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Mysteries behind the big aircraft order
But for those familiar with the way Garuda has been doing its business of late, this reminded them of other more interesting things. The time that this case took place was when Garuda bought a large number of aircraft in 2009, the biggest procurement in Garuda’s history.
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The suspect of a bribery case in the procurement of aircraft engines for national flag carrier Garuda Indonesia, businessman Soetikno Soedarjo talks to journalists after being questioned as a witness in the case for another suspect former Garuda CEO Emirsyah Satar on Tuesday, Feb. 28. (Antara/Reno Esnir)
T
he recent Rolls Royce engines bribery case implicating the former CEO of Garuda Indonesia Airline was shocking. The one that made this case more special than many other graft cases was its modus operandi, which was carried out across borders and between continents.
But for those familiar with the way Garuda has been doing its business of late, this reminded them of other more interesting things. The time that this case took place was when Garuda bought a large number of aircraft in 2009, the biggest procurement in Garuda’s history.
Garuda has formulated its mission and related strategic plans since 2007. Garuda even published a book titled From One Dollar to Billion Dollars Company, which showed how the airline’s strategic plans were focused on efforts to increase the company’s value by accumulating the company’s assets.
Garuda had pre-estimated the company’s value, when the planned aircraft purchases would have been in the company’s inventory. Suppose one aircraft costs around US$200 million, by owning 50 planes Garuda’s assets would have reached US$10 billion.
In 2009, Garuda ordered 50 Airbus aircraft including A330300/200, powered by Rolls Royce Trent 700 engines, and another 10 Boeing B777-300ER aircraft. The planes arrived one after another by 2012, which coincided with the time the market went sluggish.
Garuda’s flights to/from Japan, Asia and Australia suffered losses and the frequency of many flights had to be reduced. Since the new planes kept arriving, they had to stay on the ground, whereas the old ones went on operating almost empty. So why did Garuda order so many aircraft? Didn’t it make a market study beforehand?
In December 2014, when the signals of losses became more apparent, the CEO offered his resignation unexpectedly. According to speculation, he had just realized that his strategic plans that he had considered till then as solutions, were in fact only problems.
