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ardjono Jhony Tjitrokusumo is a former pilot for Etihad Airways, the national airline of the United Arab Emirates. He became Merpati Nusantara Airlines’ president director in May 2010.

Jhony warmly described Merpati’s heyday in the 1990s, when the airline operated 91 aircraft that served 464 routes. He was  more subdued however when discussing state-owned airline’s current situation.

“The conditions are just terrible,” Jhony said.

Protracted mismanagement and unfavorable government policies have shrunk the airline’s operations. Merpati currently fields only 32 aircraft that serve 68 routes, primarily in eastern Indonesia.

Merpati has also been buried in massive debts topping Rp 4 trillion (US$464 million) — more than twice the value of the company’s assets.

To keep its cash flow positive, the airline sold its headquarters building on Jl. Angkasa in Central Jakarta to the National Search and Rescue Agency in 2009.

Merpati has forecast a net loss of Rp 150 billion for this year, despite an average annual load factor of 75 percent.

Prospects grew dimmer when one of Merpati’s Chinese-made MA-60 aircraft crashed on approach in West Papua on May 7, killing all 27 passengers on board.

“The timing couldn’t have been worse,” Jhony said.

Merpati originally focused on serving local routes after it was established on Sept. 6, 1962, inking cities in the more remote areas of the archipelago.

The government currently owns a 93-percent stake in Merpati; the remaining 7 percent is owned by flag carrier Garuda Indonesia.

Jhony said that the turmoil at the airline was triggered by debts worth Rp 1.9 trillion that he attributed in part to mismanagement.

A government decision in the 1990s requiring Merpati to purchase locally made CN-235 aircraft from state aircraft maker PT Dirgantara Indonesia also played a role in Merpati’s woes, Jhony said.

As a subsidiary of Garuda from 1978 to 1997, Merpati lacked flexibility in its financial management as its profits were all transferred to Garuda, he added.

“The loan [obligation] created because of the government’s policies must be resolved through [government] policies, as well. Otherwise we cannot settle the debts even in 20 years time,” Jhony said.

The company also faced an additional Rp 2.1 trillion in debts under the subsidiary loan agreement scheme sponsored by the Indonesian and Chinese governments for the purchase of 15 MA-60 aircraft from Xi’an Aircraft Company (XAC).

Since 2007, Merpati has been in the throes of a restructuring program, receiving capital injections totaling Rp 525 billion from the state between 2005 and 2007, and Rp 300 billion from state asset management company PT Perusahaan Pengelola Aset (PPA) in 2008.

The additional capital has failed to give the airline the additional lift it needed. Critics cite poor governance as the reason why the airline has been dragging.

“Whatever happens, we wont let Merpati die like other airlines,” State-Owned Enterprises Minister Mustafa Abubakar said.

“We believe the company will get back on its feet. We still need Merpati to prevent remote cities that are not served by other airlines from growing isolated.”

Jhony said that while the government was eager to help Merpati, its capital injections were a case of too little, too late.

“This is why Merpati remains in the ICU,” Jhony said

PPA president director Boyke Eko Wibowo Mukijat said Merpati required another Rp 2 trillion to improve its performance.

The state asset management company is slated to disburse an additional Rp 510 billion to jump start Merpati’s performance.

“Merpati is under our restructuring program, and a proposal for additional capital is still awaiting approval from the restructuring committee,” PPA corporate secretary Renny Rorong said.

Once Merpati received the additional funds the airline would revise its strategy by focusing on operating aircraft with a capacity of 20, 50 and 100 seats, Johny said.

He said the airline might lease the British-made de Havilland Twin Otter aircraft for the 20 seaters, while for the 50 and 100 seaters the company would consider XAC’s MA-60 and Comac’s N-919, both made in China.

Despite grim situation, Johny was confident that the airline’s business plan for the next 10 years would revive Merpati.

“Our dream is to return the airline to its heyday” he said.