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he first Boeing B-737-Max of Garuda Indonesia was recently seen rolling out from a Boeing factory. At first sight, it seems that the airline, which has been acclaimed in terms of service, continuously receiving awards for its cabin crew, is on the right path. However, it is widely known that Garuda Indonesia has faced financial difficulties in the past several years.

Its losses reached US$284 million in the first quarter of 2017, far exceeding the forecast of $80 million, according to internal sources and Indonesian aviation experts. Although the situation seems to have improved, the strategy of Garuda Indonesia management should raise some questions.

The airline renamed its tagline from “Efficiency” — initiated by its previous CEO, Muhammad Arif Wibowo — to “Sincerity,” which stands for synergy, integrity, customer focus, agility and safety. The move does not seem to have led to deep changes. The main aim is to cut costs in several areas while focusing on service onboard and outsourcing.

Cutting costs by no longer serving butter on trays on regional flights, or by offering only low-grade vodka and non-French red wines to Business class customers, might lead to some savings, but focusing mainly on these aspects will not help the airline to overcome this situation. When other legacy airlines like Air France-KLM faced similar difficulties, they invested and reinforced their hard and soft products and shut down some international routes (like Air France Paris-Singapore-Jakarta route or Paris-Kuala Lumpur). They also strengthened their alliance strategy and rationalized administrative costs, focusing on the legacy market.

Nowadays, Garuda seems to be doing the exact opposite. As a member of the Sky Team alliance, Garuda Indonesia is not using alliance facilities like common check-in and handling in airports like Amsterdam Schiphol. Instead, it contracts external suppliers. It is also surprising that the airline continues to operate several routes where occupancy is considered low. Indeed, instead of reinforcing some high demand routes like Jakarta-Amsterdam — and using the Skyteam hub for connecting flights — Garuda Indonesia continues to operate routes with low occupancy of around 60 percent, like the Jakarta–London route (previously via Singapore), which is full in Business class but nearly empty in Economy class. The airline has also expressed its willingness to open a route from Denpasar to Moscow, which might not be commercially relevant at present.

Instead of focusing on the competition with legacy carriers, Garuda is instead trying to compete with low-cost airlines. Some internal sources have affirmed that, during the presentation of its strategy to employees, Garuda Indonesia’s management considered low-cost airlines such as Air Asia, Lion Air and Viet Air Jet as their competitors, arguing that Garuda should get the same results with similar costs. This perception is entirely faulty, as the Indonesian national carrier already owns a low-cost subsidiary to do the job. Moreover, the perception of the airline might suffer from such a strategy.

There are also problems in Garuda’s human resources. In June 2017, Agus, a public policy observer, said that with nine members on its executive board, Garuda was totally inefficient. According to article 121.59 of the Civil Aviation Safety Regulation (CASR) and the regulatory reference from the Transportation Ministry, management personnel is limited to four director positions (CEO, directors of safety, operations maintenance) and three chief positions (pilot chiefs, inspector and flight attendant). From April to May 2017, Garuda Indonesia was unable to fill the indispensable positions of directors of operations and maintenance, leading to complaints from cockpit crews. This pattern has been reproduced by Garuda on all layers of management, as it has multiplied positions of vice-president (41) and deputy chief (several layers within each division).

However, the main challenge regarding human resources is related to the working conditions of air crew. For flight attendants, the retirement age was previously 56 years old, like in most airlines worldwide, before it decreased to 36. All aviation experts would agree that safety comes with experience and that maturity is key to ensure safety. The idea to stop employee contracts at the age of 36 might lead to some serious issues.

Simultaneously, the airline has substantially reduced the training period for new batches of flight attendants, from four to six months to two to three months and, nowadays, to a 38-day training period, which may be efficient but is limited in terms of safety. This training is provided by the Garuda Indonesia Training Center, a subsidiary of the airline, to which each applicant must pay no less than Rp 35 million. This pattern of reducing training and looking only for the youth can also be seen with cockpit crews. During a runway excursion on a flight between Jakarta and Yogyakarta on Feb. 1, the captain was 28 years old and the first officer was 23 years old, raising concerns from aviation experts around the world.

The blame game will not help the airline to rise again. As Garuda Indonesia takes over the public service mission of Merpati, some domestic routes cannot be shut down. Moreover, integration of alliance is taking time and might not be as smooth as expected. Nevertheless, it seems essential that Garuda Indonesia’s management set the right course in terms of strategy, with serious monitoring and evaluation from both the State-Owned Enterprises Ministry and relevant House of Representatives commissions.

It is also necessary that Garuda’s CEO, M. Pahala Nugraha Mansury, understand the urgent need to shut down several layers of bureaucracy within the company. It is essential that he shows support to employees, mainly air crew, who are the real strength of the airline and who might have a better understanding of it. Garuda Indonesia, as the national carrier of Indonesia, also reflects the image of the country.

In this perspective, it is important that the airline improve its ability to compete with legacy carriers and let its subsidiary, Citilink, compete with low-cost airlines. It is also essential for Garuda Indonesia to find a good equilibrium between the race for prestige, cost efficiency and safety, the last of which can only be achieved with experienced and duly trained crew members.
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