PT. Garuda Indonesia (Garuda) is the oldest flight company in Indonesia and owned by the government. In 2010, in its 60th anniversary-an age that should enter or in mature position- it showed more losses than profit (like shown in the 5 consecutive years of financial statement). In 2006 under the new leader of Emirsyah Satar Garuda started to change its strategy to make profit. The new strategies include synergize all operation level and embedded one new value, which is team work, to achieve company’s targets. These changes resulted in profit amount to IDR 975 billion in 2008 and IDR 1.018 trillion in 2009. In the end 2010 Garuda planning to be a public company through IPO (Initial Public Offering). In order to do that, Garuda has restructured its debt to ECA and Bank Mandiri. Repayment to Bank Mandiri will be done by exchange its debt with 10% of shares sold through IPO, while negotiation with ECA for debt restructuring has been affirmed and only wait for the final signature. Beside the big plan for IPO, Garuda faces a tight competition from the LCC flight company, because many passengers still prefer the LCC over the premium flight like Garuda. Other than premium market they serve, they also serve the LCC segment using Citilink brand, unfortunately Garuda still focus on its premium service over the LCC, which is why the number of fleet and the routes provided by Citilink is still limited. This has become the hindrance for Garuda to increase its market share as well as market leader, and this phenomenon applies for domestic and international routes. The market leader for domestic and international routes is Lion Air and Air Asia respectively. Looking at the Citilink’s performance and the trend towards LCC, Citilink is a promising business to Garuda since the increase passenger from 2008-2009 reached 277.46%. Other than debt and competition issues, Garuda also faces trust issue comes from the labor union to the management due to financial statement transparency issue, criticism for selling assets, and demand of salary increase.
PROBLEM IDENTIFICATIONS AND ISSUES BASIS
Based on several issues mentioned above, problems and issues around Garuda are: 1. Places 2nd position in the Indonesian airlines in term of number of market shares (19% for domestic routes compare to 30% Lion Air’s market share, and 34% of international routes compare to 46.9% Air Asia’s market share); 2. Lack of trust from labor to the management due to question of transparency in financial statement, criticism for selling assets, and demand of salary increase.
Frame of analysis used to solve the problem by using management concepts as shown in the following figure: Strategic Issue
Social & Culture
Porter’s 5 Forces of competition analysis market share
A. External Analysis
The external analysis is divided into two parts, the macro analysis and industry analysis. Macro analysis will address issues
macro (state) that affect the airline industry, while the industry analysis will discuss industry issues that impact the profitability of the airline industry. 1. Macro Analysis using PEST Analysis
2. Industry Analysis using Porter 5’s Forces of Competition Analysis Market Share
From industry analysis presented above can be concluded the profitability of the commercial flight industry is low thus it is necessary to enhance core competence and maintain efficient cost to reach competitiveness which will lead to sustainable growth. Results from PEST and Industry...