In mid-2021, Garuda Indonesia announced options for a big restructuring. The airline had been dropping revenue for years (even pre-pandemic), and had crippling debt. It appears to be like like the airline is now headed into a completely new way, and… I’m not sure this is gong to close substantially much better?
Garuda Indonesia’s new business strategy
Indonesia’s State Enterprises Minister, Erick Thohir, has exposed new programs about what a restructured Garuda Indonesia will seem like. As documented by Bloomberg:
- Garuda Indonesia will quit traveling most worldwide routes, with couple exceptions, like pilgrimage flights to Saudi Arabia most lengthy haul flights will alternatively be operated as portion of codeshare agreements with other airways
- Garuda Indonesia will in its place target on providing small business course, premium financial state (which the airline does not at present have), and economy seats, on “local” flights Garuda Indonesia may perhaps no more time offer you to start with course, but the crafting was on the wall for that anyway
- The airline at the moment only has all around 30 planes, but intends to have the fleet return to the pre-pandemic sizing of approximately 120 planes Garuda Indonesia will acquire further planes from leasing organizations
- Garuda Indonesia demands to restructure $9.5 billion in credit card debt, and a offer has allegedly been reached with lenders
Oh, and Garuda Indonesia currently ideas to convert a financial gain in 2023(!!!).
This appears like a recipe for disaster
Garuda Indonesia is an airline with outstanding employees but horrible management. At the very least that has been the scenario traditionally, as two previous Garuda Indonesia CEOs ended up fined and arrested for corruption.
The situation is that Garuda Indonesia has kind of set itself in a spot wherever it no for a longer time has a practical company design, as is the situation with so many federal government owned airways. Sure, it’s totally genuine that generating cash on extensive haul routes is rough, and traditionally Garuda Indonesia has most likely operated much too quite a few routes for prestige relatively than income.
At the exact same time, how is Garuda Indonesia supposed to contend when it will come to neighborhood flying?
- Indonesia has rapidly growing, efficient, and robust ultra minimal price carriers, which provide practically each regional route
- I simply cannot envision Garuda Indonesia can get its price composition to the place where by it competes with the likes of Lion Air and Air Asia even with removing a large amount of credit card debt, Garuda Indonesia has so lots of legacy charge challenges that just can’t be absolutely resolved
- Admittedly some people are willing to fork out extra to fly a comprehensive services airline, but that’s most likely not a massive sufficient industry to make a sustainable organization model which is especially when you take into consideration other world wide Asian carrier fly to Jakarta, so the airline will be competing against Cathay Pacific, Singapore Airlines, etcetera.
It seems to me like Garuda Indonesia’s sweet location (admittedly it is not that “sweet”) would be functioning as an productive world wide airline:
- Prevent selecting CEOs who are corrupt, and who look out for their very own interests, relatively than individuals of the airline
- Have a straightforward, effective fleet, and configure planes more viably as very well, with an successful overall economy structure, and a great company course merchandise
- Emphasis on running routes that give connectivity concerning other elements of the globe by using Indonesia, as perfectly as flights to & from Saudi Arabia for illustration, Garuda Indonesia was by no means as economical as it could have been with connecting Europe to Australia, even however that is a massive sector
I really feel like this would reduce Garuda Indonesia’s losses although continuing to give Indonesia connectivity to the globe on the national carrier. Of course Garuda Indonesia’s aged small business program didn’t do the job, but I really don’t believe the airline becoming focused on community flights will be successful possibly, specified the competition.
Base line
Garuda Indonesia is going through a restructuring, and the most recent prepare is for Garuda Indonesia to aim on becoming a neighborhood airline, and function quite minimal extended haul flights, together with to Saudi Arabia. As aspect of this, Garuda Indonesia also plans to mature back again to its pre-pandemic sizing, and raise its fleet to 120 jets. I never see this ending properly, but that is just my take…
What do you make of Garuda Indonesia’s new company approach?
