The Reason For Erick Thohir's Garuda, Citilink, And Pelita Air Mergers, Compared To Airlines In The US

Illustration of Garuda Indonesia (Photo: Doc. Garuda)

YOGYAKARTA - The reason for Erick Thohir's merger of Garuda, Citilink, and Pelita Air is related to logistics costs and the progress of the aviation industry. The planned merger or unification of the three airlines is a continuation of the BUMN efficiency program, which was previously applied to four Pelindo in 2021.

"After carrying out a series of efficiency programs on four Pelindo, (it) will be continued to BUMN in other clusters, namely airlines. Currently, there are three SOEs engaged in the aviation sector, namely Garuda Indonesia, Citilink, and Pelita Air," said Erick Thohir in an official statement recently.

By taking steps to merge in three state-owned airlines, airline cluster efficiency programs can be like Pelindo. So what is the reason for Erick Thohir's Garuda, Citilink, and Pelita Air merger.

SOE Minister Erick Thohir conveyed two reasons for merging three state-owned airlines.

The first reason is to reduce logistics costs. Erick said the move could reduce logistics costs in Indonesia so that it could ease the business world.

"BUMN continues to suppress logistics costs. Pelindo from 4 (companies) to 1. Previously, logistics costs reached 23 percent, now it is 11 percent. We are also trying to get Pelita Air, Citilink, and Garuda to merge to reduce costs," said Erick Thohir.

In connection with the merger step, the rescue carried out on Garuda Indonesia is considered necessary because Indonesia still needs to have a flag carrier. When this airline was deployed, Erick Thohir said that at the same time he had prepared Pelita Air.

"With the aim that Indonesia will continue to have a national flag carrier if Garuda fails to be saved," said Erick Thohir in Tokyo, Japan, through information.

The second reason is to strengthen the aviation industry in Indonesia. Erick said that the merger could make the aviation industry stronger and more efficient. He revealed that the domestic aviation industry still needs to be strengthened, one of which is related to the fleet.

Erick Thohir said the number of fleets in the country was still lacking. Indonesia is still short of 200 aircraft, according to Erick Thohir. The lack of fleets is calculated from the comparison between the United States (US) and Indonesia.

In the US country, there are 7,200 aircraft operating for domestic routes. The population there reaches 300 million populations with an average GDP (per capita income) of US$40 thousand.

Meanwhile, in the Indonesian population, there are 280 million people with a GDP of US$4,700. According to Erick, more than 100 aircraft fleets are still needed for flights in the country.

"Meanwhile, in Indonesia, there are 280 million people who have a GDP US$ 4,700. That means Indonesia needs 729 aircraft. Even though now, Indonesia only has 550 aircraft. So our logistics case is not yet appropriate," said Erick Thohir.

That is the reason for Erick Thohir's merger of Garuda Indonesia, Citilink, and Pelita. This merger step taken by SOEs reaps various pros and cons.

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