Emirsyah Satar: Garuda Must Change and be More Efficient

This highest-ranking executive in Garuda, Indonesia's national flag carrier, is a modest figure. He smiles and looks at people in a friendly manner. He speaks politely but firmly -- with a high sense of optimism. A plain man, Emirsyah Satar also gives the impression that he likes working more than talking. For him work is not a chore, but a challenge.

Emirsyah, who has led Garuda since March 2005, has a very tight schedule. He arrives at the office at 7:30 a.m. and does not return home until about 10 p.m. and sometimes well after midnight. His seriousness in leading Garuda, which is embroiled in myriads of problems including the resignations of senior pilots, inefficiency and huge debts to creditors and suppliers that led to speculation that it could go bankrupt, implies his perseverance and hard work.

All this, Emirsyah said, stems from inefficiency. So the challenge that Garuda is facing is how to operate in the most efficient manner possible.

For the past year it has been Emirsyah's job to save and turn around Garuda. In the meantime the domestic and overseas aviation business has undergone great changes, especially with the price increases for fuel, which is one of the biggest cost components in an airline. "In the past, fuel accounted for only 20 percent of costs but now accounts for almost 40 percent," said Emirsyah, a father of one who graduated from the University of Indonesia's School of Economics and Sorbonne University.

Garuda is not the only airline feeling the impact of the fuel price increases, all airlines are. Some have undergone a drop in earnings or have sustained losses. Competition with other airlines, especially new airlines, is another problem. "These airlines, which are generally new, started their business without any history of debt so they can be cost-efficient," said Emirsyah, who started his career as an auditor at Cooper & Lybrand Audit Firm in 1983.

But Emirsyah considers the present condition in the airline industry as a challenge that will eventually enable Garuda to operate efficiently. Garuda, for example, has tried to achieve greater efficiency in its operations by means of aircraft utilization, aircraft maintenance, network development and greater efficiency in employee performance.

The market for aircraft maintenance in this region is quite promising and Garuda Maintenance Flight (GMF) is looking for a strong partner so as to be able to be competitive and secure a share of the market. "Our maintenance employees have received international recognition," he said proudly.

Not only that, aircraft must also be used efficiently because the cost is fixed. Whether an aircraft flies or not, the rent has to be paid. Therefore, to reach greater efficiency in this area, the types of aircraft must be reduced because, Emirsyah said, the smaller the number of aircraft that an airline uses, the greater efficiency it will enjoy.

Garuda has sold all aircraft of the DC 10 type and today uses only 747, 330 and 737 types for its domestic and regional routes. Meanwhile, Citilink, which is Garuda's low-cost carrier (LCC), has become an independent company serving only domestic routes.

Emirsyah, husband of Sandrina and father to Egadhana Rasyid Satar, did not hesitate to let go of Citilink because its market segment is different from that of Garuda, which is a full service carrier. Even a merger would have been hard to realize because, he said, an airline has never been successfully transformed from a full service carrier to an LCC. In Europe there are scores of LCCs, but only Ryan Air and ValuJet are successful.

As regards human resources, Emirsyah, who plays tennis, sees two ways to improve the efficiency of employees of Garuda, which employs some 6,000 people. One way to is reduce this number, while the other is to improve their productivity level. Emirsyah has opted for the second choice.

"We may endeavor to increase our output by setting a clear target," said Emirsyah, who was formerly deputy CEO of Bank Danamon. Take, for example, Garuda's branch offices. Garuda used to fly to Amsterdam, London, Paris and Frankfurt and therefore had branch offices in each of the cities. Today, the only branch office still operating is the one in Amsterdam. In fact, Garuda still flies the same routes but does it on the basis of codeshare cooperation with Malaysian Airlines.

The basic strategy that Emirsyah and his team have been employing is to re-arrange all of Garuda's operational, business and managerial aspects and in this respect Garuda is now in survival mode. In re-arranging the company, Emirsyah has set three periods: (a) survival period: 2006-2007; (b) turnaround period: 2008-2009 and (c) period of growth toward IPO: 2010. "Garuda is yet to get out of crisis. We are still intensively looking for a solution to its problems," Emirsyah noted.

Along with the government and its creditors, Garuda is making efforts to find a solution to reinforce its capital, reduce its debts and eliminate its liabilities. One of the ways being adopted is to find a new partner, which will be possible only with approval of its shareholders. Only then it can develop its network while learning the know-how.

Garuda's debts pose a difficult problem. The government, reportedly, has offered to extend a bailout fund of $50 million and a fresh injection of $150 million and also to set up a special company to take over Garuda's debts. "It is like doing a jigsaw puzzle. We must find all the pieces to be able to get a full picture. The same applies to this debt settlement," he said.

In the past six months, he went on, along with a number of ministries under the coordination of the coordinating minister for the economy, he and his team have been striving to find the right option to settle these debts. He is convinced, however, that the target of the restructuring of Garuda's debts of hundreds of millions of dollars, which has been set for June this year, will be reached although it may have to be delayed a month until July. Is he optimistic? "I surely am," he said, his face beaming with confidence.

In 2006, Garuda is also in its consolidation stage and expects a turn-around by 2010. Of course, it has recorded a lot of improvement, such as its On-Time Performance rate, originally 78.9 percent but now 87.4 percent (above the standard prevailing for this industry), its load factor is 72 percent and its yield (i.e. earnings per seat per km) has increased to $ 0.068/seat/km. "In the past two years, we have been focusing on efficiency and services. When these two aspects are good enough we can start concentrating on the IPO," he said.

Despite a host of jobs and obligations that are waiting to be performed, Emirsyah remains optimistic. Believing strongly in the principle that "Good is not good enough when better is expected", he always feels challenged to do better, better and even better. He believes there must be a solution to every problem although it may not be a final solution. "When we face a dead-end, just perform the ritual prayer as a Muslim. But of course we don't only pray, we must continue making efforts. Enjoy your work," he said, chuckling. (Lily G. Nababan)

The Jakarta Post, June 07, 2006