Garuda Indonesia Fires CEO For Trying To Make Airline Profitable

I love Garuda Indonesia, and find that the airline has among the best customer service out there. The national carrier has been struggling financially, unfortunately, as is the case with many mismanaged government owned airlines.

The good news is that the airline has been on the road to recovery (financially). Garuda Indonesia’s CEO (up until earlier this week) was appointed in April 2017, and he has been making some tough decisions for the airline, including significant cost cutting.

For example, the airline recently announced that they’re cutting flights to London. I’m of course sad about that, but it made sense, given that the airline was losing money on the route. Similarly, the airline had announced a while ago that they’d start flying to Los Angeles, but they put that idea on hold, realizing that there’s no way they’d make money operating the route.

The airline has also been trying to cut costs with employees and defer aircraft, realizing that bigger isn’t always better.

Garuda Indonesia’s financial performance has been improving, as the airline “only” reported a net loss of 116 million USD for the first half of the year, compared to 281 million USD in the first half of the prior year.

This week the company held a shareholders’ meeting during which they sacked the CEO, replacing him with the CEO of another state-owned company. They also changed six of the eight people on Garuda Indonesia’s board.

The company’s new CEO is Askara Danadiputra, who is currently the CEO of state-owned seaport operator  Pelindo III. He was also Garuda Indonesia’s CFO from December 2014 until April 2016, so at least he has some airline experience.

So, what’s his top priority as the new CEO of Garuda Indonesia? As noted by Asian Nikkei Review:

“The leadership must face the turbulent economic conditions, starting from the depreciated rupiah to rising oil prices. The main focus of the new management is … an increase in employee happiness. Because making the employees happy will improve customer service.”

In principle I like the idea of prioritizing employees, realizing that they’re the key to delivering the experience for customers. However, I do find it somewhat concerning that this is his primary goal, given the situation they’re currently in.

With such a radical change, both with the ousting of the CEO and six of the eight board seats replaced, my guess is that we’ll see Garuda Indonesia going back to some of their old, unprofitable practices. Who knows, as customers that might not be a bad thing, since we might see the London flight resorted, and we might see that flight to Los Angeles actually happen. 😉

It’s clear the government’s goal with the airline (at least at this very moment) isn’t just for the airline to turn a direct profit. I’ll be curious to see how long they stay on this current path, and until they once again decide that the top priority is cost cutting and a return to profitability.

What do you make of this Garuda Indonesia leadership change?

(Tip of the hat to Live and Let’s Fly)

Comments

  1. “The airline has among the best customer service out there”

    I got served ‘nacho chips’ during a 7 hour flight in business as a ‘hot meal’. And no, they said they did load food on the flight ….

  2. I wonder how many of their employees get their jobs because of their relationships with government officials. Then it makes perfect sense for the giver to be upset when the airline is cutting costs and laying off staff.

  3. In that same article you cited, it said the previous CEO’s cost-cutting measures “drew strong resistance from the labor union.” The new CEO probably stated to keep employees happy to make the labor union happy.
    I really hope Garuda stays afloat as I like the airline very much as well.

  4. @TravelQuinten My experiences weren’t too good either and I had two flights on Garuda so far. I basically got treated like second class citizen even flying in business. Maybe it is because I am Asian-American instead of European or military, but I don’t plan on flying Garuda if I can help it.

  5. Isn’t there another photo that could be used when talking about Garuda? They might be friendly but to use the same photo of 4 individuals in all your articles might be intrussive for them. Did you get their OK to show them sooo many times?

  6. As one of the employee of the airline I find the article a little bit missleading if not missinformed. What you need to know is several of their cutting cost program is violating the rule regulated by the international safety commercial flight organization, and blatantly ignoring the work agreement between company and the labor union not to mention the politics that happened inside the management level. which stir the work environment to a stressful level. FYI their program has a slogan that put “safety” on the bottom out of five points of priority. so if all of this continue it’s like waiting who wins the lottery for something bad to happen.

  7. @Rob I completely agree with you as many Asian carriers tend to treat Western customers better than their Asian or Asian-American customers simply based on the color of the skin. This also happens on Thai Airways and Cathay as well but if you know a CX crew member, it is better. Life is life and it can suck sometimes.

  8. GA is a state-owned enterprise. Indonesia has big ambitions to attract foreign investors and host the olympics in a decade or so. Therefore, having a world-class airline is a priority for them. As long as the government supports the company with money, I do not see a problem with Thai approach.

  9. Many years ago, (decades), I flew Garuda from LAX to Bali. It was on a DC10, with a stop in Honolulu and a refueling stop on Biak. The one thing I remember about the flight was how they served the meals in economy. They came in the original tin-foil pans with the tin-foil cover still on it. You had to remove the cover and then they came through a second time to retrieve the covers from you.

  10. It is more political reason, than anything. The statement “makes employees happy” tends to have “agreement” with the union labor and the pilot association, which is politic plays a big role here. Day after, the ex-CEO is appointed as a finance director of Indonesian Oil Company. It shows that his effort was good for Garuda Indonesia.

    This case also has some relationship with the next year president election. As Garuda is state owned, the government is in conservative way, by keeping the employees happy to give some boost for the election.

    As an Indonesian, I experience how complicated this situation is.

    I just hope the best for the Airline, even some onboard services were cut….

  11. Hopefully by replacing mr. Pahala Mansury with another CEO that has airline experience. Looking forward Garuda Indonesia for big improvements and finally fly back to LAX next year 2019 (after many delays).
    Why cant Garuda choose another route for transit such ICN,CAN, PVG, MFM OR DPS TO PPT directly to LAX instead of going to NRT since Japan government not granted Garuda to pick up passenger for LAX.
    COME ON GARUDA ! SHOW THE WORLD AND PROVE IT THAT YOU ARE AMONG THE BEST AND PEOPLE’S AIRLINE CHOICE !!!

  12. Whenever you guys bring up racist ideas or clichés like…. Americans are being threated worse or better, main reason for this is language, not color of the skin. A FA with a bad English will avoid you, one with a better one be happy to practice. A Thai FA might be surprised if a Thai looking person is English and monolingual.

  13. @Rob & @Stanley, it’s why all the bloggers LOVE CX. I enjoy watching the blatant discrimination in their F Lounges on full display for ANYONE to see. 😉

  14. The former CEO was an ex banker and a bean counter. No wonder he was successful in paring the losses but utterly hopeless in his attempts to grow the business into profitability. Like reader Big E comments above, I DO feel that some of his cost cutting measures ran counter to Garuda’s long term goal as 5 star full service airline worthy as a challenger to the likes of SQ and CX and especially when it relates to safety. As passengers, I personally share Travel Quinten’s frustations with the on board catering fiasco. Add that on top of the declining on time departure due to the pilots association’s decision to stage a strict work-to-rule protest, then you got A LOT of unhappy customers (not to mention the added expenses having to book your best customers into expensive, last minute full fares on their domestic rivals once GA is forced to cancel flights — they have zero reaccomodation agreement therefore needing to pay for the tickets in CASH) who started to abandon the airline in droves as they struggle to justify GA’s much higher ticket prices when they’re getting almost the same treatment as many of the LCCs that operates in the region. This is very clear when you saw that its subsidiary LCC, Citilink, saw its pax number consistently grow while GA’s numbers suffer greatly in domestic market. All in all, I think Mr. Mansury’s time has passed. He did a very good job paring the “fats” but his relationship with the workforce has become so toxic that it’s time for someone else to come in and try to galvanize the workforce and take the company forward towards profitability.

  15. Best of luck to the new CEO. Hope he can bring the airline back to black, starting with improving their punctuality.

  16. @Bobs You realise the term “Third-World” does not apply to Indonesia by any measure? Its economy, for example, is the largest in SE Asia & is among the top 20 largest economies in the World?

  17. As a regular flyer on GA internationally – mainly SYD to DPS but I have flown intra Asia as well and sometimes domestic in Indonesia, out of all those flights and I might do 4 roundtrips a year all in J, I have only ever had 1 hiccup so even as way back at the 2001 they were an amazing airline, and have only every got better. I rate GA J better than SQ – I prefer the friendliness of the GA crew – while I acknowledge that SQ has more choice with catering with book the cook, and better entertainment – I prefer to fly on GA.
    Its sad to see so many changes with destinations and flights – years ago GA was really popular from Australia to Europe with flights to AMS FRA and LGW – lots of people booked early and got really good prices AUD $1300 in Y return and about $3300 in J return, but with the flights now requiring an overnight in CGK they have lost all of that thru traffic, and often you could get really good fares to other Asian ports with a stopover in either DPS or CGK in each direction, these have all dried up too.

    Maybe the corruption with is part of doing business in Indonesia in impacting on this.

    A number of years ago I boarded a A330 in DPS for CGK, before heading to SYD, (no direct flight on a Saturday night), and most of the J cabin was partitioned off. My seat mate made comment about it, he was a Senator and said this was the aircraft that had been on an official Presidential visit to I think Korea – 10 days earlier – he was horrified the aircraft had not been returned to normal, and all those seats that could have been sold since then. When we got up to deplane at CGK – the door to this section was open – and there was just the 1 J seat set up in the middle of that area, so imagine an A330, with just the A & C seats – the rest of the cabin partitioned off – for 1 seat – 24 seats going begging for sale. Hopefully GA will never return to those bad old days
    Hopefully its only rosy skis and generous profits for the mystical dragon …

  18. GA is a government owned airline and actually a very fine one. Thirty years on from the privatization mania it is generally accepted that state owned enterprises can deliver excellent service and are arguably the right format if markets are controlled rather than liberalized. (And many private airlines, including the ones in the US deliver miserable services …)

    There’s only a problem with state-owned-enterprises, if an economic area has liberalized their market (e.g. the EU, the US domestically) and private enterprises are facing state-owned competitors.

    Some other nice state-owned carriers include Aeroflot, Qatar, Emirates, Singapore, Thai … just to mention a few.

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