News Backgrounder
Former Garuda Indonesia CFO appointed president after Mansyuri removed
Indonesia’s government has installed Askara “Ari” Danadiputra as Garuda Indonesia’s latest president after his predecessor, former banker Pahala Nugraha Mansyuri, was judged to be failing in his transformation of the carrier.
October 1st 2018
Indonesia’s Ministry of State-Owned Enterprises, which controls Garuda Indonesia, not only removed the carrier’s president director, Nugraha Mansyuri, last month but also demanded six of the eight directors of the airline’s board follow him out the door. Read More »
Clearly Jakarta believed his promised transformation program for the flag carrier was not working, despite the fact that the carrier’s most recent results of an interim loss of US$116.9 million were a significant improvement over a loss $281 million for the same months a year ago.
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To Mansyuri’s credit, he made some tough decisions, despite vehement opposition to change from Indonesia’s labour unions. After he took charge in April 2016, he cancelled several unprofitable routes, including non-stop Jakarta-London, and froze fleet expansion.
He also attempted to reduce employee welfare benefits, a goal that provoked a union backlash.
Askara “Ari” Danadiputra, was Garuda’s chief financial officer from 2016-2016. Most recently he was president of port operator Pelindo III, another state-owned enterprise. At the announcement of his appointment, he told media the working conditions of the airline group’s employees was a top priority.
“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. Making employees happy will improve customer service,” he said. “Human capital transformation is how we will make our employees happy so that they can deliver best service to customers.”
New human capital director, Heri Akhyar, said Garuda needed to boost the morale of its employees. “Usually, when a company is in a state of loss, employee motivation drops. We have to try and bring that motivation back.”
Danadiputra said the new leadership team would also be enhancing revenue and redefining the airline’s cost structure. Garuda needed to open profitable routes and close inefficient ones, he said.
He intends to renegotiate the company`s aircraft leasing contracts, which his predecessor also said were a management priority. “The aircraft leasing contracts will definitely be renegotiated with the lessor. We will renegotiate, especially to extend the leasing period of the medium- and large aircraft contracts so the monthly rates will be lower.”
If successful, revised contracts could reduce Garuda’s leasing costs by 10% to 20% or up to $100 million by year end, he said.
Local analysts said the leadership overhaul was necessary because the Mansyuri team was regarded as inexperienced in aviation and also had become a source of turmoil in the lead up to the re-election campaign of Indonesian president, Joko Widodo.
Indonesia, the world’s fourth most populous country, is home to a fast-growing aviation market fueled by an influx of tourists from the region as well as increasing numbers of locals traveling abroad.
The flag carrier faces cutthroat competition for passengers from LCCs such as AirAsia, regional carriers and Gulf airilnes. Long haul LCCs will soon be a larger sector in the competitive mix.
Garuda’s stock price has fallen to a record low and now has a market capitalization of around $370 million, making it one of the least valuable airlines in Asia. The carrier’s financial performance has been volatile for years.
During Emirysah Satar’s Garuda reign, from 2005 to 2014, Garuda reported losses of $7.2 million in 2005 and $338 million in 2014. He was replaced in 2014 by Arif Wibowo, who delivered a profit of $77.97 million for the carrier in 2015 .
Profits declined to $9.36 million a year later as LCCs undercut fares and the national economy grew sluggish. Wibowo was dismissed after the carrier reported a 2017 first quarter loss of $283.8 million. Mansyuri was his successor.
Wibowo is now the finance director of state-owned oil and gas holding company Pertamina. “Rotations within state-owned enterprises (SOEs) are common refresher measures. We do it based on individual abilities,” said the mining, strategic industries and media affairs undersecretary at the SOE Ministry, Farjar Sampurno. “The reasons for replacing (members) on the executive boards of SOEs are to meet the enterprise’s needs in facing challenges.”
