Idled Merparti Nusantara Airlines plans to re-launch as a domestic carrier later this year after two postponements. The airline initially targeted the re-launch for March 2014, a month after it suspended operations, then for April 2015. A breakdown in talks with its biggest creditor, Indonesian national oil giant Pertamina, foiled those plans. Pertamina had indicated that it will only supply fuel when it receives payment in cash.

State-owned Merpati grounded its fleet of five de Havilland Twin Otters and 13 Chinese-made Xian Aircraft Industries MA60s after 50 of its 178 pilots walked out due to non-payment of salaries and Pertamina’s refusal to supply fuel on credit. The carrier grounded its jet fleet of one Boeing 737-400, three 737-300s and one 737-500 in late 2011 to reduce operating cost.

Liliana Agus, a senior official at the Indonesian transport ministry in Jakarta, said a big market for Merpati's turboprop operations exists in the Sulawesi and Kalimantan. Merpati plans to use Sultan Hasanuddin International Airport (SHIA) in Makassar in south Sulawesi as its main hub. The airline moved to SHIA in 2008 from Jakarta’s Soekarno-Hatta International Airport under a restructuring exercise that reduced the workforce from 2,100 to 800. Transport ministry officials wouldn’t say what type of turboprop aircraft Merpati will use for its operations.

According to PT Perusahaan Pengelola Asset (PTPPA), the government-owned asset management company that handled Merpati’s restructuring and payment to creditors, the airline’s debt stood at $444 million at the time it suspended operations.

PTPPA had invited bids for the sale of Merpati since June 2014 but has yet to receive any. Although the government has indicated its willingness to divest a stake of up to 40 percent to a strategic investor, it recognizes it would encounter extreme difficulty selling such a heavily indebted company.

The government owns 93.2 percent of Merparti, while flag carrier Garuda holds the remaining 6.8 percent.

Established in 1962, Merpati served as the government’s “air bridge,” linking remote areas of Indonesia with the mission of developing and building the economies of the regional areas.

Despite three separate bailouts, Merpati continued to generate losses under the weight of mismanagement and alleged corruption.