The financial deck warning lights had been flashing furiously when Indonesia’s Garuda airline welshed on its AUD 660 million sukuk repayments this month after a 14-day grace.
The company, which is more than 60 per cent owned by the government, had already extended the loan’s maturity by three years. A sukuk is a financial certificate which complies with Islamic law prohibiting the receipt of interest while allowing acceptance of profits.
Most big flyers are facing financial headwinds in the wake of Covid-19 but Garuda is particularly airsick and not just through Australia shutting its arrival and departure gates. The other problem is management. The company has got through eight CEOs so far this century. Qantas is with its second.
Hundreds of thousands of Australians will have flown Garuda mainly to holiday in Bali. Other airlines helped carry an estimated 1.4 million visitors in 2019, but when and if the borders reopen they’ll have to find other services.
Garuda CEO Irfan Setiaputra told the Indonesian legislature the Melbourne and Perth flights will end in July, while the Sydney-Jakarta route mainly used by business people and bureaucrats is ‘under evaluation’.
Other Jakarta-origin Garuda routes likely to be grounded are Amsterdam and Kuala Lumpur. The company’s restructure includes retrenching many of its 20,000 staff (around 1,000 have already been through departures) and cutting the largely leased fleet to around 66 planes. Twenty aircraft are back with lessors.
This is hitting the Indonesian psyche and if minds weren’t focused on surviving the pandemic there’d be outrage at the damage to national pride, with the world’s fourth most populous country having to rely on foreigners to get airborne.
The idea of a civilian airline as an aerial ambassador is ridiculous unless the state which flies the jets makes the machines. That limits the range to the US, the four-member European Airbus consortium, China and Russia.
Other nations buy or lease, add a logo and parade on airport aprons as though they represent a triumph of their engineering rather than a paint job (livery in PR jargon), and call them flag-carriers. Qantas claims to be the ‘Spirit of Australia’, which sounds like a duty-free purchase.
Garuda is Indonesia’s Qantas minus the Australian’s clean accident record. It’s named after a mythical bird that appears in Hindu and Buddhist culture carrying the god Vishnu, a curious choice for the world’s largest Islamic country.
A garuda looking more like the US heraldic bald eagle is the national emblem, so much jingoism is embedded in the name. Despite the Republic’s economy bogged in a fiscal quagmire reported in an earlier column, a government rescue of the ailing airline is most likely.
It would be a courageous decision (as in a Yes Minister definition) for President Joko Widodo to let the company, overweight with an AUD 8.6 billion debt, crash and trash the Republic’s place among the world’s high-flyers, even though Garuda is not the biggest in the country. That spot on the runway is held by private Lion Air with a fleet of 140, two more than Garuda pre-pandemic.
Other options are to focus on the domestic market meaning the Garuda name will no longer appear on international departure lounge flight screens further diminishing the nation’s status.
Garuda has been nervous passengers’ no-fly zone with a record of 13 major accidents since 1950. In-flight service has also been hazardous. In 2004 human rights activist Munir Said Thalib, 38, was heading to Amsterdam via Singapore on a Garuda flight when off-duty pilot Pollycarpus Priyanto slipped arsenic into his drink. An autopsy showed the dose was three times the fatal level.
Priyanto, who has since died, was allegedly aided by staff supplying false travel documents. He was jailed along with Indra Setiawan, former CEO of Garuda. The suspicion continues that the men were fall guys in a plot to silence Thalib’s criticism of the State Intelligence Agency.
In June 2007 the EU banned Garuda landing rights for two years to improve safety standards. The order followed a domestic passenger flight over-running the Yogyakarta runway killing 21, including five Australians when it caught fire. Five years earlier at the same airport, a Boeing suffered a flameout in both engines and ditched in the River Solo, killing one and injuring 13.
In 2009 the company started a five-year expansion plan called ‘Quantum Leap’ which involved more uniform and logo redesigns, though less attention to staffing. Some flight attendants went public alleging sexual harassment and a prostitution ring.
In 2019 the company earned world ridicule when it tried to ban in-flight photography after a passenger uploaded a video of a handwritten menu for business class.
In 2020 CEO Emirsyah Satar was jailed for three months and fined AUD 100,000 for accepting bribes of AUD 4.1 million in deals involving planes and parts from Airbus and Rolls Royce.
After a long investigation one of Satar’s successors, Ari Askhara was jailed for a year for using the delivery of a new Airbus to smuggle a classic Harley Davidson motorcycle and two Brompton folding bicycles.
Garuda’s Independent Commissioner Yenny Wahid was quoted saying the company was carrying a burden ‘because corruption cases in the past have had an impact on Garuda’s management.’ Wahid is a human rights activist and anti-graft campaigner. She’s the second daughter of the late Abdurrahman Wahid, aka Gus Dur, the fourth president of Indonesia. At one stage she worked as a journalist in Australia with The Age and SMH.
Between 2008 and 2010 the Australian Competition and Consumer Commission took legal action against 15 airlines, including Garuda, alleging price-fixing on air freight. This year the Indonesian copped an AUD 14.7 million fine after dropping an appeal to an earlier Federal Court decision. Most of the other defendants settled out of court.
In the mythology, Vishnu, the god of preservation, rides on the back of Garuda. If the real Garuda stays aloft it will be shouldered by taxpayers.