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Mandala Airlines suspends service, applies for time to restructure. Indigo Partners 49% owners

14-Jan-2011

All Of Indonesian LCC, Mandala Airlines' flights were suspended effective 13-Jan-2011. Mandala yesterday announced it had requested “suspension of payment obligation to the Commercial Court allowing its management to restructure the business and to restore the airline to profitability”.

Mandala Airlines President Director Diono Nurjadin said "this is a difficult time for Mandala Airlines but we are confident that, with the support and understanding of our passengers, agents, regulators and other stakeholders, we will not only pull through but come back with a better and stronger airline to serve Indonesian air travellers.” 

The airline has requested the Jakarta Commercial Court to grant of a suspension of payment obligation order which would provide management a 45-day window to submit a business plan to restructure the company.  Pak Diono said, "over the past few months, Mandala Airlines has been performing at a commercial loss and the situation now is such that we need to restructure the company to pave the way for the entry of new investors".

Six of Mandala’s 11 leased A320 family aircraft had already been given back to the lessors, and the remaining five are being returned today, 13-Jan-2011. Mandala reportedly requires a new investor to purchase five new aircraft and lease another five in order to meet Indonesian legal requirements to restart the carrier.

PT Mandala Airlines, founded on April 17, 1969, originally belonged to the Indonesian military. In Apr-2006 Indonesian transport group Cardig International acquired the airline for IDR 300 billion (USD 34 million) and shortly after, In Oct-2006, US investment firm Indigo Partners acquired 49% of Cardig's shares.

Back in Oct-2010, there were rumours of disagreements between the owners, Cardig and Indigo Partners, when Mandala Airlines' Communications Officer Ms Nurmaria Sarosa announced that the carrier was "open to new investors". Cardig was then expected to remain as Mandala’s majority shareholder, with Indigo’s stake to be sold down. At the time, the carrier had orders for 24 A320s.

Indigo Partners also have investments in low cost airlines, Spirit Airlines (US), Tiger Airways (Singapore), Avionova (Russia) and Wizz Air (Hungary).

Pak Diono said that the Commercial Court's granting of a suspension of payment obligation order will give Mandala Airlines' management a 45-day window to submit a business plan to restructure the company. "We are confident of attracting new investors to inject additional funds into the airline because, once restructured, Mandala Airlines will be an attractive investment. There is a huge demand for air travel in Indonesia and the market has lots of space for a well-defined and positioned mid-cost carrier."

Indonesia’s domestic market has boomed over the past five years, as low cost airlines proliferated, but there has been cutthroat competition and thin yields.

Indonesia is already the 12th busiest domestic market in the world, with its airlines  handling 48.1 million domestic passengers in 2010, according to the Transport Ministry’s projection for the full year. This was off a base of  7.6 million in 2000 – the most extreme rate of growth of any country in the world.

See related report: Indonesian Aviation Outlook: A massive aviation opportunity, but some risks to growth

In late 2010, Indonesia's largest private airline, Lion Air, commanded a 40% domestic market share. Garuda was next largest with 8.4 million, followed by Batavia (6.1 million), Sriwijaya Air (5.5 million) and Mandala Airlines (3.6 million).


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