Garuda’s revolving door of leaders has proved detrimental to its long-term interests and must be addressed for the carrier to get back on track.
Emblematic of deep-seated organisational issues, the worst blows Garuda suffered in 2019 were the misstatement of its 2018 financial results and the public dismissal of its chief executive, Ari Askhara.
Fronting the investigations into Askhara’s alleged wrongdoings, Indonesia’s minister for state-owned enterprises Erick Thohir stressed the need for his dismissal to be done “in a procedural manner”. But this only highlights the fact that the carrier is majority-owned by the government, which will likely decide its next chief.
The track record in picking leaders for Garuda has not been the best. Former chief executive Arif Wibowo was in office for just over two years before he was replaced in April 2017. Since then, the carrier has had two short-lived chiefs: Pahala Mansury from April 2017 to September 2018, and then Askhara.
Ahead of an extraordinary general meeting later this month, the government has stated its preference for an outsider with strong management skills to lead Garuda, one who can bring a fresh perspective to the challenges faced by the loss-making carrier.
“Certainly we’re looking for the best person… This person would not be contaminated with the issues faced by Garuda Indonesia, and is able to take the carrier higher, including not losing money,” Arya Sinulingga, a special staff at the ministry of state-owned enterprises, said on 13 January.
Without a clear succession plan, the lack of direction from top management presents downside risk to the carrier, opines Lee Young Jun, an analyst with Mirae Asset Sekuritas Indonesia.
This could affect key business decisions such as fleet additions, as well as the renegotiation of up to 15 aircraft leases this year. The company will also have to consider refinancing options, having shelved plans to raise nearly $900 million.
The onus is also on Jakarta to appoint an independent and competent board of commissioners that provides checks and balances and offer support to internal reforms.
In the financial statement fiasco, the only saving grace was the refusal of board members Chairal Tanjung and Dony Oskaria to sign off on the reports, which brought to light contentious accounting practices.
Garuda’s leadership team faces the challenge of returning the company to profitability while balancing government expectations that the carrier should help expand Indonesia’s network.
The flag carrier is the only Indonesian carrier contracted by the ministry of religious affairs for Hajj travel. However, it recently found itself justifying to Jakarta commercial decisions about its European services and has been under pressure to lower ticket prices to boost tourism.
The next chief executive will have the onerous task of implementing lasting changes and strengthening corporate governance, and will also need the support of competent and principled individuals in senior roles.
It will take time and effort for Garuda to move past the bad press and reputational damage as it strives to restore the cachet of being “The Airline of Indonesia.”
Story by Firdaus Hashim of the Cirium editorial team.