Arif Wibowo has a tough job ahead of him to pull Garuda Group back into profit. Undaunted by a string of losses caused by the poor economic environment, Arif doesn’t intend to throw in the towel and is planning big changes.
By Muhammad Azhari
Garuda president director and CEO Arif Wibowo was upbeat when GlobeAsia met him at his office for an interview. He had just met with Airbus officials and a day earlier he had received a prestigious award recognizing his achievement in running Indonesia’s flag carrier. On his phone is a high-tech mobile application called Executive Dashboard which allows him to monitor Garuda’s performance and daily operations. “If the indicator is red in a particular area, we will warn the supervisor for that area,” said Arif, who was born in Banyumas, Central Java, on September 19, 1966. Digitalization has changed the lives of Garuda’s management in running the airline but it has also benefitted customers, especially as the airline offers various e-booking platforms. “We regularly track our sales from our e-commerce platforms,” Arif said, adding that Executive Dashboard also shows the e-commerce platform, including from the official website, smartphone applications and cooperation with online ticketing partners. Travel agencies are still the biggest contributor, generating about 51% of total ticket sales, and ticketing offices still hold a big proportion of sales at 23%. Arif described his priority as a maximization strategy to reduce overhead costs, route restructuring and revenue management. That includes re-negotiating contracts with global aircraft manufacturers like Airbus, Boeing and ATR that have supplied aircraft for the Garuda fleet. The challenging atmosphere in the aviation business, with the domestic purchasing power of consumers weakened and the rupiah depreciating, led to stagnant sales and revenue, causing various costs to soar. Garuda was in the red in the first nine months of 2016 but the losses were at least narrowing in the January-September period, when the airline booked $44 million in losses from a loss of $63.2 million in the January-June period. “It was improving in the third quarter and in the fourth quarter, God willing, we will achieve positive results,” said Arif, the holder of an engineering degree. Other efforts to maximize returns have included route restructuring, boosting ancillary revenue, strengthening sales channels and boosting operational efficiency. In route restructuring, Arif said Garuda will focus on developing its international flights to China and the Middle East. China’s cities like Guangzhou, Shanghai, Beijing and Hong Kong are key targets. Garuda currently has flights from Jakarta to the four Chinese cities and will complement them with new flights from Denpasar in Bali. “In January we will have the Chengdu-Bali route and we are eyeing others like Xian and Tianjin,” he said. Chinese visitors from the last three cities now fly to Indonesia using chartered flights, and Garuda seeks to offer scheduled commercial flights to cater to the growing number of Chinese tourists to Indonesia. For the Middle East, Garuda is eyeing new routes from major cities, especially to cater to umroh pilgrims. Garuda, he said, seeks to add departure points from Indonesia apart from the traditional centers of Jakarta and Surabaya to bring its services closer to consumers. As for the European market, Garuda, which flies its Boeing 777-300ERs to London and Amsterdam, is currently still booking losses. “For airlines, there are many variables to calculate, we do cross-subsidies for such losses, but we still aim for our 777-300 aircraft to make good money,” he said.
Sky beyond strategy Arif is embarking on a bigger ambition as he spearheads “Sky Beyond,” a strategy that highlights return maximization, excellent Indonesian hospitality and group synergy. His goal is to make Garuda Group an enterprise with annual turnover of $10 billion in the five years from 2016. That would be a jump from about $3.8 billion today. The aim is to boost market share in domestic flights to 50% from 41% and international flights to 40% from 27%. To support such ambitious targets, Garuda Group, including its low-cost carrier (LCC) unit Citilink, needs a combined fleet of 312 aircraft, up from about 194 aircraft now. “For that we need to strengthen our equity. For this, our main shareholder - the government which controls more than 60% of shares – plays an important role,” Arif said. Much effort will be directed at Citilink, which compete directly with market leader Lion Air, while Malaysia’s AirAsia is also fighting for a bigger share in the Indonesian domestic aviation market through its Indonesia AirAsia unit. “We will really strengthen Citilink’s role as an LCC, and it will have a bigger fleet than Garuda in the domestic market. We will nurture it so that it can grow in a healthy and safe manner to meet local market demand,” Arif said. Arif received the CNBC Asia Business Leaders Award as one of only two CEOs from Indonesia to receive the prestigious award, which shortlisted about 60 candidates from Asian countries. Already a world-class airline, Garuda has secured dozens of awards and certifications. Garuda now owns seven subsidiaries: Citilink, Aero Systems Indonesia, GMF AeroAsia, Aerowisata, Cargo Garuda Indonesia, Abacus Distribution Systems Indonesia, Garuda Sentra Medika and Gapura Angkasa. There are also dozens of “grand-children” companies, or units of subsidiaries.