Rising from the Ashes: Garuda Indonesia CEO Shares Key Lessons from Successful Restructuration at UIII's BIZTALK Event

January 04, 2024

Contributor: Rashid Shabir Abbasi | Editor: Ari Stoltze

UIII.AC.ID, DEPOK - Irfan Setiaputra, President and CEO of Garuda Indonesia, shared valuable insights at the University of Islam International Indonesia's Faculty of Economics and Business BIZTALK event on December 13, 2023. The presentation, titled "Lesson Learned from Garuda Indonesia Restructuration," shed light on the troubled-ridden flag carrier’s journey through the challenges posed by the Covid-19 pandemic and the subsequent successful restructuring process.

The aviation industry faced historic lows during the Covid-19 pandemic, with International Air Transport Association(IATA) reporting unprecedented challenges during the pandemic. “Our airports had turned into parking lots, reaching a nadir one day when we operated only three flights, each carrying a maximum of 6-8 passengers. Because of this sharp decline in revenue and high fixed cost, Garuda was at the brink of going bankrupt,” explained Mr. Setiaputra. He likened the situation to opening Pandora's box, as the company was grappled with a sharp decline in profits due to increased expenses, affecting liquidity and solvency. The company's total liabilities amounted to $10.1 billion, and revenue plummeted by 90%, raising red flags for its business fundamentals.

The presentation highlighted key issues, including problems in corporate governance, uncompetitive aircraft leasing costs, an inadaptive cost structure, and an uneven organizational composition and market view. Mr. Setiaputra emphasized that, at that time, there was no existing business model or academic study to guide the company through the unprecedented challenges posed by the pandemic. Despite the novelty of the situation, he was committed to turning the company around. “Garuda started its operations only about three years after our independence; hence, Garuda’s history is our nation’s history. We had no other choice but to act swiftly to prevent the national flag carrier from going down.”

Redefining opportunities, risks, and strengthening the growth mindset became pivotal for Garuda Indonesia's resurgence. The CEO outlined four key strategies: value proposition and customer demands, focus on the greater impact, business diversification, and emphasizing the critical role as the national flag carrier. Mr. Setiaputra said, “One of the successful initiatives we implemented was the wheelchair service to meet the needs of our passengers.”

During the restructuring phase, the company faced challenges with over 800 creditors, consisting mostly of non-banking institutions like local vendors, government entities, etc. Mr. Setiaputra claimed, “Garuda’s restructuring is the biggest and most complex restructuring in this country because restructuring a loan with a bank is much easier compared to that with other creditors, and we only owed $1 billion out of $10 billion to banks. With a tight timeline of 270 days to decide the future of Garuda Indonesia, the restructuring phase required goodwill, good faith, and openness.” The positive results of the restructuring included a 50% decrease in Garuda's debt value, reduced lease rates, and optimized total aircraft, leading to positive financial and operational performance in 2022. Garuda Indonesia was recognized as the Most Punctual Global Airline by OAG Flightview. Additionally, the airline received the "World's Best Cabin Crew" award from SkyTrax for the sixth time in 2023 and was acknowledged for having the best corporate performance on a global and national scale.

To cultivate a symbiotic relationship that bridges academia and industry, Mr. Setiaputra also offered collaboration prospects between Garuda Indonesia and the University of Islam International Indonesia. He proposed to provide internships and research opportunities to UIII students. This mutually beneficial arrangement is aimed to empower students while providing Garuda Indonesia with fresh perspectives on its operations. Moreover, Mr. Setiaputra revealed plans to offer discounted flight tickets to both UIII students and faculty, promoting accessibility to travel experiences and fostering a stronger connection between the university and the airline.

Mr. Setiaputra concluded the presentation with the key lessons learned from the experience: turning crisis into opportunity, managing risk and swift decision-making, prudent policy for business sustainability, and service consistency to achieve better results.

The CEO's closing message was clear: think positive, leverage capabilities to find solutions even in impossible situations, stop complaining and blaming others, act cheerfully, and live happily. The presentation left the audience inspired with a sense of resilience and optimism in the face of adversity.