Led by newly installed Garuda president director Irfan Setiaputra, who has a wealth of experience in the information technology (IT) and mining industries, and chief commissioner Triawan Munaf, a businessman and former head of the now-dissolved Creative Economy Agency, the new team will map out a new route to good corporate governance.

To be blunt, Garuda has long failed in basic governance.

Irfan’s predecessor, Gusti Ngurah Askhara Danadiputra, was dismissed for allegedly smuggling a 1972 Harley-Davidson classic motorcycle and several Brompton bicycles in a newly purchased Airbus 330-900 aircraft flown from France to Jakarta in December. Four other directors aboard the new jetliner were also dismissed.

In April 2019, Garuda’s reputation as a flag carrier and a publicly listed company suffered a devastating blow after its management was discovered to have committed the egregious sin of colluding with auditors to cook its 2018 financial report by artificially inflating its earnings to US$800,000 from losses of $175 million.

Airlines need highly competent management, as the business is complex, capital- and labor-intensive and extremely competitive with a very thin margin, and therefore difficult to run. They encounter plenty of unpredictability in major factors that are simply beyond management control and impact results, such as fuel prices, the weather and macroeconomic changes.

But most transportation analysts forecast a bright future for the airline industry in Indonesia, the world’s largest archipelagic nation containing more than 17,000 islands that stretch around 5,100 kilometers east to west and 1,800 km north to south. With a population of over 265 million and a steadily growing middle class, the country certainly needs air transportation. Moreover, its untapped tourism potential and its strategic location amid the trade flow between Europe and Australia presents Garuda with a huge opportunity for expansion.

In an industry that offers largely similar services — passenger travel — and a choice in technology mostly between Boeing and Airbus aircraft, the only clear competitive advantage is in price, routes and value-added in ground and in-flight services.

Passenger load factor is the most critical element because it is the airline’s primary revenue generator. When a plane takes off with unfilled seats, the airliner makes no money because its high fixed expenses means that the cost of adding passengers on a partially filled flight is virtually negligible.

Garuda should therefore focus on investing more in better passenger comfort by steadily improving its safety and on-time performance to meet international standards, expediting its check-in services and adopting IT systems that support 24-hour communication with its customers.

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