"We've put the [remaining 13] aircraft in maintenance, repair and overhaul facilities so that they will be in much better condition to boost our business in the future," he added.

The acquisition by AirAsia was aimed at accelerating the foreign airline's growth in aviation markets in Indonesia because Batavia flies to more than 50 destinations in the country.

Meanwhile, Indonesia AirAsia and Batavia spokeswomen, Audrey Progastama and Elly Simanjuntak, respectively, confirmed Sukarna's statement that AirAsia planned to reveal the details of the case today.

Contacted separately, aviation expert and former investigator at the National Transportation Safety Committee (KNKT) Hana Simatupang said that the cancellation would harm AirAsia's name.

"Its shares on stock exchanges will drop due to lack of [investor] trust on the day it announced the cancelled acquisition," Simatupang told The Jakarta Post.

AirAsia shares are currently listed on Malaysia and Thailand stock markets.

She also said that Batavia had taken a good step to improve its business by reducing flight frequency and repairing some of its aircraft.

Batavia might have to layoff employees if it wants to remain in business next year.

"It has to trim down its employees and put its aircraft into operation on profitable routes because it has to significantly reduce costs," she added.

If the airline was able to operate more economically, she said, it would still be able to fly in the future.

Based on Transportation Ministry data, Batavia Air passengers reached almost 7 million last year: 6.75 million domestic passengers and 292,280 international passengers, taking an 11.25 per cent domestic market share and 3.59 per cent of the country’s international market share.


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