Garuda gets new chief

Garuda gets new chief

There were no explicit phrases in Transportation Minister Haryanto Dhanutirto's prepared speech enlightening us of the reasons behind the retirement of Wage Mulyono as the president of Garuda Indonesia after only three years in that position. When Dhanutirto installed Soepandi, 58, on Friday as the new captain of the airline's management, he spoke only in general terms to state companies under the supervision of his ministry.

The minister asked state companies to increase profits because the government expected a much larger amount of revenues from their dividend payments, and to be fully transparent to the government. That remark implied the retirement was related to a poor financial performance. If that was the reason, the replacement seemed puzzling because the 46-year-old Garuda last year posted a before-tax profit of Rp 350.6 billion (US$160 million) which was more than 4.5 times higher that the Rp 73 billion earnings in 1993. Even though the Rp 77 billion in non- operating profits earned from the sales of old jets last year was disregarded, the 1994 earnings still boasted a 270 percent increase.

In so far as Garuda is concerned, we find it hard to accept the minister's opening remarks that the appointment of new officers and the replacement of old ones are entirely normal within an organization. Dhanutirto kept a lot of things unexplained as to why Wage, who failed to attend Soepandi's installation ceremony, retired after only a three-year tenure. Within the spirit of the ongoing economic and bureaucratic reform process, the parameters for assessing the management of state companies are supposed to be clear-cut and transparent.

When Wage was installed in the middle of January, 1992, he was hailed as most qualified for piloting Garuda's management. Wage, a retired air force commodore and an adjutant to President Soeharto in 1969-1973, entered Garuda after 13 years of impressive records in managing Pelita Air Service, the nonscheduled airline subsidiary of the Pertamina oil company.

However, after only about eighteen months in his post speculations were rife that Wage would be replaced in November, 1993. Wage himself often implicitly hinted at his intention to retire early, though he was obviously unwilling to openly discuss his reasons. But the speculations about his replacement surfaced amid extensive mass media stories about his differences with the minister of transportation regarding the procurement of new aircraft, flight route distribution, the sales of old jets and organizational restructuring. Garuda's executives also have often complained about what they alleged as the government's preferential treatment to private airline PT Sempati Air which has significantly encroached lucrative service routes previously dominated by the flag carrier.

Last year, for example, Garuda suffered an overabundance of its A300-600s and was forced to lease some of them. When the jets were initially ordered the airline was not aware it would share its regional flight routes to Taipei, Australia and several other cities with another domestic airline (Sempati Air).

Wage's predecessor, Mohammad Soeparno, who managed Garuda for four years had also complained of unnecessary intervention that forced the airline to lease MD-11 jets from a joint venture company partly owned by PT Humpuss and PT Bimantara. The problem was not so much the leasing itself but the requirement that Garuda deal only with the appointed lessor instead of getting the best deal on the open market.

We are encouraged to note that Garuda realized that part of its problems were also of its own doing. Garuda, spoiled by its virtual monopoly of the domestic services for almost 40 years, seemed too slow to awake to the keen competition unleashed by the deregulation measure in the domestic schedule flight services in 1990.

But the intensive consolidation process Garuda has been conducting would be rendered ineffective if its management was constantly vulnerable to government intervention. Dhanutirto asserted that the government is involved only in the macro-policy of state companies. But what the Garuda management under Wage or Soeparno experienced seemed to have been deeper than what strategic intervention should have been.

We should realize that an airline company has its capital, technology and labor intensive operation bundled together and we as a developing nation still have to learn a great deal about managing a service business. Management flexibility and consistent policy are therefore quite crucial. Moreover, Garuda, as the national flag carrier, also serves as a window to Indonesia. Hopefully, Soepandi will be provided with a greater management autonomy to weather the highly turbulent airline competition.