By Nurfika Osman

INDONESIA - The government may cancel the acquisition of local airline Batavia Air by Malaysian airline, AirAsia Berhard, and its Indonesian partner, if the transaction breaches the ownership limit imposed on foreign companies in national airlines, a top government official has said.

The Transportation Ministry's air transportation director general, Herry Bhakti Gumay, said AirAsia Berhard and its partner in the acquisition, PT Fersindo Nusaperkasa, had yet to report their acquisition to the ministry.

AirAsia and its Indonesian partner Fersindo, owner of a 51 per cent stake in Indonesia AirAsia (IAA), signed an agreement on Thursday to buy Metro Batavia, the owner of Batavia Air, for US$80 million (S$99 million).

"We will give Batavia, AirAsia Berhard and Fersindo Nusaperkasa one month to report their plan to us. We will cancel the acquisition process if Indonesia is not the majority shareholder," Herry told reporters.

Herry said the ministry would not hesitate to "revoke Batavia Air's SIUAU [flight permit]".

According to the acquisition plan, AirAsia would own a 49 per cent stake in Metro, while Fersindo would hold the remaining 51 per cent in order to comply with Indonesian ownership rules.

Seventy-six per cent of the shares are due to be purchased this year and the remainder by 2013.

Herry said, however, that the ownership status of Fersindo, which controls 51 per cent of AirAsia's Indonesian subsidiary IAA, remained unclear.

"They will not be able to execute their plan if they do not report clear information to us," he added.

Previously, AirAsia Group's CEO, Tony Fernandez, had said in a statement that the Batavia Air acquisition was a fantastic opportunity for AirAsia to accelerate its growth plans in one of the most exciting aviation markets in Asia; and that it further underlined its belief in the growth potential of Indonesia's aviation sector.

Even though analysts might see the acquisition in a negative way, Tony said the partnership would help both companies to grow.

"This is a good marriage because Batavia Air is the jewel of Indonesia. We hope we can build something very special here; to increase tourism in Indonesia, and help more Indonesians to fly," Tony told reporters at a conference.

Batavia Air's president director, Yudiawan Tansari, said the company would maintain its name and its mid-range service after the acquisition.

Aviation expert and former investigator at the National Transportation Safety Committee (KNKT), Hana Simatupang, said the acquisition showed the growing dominance of foreign airlines in the national aviation industry.

The Batavia acquisition comes hot on the heels of Tiger Airway's takeover of Mandala Air earlier this year.

"This is what I'm afraid of. Foreign airlines, through their subsidiaries, will come to control domestic airlines because they [domestic airlines] have failed to professionally manage their businesses," Hana told The Jakarta Post.