Observers and industry players have questioned whether Garuda and the state-owned enterprises (SOEs) can bring Merpati airlines back to life, yet also highlighted opportunities in the cargo business and aviation services, which will be the line of business focus for the ailing airline.

Aviation observer Alvin Lie said the cooperation between Garuda and Merpati may have been agreed on without deep financial calculations. He expressed concern over the possibility that the cooperation burdens the state-owned enterprises involved, as opposed to providing mutual benefits.

“I cannot understand the logic of this,” he told The Jakarta Post.

Under the agreement, signed on Wednesday, Merpati will operate an air cargo business for domestic and international routes using Garuda’s fleet. State logistics agency Bulog, trade company Perusahaan Perdagangan Indonesia, cement giant Semen Indonesia and fisheries firm Perikanan Nusantara will use the cargo services.

Alvin questioned the difference between Merpati’s new cargo business and other air cargo businesses. He warned of potential unhealthy business competition and monopolistic practices, as SOEs who signed the cooperation would be required to deliver their goods using Merpati cargo services, instead of making free market-driven decisions.

Apart from cargo, Merpati will also handle maintenance, repair and overhaul (MRO) services for state energy giant Pertamina and utility company PLN as a marketing agent and turbine maintenance service operator. Four state lenders – Bank Mandiri, Bank Tabungan Negara (BTN), Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI) – will provide the necessary financing.