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Union Aviation: Garuda, Citilink, Pelita Air Fuse



Minister of State-Owned Enterprises Erick Thohir has unveiled an ambitious plan to streamline Indonesia's aviation sector by merging three prominent state-owned companies. These companies include Garuda Indonesia, Citilink, and Pelita Air. This strategic move is underpinned by a commitment to enhance efficiency within the state-owned enterprise sphere, building upon the successful 2021 merger of four Pelindo companies. He envisions this amalgamation as a pivotal step towards reducing logistics costs across Indonesia, fostering a more business-friendly environment. By consolidating these aviation giants, he aspires to catalyze a stronger and more efficient aviation industry, bolstering the nation's competitive edge. While this proposal promises increased operational efficiency, it has also ignited concerns and apprehensions. Stakeholders are wary of potential complications and challenges from the merger. Nevertheless, Thohir remains resolute in his belief that this strategic restructuring is indispensable for the greater economic good. The nation is closely observing with great anticipation as the aviation sector undergoes this significant transformation. The aviation industry is a source of national pride and a vital catalyst for economic growth. With the Minister's steadfast dedication to improving the performance of state-owned companies, this merger has the potential to be a shining example of progress. It could lead the way toward a more prosperous and competitive aviation landscape in Indonesia, benefitting both the industry and the country.


During the closing of the market on Tuesday (8/23), the stock price of GIAA closed at Rp 73 per share, marking a significant surge of 8.9 percent. This rise reflects GIAA's consistent positive performance over the preceding three months, with its stock price having escalated by an impressive 15.8%. Nafan Aji Gusta, a Senior Investment Information expert at Mirae Asset, expressed optimism about GIAA's trajectory, attributing it to the company's diligent pursuit of efficiency enhancement within the state-owned airline. He observed that while GIAA's bottom-line performance showcases an upward trend, the escalation in costs has resulted in net losses. Looking ahead to the second quarter of 2023, Nafan highlighted the potential of the impending merger to curtail costs by optimizing business efficiency, sharing his insights with Kompas.com on Tuesday (8/22). Nafan went on to underscore the positive prospects tied to the merger, which involves amalgamating assets and human resources. He noted that the merger's success will hinge on its strategic utilization to foster competition and bolster occupancy, especially on routes characterized by robust connectivity. In essence, Nafan's assessment underpins the anticipation of GIAA's continued growth, riding on the wave of the merger's potential advantages.


The huge news of the upcoming merger has left numerous questions, leading to curiosity of the reasons behind such a big decision. It was later revealed that SOE Minister Erick Thohir proposed a merger of the three airlines to reduce logistics cost efficiency in the country. Erick referred to the successful cost efficiency of sea logistics after the four Pelindo mergers in 2021. This merger plan surfaced after Erick reviewed the comparison of the number of aircraft in Indonesia and the United States with population calculations compared to the average per capita income ratio. To reduce the lag in the number of aircraft, Erick did not rule out the possibility of a merger of the three state-owned airlines to reduce logistics costs. On another view, Gerry Soejatman, an aviation consultant, assessed that Garuda Indonesia's financial condition still needs time to be seen in its direction, even though it has PKPU or postponed debt payment obligations. Meanwhile, Citilink this year seems to be losing money and Pelita is still in the early stages of its business plan so it has not been profitable. Alvin Lie, member of People’s Representative Council of Indonesia, said he had a hard time understanding the focus of the aviation holding business, he was confused whether if three companies were made, there would be only one company left. Lastly, Alvin noted his worryness in the competitiveness and the size of the business. As the eagerness from the SOE Minister has risen, the merger is nearing its realization.


Sources:

CNBC Indonesia

CNN Indonesia

MSN


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