Garuda gets new chief<\/p>\n
There were no explicit phrases in Transportation Minister
\nHaryanto Dhanutirto's prepared speech enlightening us of the
\nreasons behind the retirement of Wage Mulyono as the president of
\nGaruda Indonesia after only three years in that position. When
\nDhanutirto installed Soepandi, 58, on Friday as the new captain
\nof the airline's management, he spoke only in general terms to
\nstate companies under the supervision of his ministry.<\/p>\n
The minister asked state companies to increase profits because
\nthe government expected a much larger amount of revenues from
\ntheir dividend payments, and to be fully transparent to the
\ngovernment. That remark implied the retirement was related to a
\npoor financial performance. If that was the reason, the
\nreplacement seemed puzzling because the 46-year-old Garuda last
\nyear posted a before-tax profit of Rp 350.6 billion (US$160
\nmillion) which was more than 4.5 times higher that the Rp 73
\nbillion earnings in 1993. Even though the Rp 77 billion in non-
\noperating profits earned from the sales of old jets last year was
\ndisregarded, the 1994 earnings still boasted a 270 percent
\nincrease.<\/p>\n
In so far as Garuda is concerned, we find it hard to accept
\nthe minister's opening remarks that the appointment of new
\nofficers and the replacement of old ones are entirely normal
\nwithin an organization. Dhanutirto kept a lot of things
\nunexplained as to why Wage, who failed to attend Soepandi's
\ninstallation ceremony, retired after only a three-year tenure.
\nWithin the spirit of the ongoing economic and bureaucratic reform
\nprocess, the parameters for assessing the management of state
\ncompanies are supposed to be clear-cut and transparent.<\/p>\n
When Wage was installed in the middle of January, 1992, he was
\nhailed as most qualified for piloting Garuda's management. Wage,
\na retired air force commodore and an adjutant to President
\nSoeharto in 1969-1973, entered Garuda after 13 years of
\nimpressive records in managing Pelita Air Service, the
\nnonscheduled airline subsidiary of the Pertamina oil company.<\/p>\n
However, after only about eighteen months in his post
\nspeculations were rife that Wage would be replaced in November,
\n1993. Wage himself often implicitly hinted at his intention to
\nretire early, though he was obviously unwilling to openly discuss
\nhis reasons. But the speculations about his replacement surfaced
\namid extensive mass media stories about his differences with the
\nminister of transportation regarding the procurement of new
\naircraft, flight route distribution, the sales of old jets and
\norganizational restructuring. Garuda's executives also have often
\ncomplained about what they alleged as the government's
\npreferential treatment to private airline PT Sempati Air which
\nhas significantly encroached lucrative service routes previously
\ndominated by the flag carrier.<\/p>\n
Last year, for example, Garuda suffered an overabundance of
\nits A300-600s and was forced to lease some of them. When the jets
\nwere initially ordered the airline was not aware it would share
\nits regional flight routes to Taipei, Australia and several other
\ncities with another domestic airline (Sempati Air).<\/p>\n
Wage's predecessor, Mohammad Soeparno, who managed Garuda for
\nfour years had also complained of unnecessary intervention that
\nforced the airline to lease MD-11 jets from a joint venture
\ncompany partly owned by PT Humpuss and PT Bimantara. The problem
\nwas not so much the leasing itself but the requirement that
\nGaruda deal only with the appointed lessor instead of getting the
\nbest deal on the open market.<\/p>\n
We are encouraged to note that Garuda realized that part of
\nits problems were also of its own doing. Garuda, spoiled by its
\nvirtual monopoly of the domestic services for almost 40 years,
\nseemed too slow to awake to the keen competition unleashed by the
\nderegulation measure in the domestic schedule flight services in
\n1990.<\/p>\n
But the intensive consolidation process Garuda has been
\nconducting would be rendered ineffective if its management was
\nconstantly vulnerable to government intervention. Dhanutirto
\nasserted that the government is involved only in the macro-policy
\nof state companies. But what the Garuda management under Wage or
\nSoeparno experienced seemed to have been deeper than what
\nstrategic intervention should have been.<\/p>\n
We should realize that an airline company has its capital,
\ntechnology and labor intensive operation bundled together and we
\nas a developing nation still have to learn a great deal about
\nmanaging a service business. Management flexibility and
\nconsistent policy are therefore quite crucial. Moreover, Garuda,
\nas the national flag carrier, also serves as a window to
\nIndonesia. Hopefully, Soepandi will be provided with a greater
\nmanagement autonomy to weather the highly turbulent airline
\ncompetition.<\/p>",
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