Service, efficiency and size key to Garuda privatization
Service, efficiency and size key to Garuda privatization
By Berni K. Moestafa
JAKARTA (JP): Three more stages comprising better service,
efficiency and bigger size await national airline PT Garuda
Indonesia ahead of its privatization plans in 2003.
The airline's spokesman, Pujobroto, said the stages were
necessary to build confidence before Garuda could claim itself
fit for privatization.
"After we feel we're really ready, in our operation, our
system, then we'll have the confidence to take on privatization,"
Pujobroto told The Jakarta Post last week.
He said the three stages were part of Garuda's recovery
program that began in 1998 during the economic crisis.
"The year 1998 was for consolidation, 1999 for rehabilitation,
the year 2000 is for service, 2001 for better efficiency and 2002
for expansions," he explained.
He said that while in 1998 the company managed to avert
bankruptcy, in 1999 Garuda focused on improving its overall
operation performance.
The steep fall of the rupiah during the crisis caused Garuda's
dollar-based debt to soar and its passenger load factor to
plunge.
Before the crisis, Garuda was also known as the cash cow for
the family and cronies of former president Soeharto.
The subsequent inefficiencies combined with dropping revenue
led the company to suffer a negative equity of Rp 1.92 trillion
(about US$225 million at the current rate) at the end of 1998.
In that year, the state airline operator hired German flag
carrier Lufthansa and the Deutsche Bank as consultants, and
managed to resume normal operation by 1999.
Pujobroto said Garuda managed to bolster its passenger load
factor to 69.1 percent in 1999 from a 54.4 percent the year
before.
Garuda's yield or revenue rose to 5.1 U.S. cents per seat per
kilometer in 1999, from 3.4 cents per seat per kilometer in 1998,
he said.
Garuda is now in its fourth year of the program, which it
calls the year of service and communication.
"This year we are revamping our entire service," Pujobroto
explained.
Garuda said the program's goals were to raise service and
reliability and improve Garuda's public image.
The restructuring of services would cover preflight, such as
check-ins, in-flight and postflight services, such as during
baggage claims, the company said.
Next year, Garuda plans to kick off its efficiency year.
"Efficiency here is not to be mistaken with cost reduction,"
Pujobroto said.
He said the efficiency year would focus on optimizing Garuda's
existing resources to yield better productivity and higher profit
margins.
"For instance, what once took people seven days to accomplish
we try to narrow it down to only two days, thus saving us a lot
of time," he explained.
Garuda further expects to implement good corporate governance
to achieve the program's goals.
The efficiency program, Garuda said, would cover its
administration, organization, operation, financing and
purchasing.
Expansion
As for the year 2002, Garuda plans to expand its routes,
products, services and its fleet.
Pujobroto said the company would reopen several of its
international routes that were closed.
In 1998, he said, Garuda suspended 17 international routes,
including services to the United States, Taipei, Seoul, Paris,
Rome, Zurich and Saigon, as part of its retrenchment program
during the crisis.
This year alone, he said, Garuda planned to add more routes
should the market and the company's resources permit it.
"On Oct. 29, we will reopen our Jakarta-Seoul route, which we
will serve three times a week," he said, adding that by April
2001, Garuda would increase flights to four times a week.
Pujobroto further said the expansion program also called for
Garuda to add more aircraft to its existing fleet of 42 planes.
Before the crisis, Garuda operated a fleet of 58 planes.
Albeit still heavily indebted, Garuda has secured a deal to
lease seven Boeing 737s from GE Capital Aviation Services (GECAS)
and the International Leasing Finance Company (ILFC).
Coming at a cost of between $200,000 to $250,000 a month, the
company expects the seven Boeings to replace several old planes
and serve new routes.
Pujobroto said by that year, Garuda hoped to become the leader
in the domestic market.
A strong local market is necessary to support Garuda's
international service as well as benefit from it, he said.
"Inbound passengers who want to continue their flights to
other regions in Indonesia can fly Garuda's domestic fleet," he
explained.
However, he added, Garuda did not aim to dominate the local
market.
Pujobroto said Garuda's privatization target for 2003 was only
the company's internal target, which was subject to government
approval.
Thus far, the government has yet to announce plans on how it
will divest Garuda and how much it expects in proceeds.
The government recently assigned independent auditor
PricewaterhouseCoopers to audit the national airline as part of
its agreement with the International Monetary Fund (IMF).
Garuda is in the middle of a debt restructuring process after
it amassed debts totaling $1.8 billion, of which $610 million is
owed to the European Credit Agency (ECA).
By the end of this year, Garuda expects to finalize a debt
restructuring agreement.
The state company was in the red for over a decade, and only
last year it returned to the black when it recorded a net profit
of Rp 548 billion ($62 million).
Garuda's finance director Emirsyah Satar said earlier this
month that he predicted the net profit to reach another Rp 500
billion this year.