Govt dismisses Garuda board of directors
Agencies Hong Kong/Jakarta
PT Garuda Indonesia, the nation's largest airline, has fired its entire 13-member board in a government move to improve the management of the carrier and its financial performance, a minister has said.
The government, which owns Garuda, fired six commissioners and seven directors of the Jakarta-based airline on Tuesday, said State Minister of State Enterprises Sugiharto.
"I'm reforming the management of Garuda. I would like to position Garuda as the national flag-carrier rather than being marginalized," he was quoted as saying by Bloomberg in an interview in Hong Kong on Wednesday.
This will be the second time in eight years that Garuda has changed its management team, with the latest board changes coming ahead of plans for an initial share sale. Garuda, set up in 1949 with the help of KLM Royal Dutch Airlines when Indonesia won its independence from the Netherlands, has targeted becoming a public company this year.
Garuda, Singapore Airlines Ltd., and Malaysian Airline Systems Bhd., are facing increased competition from 10 new, low-fare airlines in Southeast Asia as well as difficulties arising from soaring fuel prices.
"The company has spent the last decade trying to reshape its finances and generate profit, and it has not managed to do so," Sugiharto said.
Garuda operations director Rudy A. Hardono said the directors had yet to receive formal notice of their dismissals.
"We have heard about it, but so far we haven't received letters informing us of the decision," Rudy told The Jakarta Post in a telephone interview.
Although the decision seemed not to surprise him, Rudy said that talks of the board's dismissal was not a major issue within the company.
"We are ready to be transferred or dismissed anytime. Besides, we have been on the board of directors long enough," he said, adding that he had served as Garuda's operations director for the past four years.
However, he was unable to provide details on who would succeed the current directors and commissioners or when the formal handover would take place.
Garuda was nationalized in 1954. It now flies to 30 destinations in Indonesia and serves 24 international routes with a fleet of 67 aircraft, according to its Website.
Garuda's 2004 sales may have risen 20 percent to Rp 10 trillion (US$1.1 billion) over the previous year. It spent an extra Rp 700 billion last year as fuel prices rose.
Garuda flew 7.3 million passengers in 2003, 50 percent more than in 2002, according to its latest figures. Of this total, 5.5 million were domestic passengers. It filled an average of 69.6 percent of its seats in 2003, higher than the 66.9 percent recorded in 2002.
Sugiharto said the restructuring would not stop at Garuda.
Another state-owned carrier, PT Merpati Nusantara Airlines, also needed changes, and this would entail the sale of a stake to investors, he said.
"At Merpati, I have urged the management to undertake a major restructuring so as to allow investors to come into the firm," Bloomberg quoted Sugiharto as saying.
The strategy was to improve governance in state enterprises and prevent past practices of corruption, collusion and nepotism, the minister said in his interview.