Qantas gets green light to buy AdamAir's shares

Monday, February 6, 2006

The Jakarta Post, Jakarta

Qantas Airline, one of major airlines in the Asia Pacific, appears unlikely to face any problem in acquiring a 20 percent stake in growing local airline company AdamAir.

Minister of Transportation Hatta Rajasa said Saturday that the government welcomed the Australian airline's plan to buy a part of the locally owned AdamAir.

He, however, warned that the acquisition of AdamAir's shares should be in line with the Cabotage law in which a foreign airline should be allowed only to buy up to 49 percent in a local airline company.

"There will no problem for Qantas to buy Adam's shares and become its strategic partner as long as it complies with the existing regulation," the minister was quoted as saying by Antara.

He said that under the Cabotage law, foreign airlines were not allowed to become a majority shareholder in a local airline company. "They may only own up to 49 percent of the shares," he added.

AdamAir said Friday it would sell 20 percent of its shares to Qantas. "The Australian company actually offered to buy 30 percent of the shares but we are only prepared to sell 20 percent because another 20 percent will be sold during Adam Air's initial public offering (IPO) in Singapore next year," AdamAir's chief executive officer Gunawan Suherman said Friday.

Qantas CEO Geoff Dixon visited Soekarno Hatta International Airport Friday to take a look at AdamAir's operations. He said Qantas was very much attracted to Indonesia's airline industry whose growth last year was predicted to reach more than 10 percent.

Minister Hatta Rajasa said more foreign airlines would likely enter the domestic airline industry in partnership with local airline operators within the next few years to take the advantage of the growing market in the country.

He said the entry of the foreign airlines was also needed to help local players compete globally.

Meanwhile, the Indonesian National Air Carriers Association (INACA) has demanded that the government enforce the Cabotage law, fearing that foreign airlines would damage the nation's airline industry.

According to international law on air traffic as stated under Article 1 of the Chicago Convention 1944, every country has the exclusive right to control air traffic within its control. This restriction is more popularly called Cabotage. (01)