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.