News of former Larne - Cairnryan fast craft Jetliner

No. 39/V/May 31 - June 06, 2005 Economy & Business From http://www.tempo.co.id Wishing for the Moon

Pelni is overwhelmed by competition with other transport modes. But a bigger threat comes from within.

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FROM the container terminal dock of Tanjung Emas port, Semarang, the ship that dropped anchor around two miles from the coastline is visible. The top is white, its hull a yellow ochre with "Jetliner" written on it, complete with PT Pelayaran Nasional Indonesia's (Pelni) logo.

Compared to dozens of other ships around it, Jetliner gives the impression of luxuriousness and solidity, and becomes even brighter at night. Lights illuminate the entire body. Jetliner is one of the express ships owned by Pelni purchased second-hand from the Norwegian Fast Ferries Line, Norway.

With a maximum speed of 35 knots, Jetliner needs only 18 hours to cover Semarang-Pontianak, half the time required by KM Egon or KM Leuser for the same distance. The ship is equipped with a digital and computerized navigation system that can provide ocean map information automatically and in detail, plus four master engines that require 5.5 tons of diesel per hour.

However, for economy's sake, the ship usually runs at 21 knots or at the most 29 knots. It is not surprising if the ship was once a source of pride and was planned to be the one to rely on in anticipation of a passenger boom, which in 1999 reached a high of 8.1 million people.

Alas, that was then; Jetliner's sailing days were short-lived. The 11-year charter contract worth US$19.8 million was signed in London, England, on November 21, 2000. One month later, the ship, made at the Bergen shipyard in Norway in 1996, set sail for Indonesia and started its operation.

By the end of September 2001, Director of the Pelni fleet, Tjahyo Widono, was already writing an official note to President Director Isnoor Haryanto, informing him that the master engine had 3,000 hours left. With average operating hours of 600 per month, in five months it must be overhauled (status W6).

Based on documents, including Pelni's official notes, from the several options offered by the maker, Pelni's management chose to replace two engines, both at US$1.22 million. In addition to miscellaneous costs, the total repairs at Sembawang Shipyard, Singapore, reached 5.763 million euros.

However, the declining national economic condition and plummeting exchange rates made the amount in rupiah soar. In addition, the operation that did not last as long as expected obviously made it impossible to cover operational costs, let alone reap a profit which in 2001 was targeted at Rp12.3 billion.

Losses that year were more than Rp2 billion. A year later, losses escalated to Rp4 billion. One of the problems faced by Jetliner was that the ship's specifications were not exactly suitable for the ports that Pelni visited.

The ramp door of the prow and stern of the ship demand additional facilities at dock, such as at the crossing port. Such a lack of facilities means that the transport space that can accommodate 160 sedans, or a combination of 12 buses and 50 sedans, is hardly utilized. "The 600-seat capacity at the most is only 65 percent filled," said a Tempo source in Pelni.

A more bitter pill to swallow had to be faced by the ship upon its return from Singapore. The growth of air transport, with its cheap tickets, practically makes it impossible for ships to compete. The latter became too expensive to operate. To reduce losses, Pelni management had no choice but to halt it.

Since the beginning of 2002 the fast ship was left in a port-stay status off the Semarang coast until today. Costs remain high, however. Once a week the ship docks at Tanjung Emas to provide 40 tons of potable water for the 20 crewmembers. Once every 20 days, it must dock again to fill 20 tons of diesel to turn over the engine every time it docks at Tanjung Emas, to turn on the assistant motor to keep the air-conditioning running, and to turn on the lights every night.

"It was the best choice at that time. And Jetliner wasn't the only one that had to be put to rest," said Pelni Business Director Jussabella Sahea. He also denied that the overhaul cost would reach Rp82 billion. "At the most, tens of billions, because the used engine is bought back by the producing company." And those costs, he added, had been taken into consideration when the decision to purchase was made. "If that was not the condition, the price would've been higher."

Jussabella cannot accept the charges that Pelni's management was imprudent when buying the ship. In addition to the high market demand at the time, the management did not anticipate such an accelerated growth in the airline industry. When oil prices skyrocketed-while ticket prices could not be increased-costs increasingly ballooned.

True, until 1999, Pelni still had at least Rp720 billion. Even until 2001, Pelni was still making a profit of nearly Rp24 billion. That made many people wonder, why in 2002 Pelni suffered losses of up to Rp258 billion. The following year, although the state subsidized Rp80 billion through its public service obligation (PSO) program, losses soared up to Rp382.5 billion. Last year, Pelni still suffered losses of Rp255.8 billion.

Minister for Transportation M. Hatta Radjasa regretted such a purchase that did not consider needs and conditions. Consequently, he will question Pelni and ask for a repeat examination. "Although there were no findings according to the Supreme Audit Agency," he said.

As such, business competition with airlines, always cited by Pelni's management to "understand" its losses, is not a good enough reason. "We ask that the purchases be reevaluated," said Sofyan Mile, head of the House of Representatives' Infrastructure, Telecommunications and Transportation Commission. He also cited as an example the plan to purchase ship number 24 from Germany approved by the previous government as too expensive.

Faced with various pressures, Jussabella assures that there were no deviations in the purchasing process. Especially charges of Pelni's recklessness in the various purchases was driven by fees from brokers or ship owners. "There was no such motive," he said. "There was a special investigation on us by the Development Finance Controller for six months, and they did not find any irregularities."

If it was true that such a motive did not exist, inefficiency in Pelni is undeniable. The number of passengers continues to decline. The fleet has decreased from 30 to 28 units, after two of their ships with a 2,000-passenger capacity, KM Kambuna and KM Rinjani, were granted to the Indonesian Navy. The number of cargo ships also dropped to four units from 22 in 2003. In the meantime, the number of employees has remained practically stable, more than 5,600-including 3,000 on board ships.

"We do indeed urge the board of directors not to lay off people or close branches," said Sudarsono, head of the bureau for legal, insurance and claims, who also chaired the labor union in Pelni. "Our branch office buildings are also rented out for additional revenues," he reasoned.

The management itself is still convinced that the bad times will soon be over. The tough competition with airlines is forcing them to change their business focus by increasing the cargo transport portion to 40 percent, from a mere 3-5 percent.

For that purpose, they must modify their ships with financing that will hopefully come from foreign investors, through a joint operation system. "In five years, we will once again make profits," promised Jussabella. Also, they are still hoping that the government will buy new ships.