In a race to save the pandemic-hit tourism sector, the Indonesian government has announced plans to unite nine state-run companies, including airlines, airports and tourism businesses, under one holding company.
This will include national carrier Garuda Indonesia and low-cost airline Citilink; Hotel Indonesia Natour, which owns 14 properties on Bali and elsewhere; businesses managing tourist and World Heritage sites; and departmental store, Sarinah.
The move is hoped to streamline costings, tighten efficiencies across departments, while providing a stronger synergy and environment for collaborations on initiatives such as discounted travel packages.
An idea that's been in the pipeline for some time, President Joko Widodo had made hints of this plan earlier during an August ministerial meeting. "The headwinds in the travel industry provide a good opportunity to start integrating and transforming the tourism and aviation sectors," he was quoted as saying by Nikkei Asia as saying.
Industry watchers believe that another possible reason for this merger is to redirect funds into Garuda Indonesia, which posted a US$712 million loss in the first half of 2020, after taking a near 60% hit to operating revenues.
This is since the government will be pumping 8.5 trillion rupiah (US$578.7 million) into the holding company, with the state holding 60% of shares — prompting questions on whether the state aid is a wholly public-purpose driven one.
Garuda will also enter the union with US$76 million debt on their shoulders to the airport management companies joining the holding company, further raising eyebrows since the government had earlier this year indicated that it will not bail out the national carrier.
Indonesia closed its borders to most overseas visitors in April, and had initial plans to reopen Bali to international arrivals from September 11, but abandoned plans for fear of a second pandemic wave.
Instead, the destination has turned to developing a ‘digital tourism ecosystem’, with the Indonesian Tourism and Creative Economy Ministry encouraging all travel industry members to digitise services as much as possible.