Indonesia’s PT Merpati Nusantara Airlines has grounded all flights until at least the end of February as the debt-laden state-owned airline struggles to pay for fuel, insurance and salaries, company officials said.

Angry customers were demanding refunds for cancelled flights in Merpati’s central Jakarta office today and workers said they have not been paid for three months.

Merpati has reduced its routes to cut costs, but it is straining under a debt of more than 6 trillion rupiah (US$490.2 million).

All of Merpati’s route permits have been suspended until the end of February, but the airline will resume flights when it is ready, operations director Daryanto said, without giving a specific timeline.

It is exploring options such as selling assets and converting debt to equity, he added.

The government and various state-owned enterprises have decided not to give any more loans to Merpati, which has assets worth only 300 billion rupiah, Deputy State-Owned Enterprises Minister Wahyu Hidayat told reporters late yesterday.

The airline has had to pay Pertamina in cash for jet fuel since Jan 15 after twice breaching the maximum debt limit allowed by the Indonesian oil and gas company.

- Reuters