Indonesia's Mandala Airlines suspends operations, seeks new investors

Mandala Airlines A320. Photo: By Rob Finlayson.

Jakarta-based LCC Mandala Airlines suspended all flights Thursday pending a "major restructuring exercise" aimed at attracting new investors, but the financially troubled airline's future viability is unclear with its fleet of five Airbus A320 family aircraft being returned to lessors.

President Director Diono Nurjadin said the company has asked an Indonesian court to grant a "suspension of payment obligation" to give management "a 45-day window to submit a business plan to restructure the company." During a Jakarta news conference, Nurjadin insisted the carrier could return to business and vowed no workers would be laid off, according to media reports. He said employees' salaries would continue to be paid. He cited high aircraft lease rates as helping to cause Mandala's downfall.

In a statement, he conceded that "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 …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."

The airline began operations in 1969, originally belonging to the Indonesia military. In April 2006 Indonesian transport group Cardig International acquired it for IDR300 billion ($34 million). In October 2006 Indigo Partners, a US investment firm with a portfolio of investments in LCCs, purchased 49% of Mandala's shares from Cardig, which remains the majority owner. Indigo is also a part-owner of Singapore-based Tiger Airways.

According to Ascend, Mandala's in-operation fleet comprised two Airbus A319s and three A320s; the airline said those aircraft would be returned to lessors immediately. It has 25 A320s on order with five options. "We will not only pull through but come back with a better and stronger airline," Nurjadin stated.

In May 2010, Mandala became the first privately owned Indonesian airline to achieve IOSA registration (ATW Daily News, May 13, 2010).