Indonesian flag carrier Garuda is undergoing more management upheaval as it struggles to implement a critical fleet modernisation programme and lift performance after one of its toughest years.
In the face of intense competition on key domestic and international routes from local rival Sempati and more efficient foreign competitors, the Jakarta-based carrier has asked the government for a US$470 million cash injection to restructure working capital and buy new aircraft.
The plea came as the Ministry of Finance sacked three senior board members - finance director Jazid Adam, commercial director Kussuyono and technical director Suratman - and replaced them with government insiders. Ahdam Subianto, deputy of head of the strategic industries department, takes over finance, transport ministry official Sudarso Kadri will head commercial, and an official of the government-owned aircraft builder IPTN, Bambang Wahyudi, is technical director.
Local sources suggest the government moved to revitalise the board and inject new blood into crucial strategic areas following a dismal year for Garuda and the failure of the previous officials to make any real gains in trimming costs and improving performance. The government replaced Garuda's president Wage Mulyono last year over disagreements on strategy and costly lease arrangements forced on the carrier by the state. The airline has not released any financial details for 1995 but after net profits of US$87 million in 1994 it is understood Garuda struggled to stay in the black last year. This bleak prognosis was borne out in October when the carrier cut frequencies and routes and trimmed orders.
Garuda must modernise if it is to keep pace with regional competitors which are spending billions of dollars on new Boeing and Airbus jets. The good news is the government has indicated funds are available for a re-equipment programme - but there is a rider.
A member of Garuda's board of commissioners, Martiono Hadianto, says the government 'has already given indications that it will give us the equity but we still have to do our homework, especially with respect to an increase in working capital.' 'Homework' includes a plan to cut administration and operating costs and increase fuel efficiency.
Garuda, whose debts have increased to $400 million in the last 12 months because of aircraft purchases, wants the additional money to order five B737-400s for its domestic fleet and two B747-400s to upgrade international services. The first of nine A330-300s will begin arriving from December - the initial six aircraft are being acquired under operating leases arranged by Deutsche Morgan Grenfell. The aircraft will operate in a two-class configuration, flying to Australia, the Middle East, Japan and south east Asia.
Tom Ballantyne
Source: Airline Business
