Garuda's new board faces tough task

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.