Garuda's new board faces tough task

Urip Hudiono, The Jakarta Post, Jakarta

State Minister of State Enterprises Sugiharto has told the newly appointed board of national flag carrier PT Garuda Indonesia that they have a daunting task ahead of them.

"This change in management was carried out to strengthen Garuda, which the Wall Street Journal daily recently mentioned as the weakest performing airline in Asia," Sugiharto said on Monday after inaugurating the new board.

"I expect the new management to be able to lift Garuda's performance and transform it into a flag carrier that this nation can be proud of."

Emirsyah Satar has been appointed Garuda's president director, replacing Indra Setiawan.

Sugiharto said the new management's job would not be an easy one, as Garuda still had a negative cash flow and total debts amounting to some US$845 million.

The airline had only reached 72 percent of break-even point, while its load capacity factor was still below 60 percent and its on-time performance remained under the 87 percent standard.

"Garuda must avoid defaulting on its debts, as this would surely affect our overall sovereign debt rating," he said.

Responding to Sugiharto's request, Emirsyah said the new management would try to increase Garuda's net operational revenue of about Rp 500 billion (some $54 million) it managed to achieve last year.

Garuda's 2004 total revenue is estimated at about Rp 10 trillion, a 20 percent increase from Rp 8.3 trillion the previous year. The rise was attributed mostly to a higher passenger load of about eight million, up from about seven million in 2003.

"We must work hard to be able to do this so we can pay our (debt-servicing) obligations of some $115 million (a year) until 2010," said Emirsyah, who as Garuda's finance director from July 1999 to May 2003, played a pivotal role in restructuring the airline's massive debts, measured at more than $1.1 billion in 2001.

Emirsyah explained that one way to improve Garuda's financial condition was by thoroughly evaluating its existing routes and closing down unprofitable ones. "It is only after the evaluation and achieving a stable cash flow, that we will look into the possibility of expanding into other potential routes."

The new management would not be tempted into directly competing with low-cost carriers, although it would still be interested in establishing Garuda as a domestic route leader through its Citilink service, Emirsyah said.

"There is a plan to separate Citilink into a subsidiary," he said.

The other new board members are Sunarko Kuntjoro (vice president for technical affairs and information technology), Agus Priyanto (VP for marketing and sales), Ari Sapari (VP for operations), Arya Respati Suryono (VP for service delivery), Achirina Suryono (VP for general affairs and business support), and Alex Maneklaran (VP for financial affairs).

Sugharto also appointed former Garuda president director Abdul Ghani as the airline's new president commissioner, with Gunarni Soeworo, Bambang Wahyudi, Slamet Riyanto and Aries Mufti serving as members of the board of commissioners.