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A Talk with The New Man in Charge at Garuda Indonesia

INTERVIEW: Irfan Setiaputra – CEO, PT Garuda Indonesia Airlines

Only two months ago on Wednesday, 22 January 2020, Irfan Setiaputra, following the sudden dismissal of the Airline’s entire Board of Directors amidst a corruption and smuggling scandal was thrust into the role of CEO for the National Flag Carrier PT Garuda Indonesia.

Irfan assumed a job heading an airline that was besieged with problems on many fronts. The Airline is faced with a severe cash shortage in the face of some US$900 million in debt that comes due in 2020, problems with under-performing subsidiaries, and demands from the government to rapidly expand its route network to support the Government's ambitious plans to grow the national tourism industry.

What follows is Balidiscovery.com’s free translation of an interview conducted by Detik.com with Garuda’s CEO, Irfan Setiaputra.

QUESTION: We know that before your appointment, Garuda Indonesia was already confronted with a multitude of management problems. Currently, every airline in the world finds itself in the perfect storm of the novel coronavirus. What are the steps being taken by Garuda to save the Airline?

ANSWER: This was not expected. Almost all airlines have felt the impact (of the coronavirus). 

To simplify our understanding, we need to understand there are basically two types of airlines operating in the world at this time. 

First, there are hub-based airlines. These include, for example, Singapore Airlines, Cathay Pacific, Emirates, Etihad, and Qatar. These hub airlines fly their passengers to all destinations via their operational hubs. 

These hub-based airlines enjoy support from their home governments. They also enjoy many privileges, subsidies, and airport facilities from their hubs, such as those provided in Doha to Qatar Airways.

The second type of airline resembles Garuda Indonesia. We have a robust domestic market. National Airlines based on hubs do not generally have supporting local markets, making them even more vulnerable to the effects of situations created by problems such as the coronavirus. Meanwhile, Garuda is fortunate because we have a robust domestic market. When the coronavirus suddenly appeared, the sentiment to not travel was less a factor.

The Government has created packages of incentives to encourage domestic air travel, especially to tourist areas in Indonesia hit hardest by the effects of the coronavirus.

QUESTION: With new policies coming from the Government, such as ‘social distancing,’ what has been the impact on Garuda?

ANSWER: Actually, the effects of the coronavirus in Indonesia has been somewhat delayed. Only a few days ago did we begin to feel a significant downturn in domestic travel as the public started to even avoid domestic travel.

We were shocked when Singapore announced that for people who arrive after a specific date – last Tuesday (17 March), if I am not mistaken - they will be isolated for 14 days. On the eve of that deadline, Garuda’s airplanes flying to Singapore suddenly became flooded with reservations for the day before the Singapore deadline.

I would describe this as good fortune, but we questioned why were there suddenly so many passengers wanting to fly to Singapore? Was it possible that many Indonesian suddenly decided to stay in Singapore for some reason?

But the sudden increase in passengers was also a factor in the decisions to close schools, companies, and some government offices in the face of calls for people to work from home. On the same day, it was interesting to see that flights to Denpasar (Bali) were also full. I wondered if because people were studying and working from home, families were then deciding it was an excellent time to fly to Bali.

QUESTION:  Or maybe a decision for students sent home from school to study while on holiday?

ANSWER: I don’t want to say that. But it was interesting to observe how the Indonesian public decides to travel. 

Secondly, over that weekend, the business remained busy. Many reasons were cited. These included: People did not want to postpone wedding plans. Others decided to enjoy a weekend holiday visiting friends, while others simply wanted to take a brief holiday. But, then, a sudden downturn in domestic air travel began to take hold.

When the coronavirus first appeared, we closed flight to China. Actually, Garuda acted confidently and took the lead. But, for us, the ‘hit’ we really felt was the closing of the umroh pilgrimages.

Our schedule of frequent flights to Singapore has been reduced drastically. When we once flew to Singapore 9-10 times a day, we now only fly three times a day. We once operated 24 flights a week to Saudi Arabia for Umroh Pilgrimages using wide-body aircraft that has now been completely stopped.

We also operated, if I am not wrong, 10-11 days of flights each day to Saudi Arabia. After the coronavirus collapse, we were obliged to operate flights to bring back people who had already purchased tickets. Umroh pilgrims, who were already in Saudi Arabia, had to be served. For almost one week or more, we would fly to Saudi Arabia empty and fly back full of passengers.

QUESTION: So, from your perspective, the people of Indonesia continue to travel on weekends due to new work at home practices? Will Garuda follow this trend? Is Garuda compelled to continue to serve the passengers?

ANSWER: Garuda has to continue to fly even though the number of flights to specific destinations has been reduced. At this point in time, there is no city that we have stopped serving. We have adjusted schedules depending on the number of customers. Where there were once 10 flight frequencies, there are now 8, or 7, or 5, or even 1. But we are making sure that flight connections will be maintained until we are asked by the government to stop.

So even if the occupancy figures are low, we will continue to serve all our destinations. 

QUESTION:  Global fuel prices have fallen, but, at the same time, the Indonesian Rupiah is weakening. How has this affected Garuda?

ANSWER: Clearly, this has impacted our costs, in both positive and negative ways. I have yet to undertake a detailed accounting, but many are asking the implications of a weak Rupiah and lower fuel costs. This is a day-to-day dynamic situation that is proving very challenging.

On paper, it can be assumed that fuel prices and the Rupiah's value will continue to decline from here on. But this may not be the case. I want to avoid trying to making specific fixed assumptions about the future. Many of our costs are US dollar-based, and the stronger dollar increases our financial burdens.

Our single biggest expense is aviation fuel, and we can enjoy the falling fuel prices. Unfortunately, our current number of flights is below average. Ideally, we should be flying our regular schedule while enjoying lower fuel prices.

QUESTION: The former management of Garuda has have left a legacy of large debts. What steps are you taking to overcome this situation?

ANSWER: I don’t want to call this a ‘legacy.’ I prefer to term this a ‘given condition’ that we must confront. Nothing is served by complaining and finding fault. In order ‘to still dare’ to carry on, we must be committed to work in whatever condition we find ourselves.

Today with reduced income, Garuda is in an uncomfortable position to face our debts. We are in discussions with them (our debtors). We are fortunate that this is not a problem specific to Garuda, but a problem faced by all airlines.

We are thinking about how to refinance our debt. The ‘appetite” for the aviation business has diminished. But I think all industries – banking and finance companies are adopting a ‘wait and see’ attitude as regards the future development of coronavirus. This has not only hit airlines, but it has also hit everyone. So if you’re asking what steps are we taking, we are meeting, negotiating, and seeking new sources of funds for refinancing and other requirements.

QUESTION: Are the signals positive from your creditors?

ANSWER: It’s positive, at least from the standpoint that our creditors are willing to talk. But we must also understand that they have their limits. But I am in discussion with our creditors. I preface our talks, saying it is in times like these that our partnership is put to the test.

Yes, there are creditors making demands. But I also see a willingness to discuss finding a meeting point on terms, the kind of reductions which may be possible, and what they are actually demanding. All our discussions seek to find an agreement.

QUESTION: The Minister of State-owned Enterprises (BUMN), Erick Thohir, said that 5 of Garuda’s subsidiary companies need to be closed. What is your evaluation in this regard?

ANSWER: We continue to evaluate the situation while awaiting agreement from the Ministry of State-owned Enterprises (BUMN) to execute the next step. We have already told the management of the subsidiaries of our intentions and advised them to be prepared.

Secondly, we need to take an inventory of all the issues at hand. I have simply asked the directors of these companies to first make sure that not one of our employees is forgotten or ignored. This situation is not their fault.

Going forward, let's make sure there is a business solution. The cooperative relationships we have already created must continue in a new framework.

In considering these 5 subsidiaries, we want to first focus on the mandate given by Pak Erick. We will determine which company should be retained as Garuda subsidiaries, which should be liquidated and not merged into other companies, and which should be closed.

QUESTION: Which fields?

ANSWER: Unfortunately, there are a range of companies involved, from those that diversified to units that were turned into companies in their own right. Some became suppliers to Garuda. And there were also ‘new’ businesses, such as the well-known case of PT Tauberes.

We are seeking ways to finalize the merger of some companies back into GarudaTauberes has an application that was created that turns out to be very good. If we could implement that application into Garuda’s operations, it could be used directly by the airline and not operated as a subsidiary. This would be a two-level promotion for Tauberes.

QUESTION: Do you have the credibility to do this because of your long experience in telecommunication?

ANSWER: Yes, hopefully, that is the case. In addition to assisting the business process, we can also collaborate using the knowledge of friends to help. To optimize the process, we will try to enhance the services offered by subsidiaries to meet our current business demands.

QUESTION: There are two major issues related to Garuda's new management. When you were selected as CEO, elements within the Indonesian Hotel and Restaurant Association (PHRI) (Editor: sic: ASITA?) who accused Garuda of creating a cartel by extending its best prices to only selected travel agents. Second, there is also the problem of how female employees at Garuda were being mistreated. How are you addressing these matters?

ANSWER: This is interesting in that Garuda is part of the entire travel industry comprised of travel agents, airlines, hotels, entertainment, etc. This problem was tabled from my first day on the job. Was PHRI (ASITA?) was merely asking a question or actually questioning my management skills? This fact will always linger in my memory.

In collaborating with our partners, the only important consideration is fairness. We must be fair in how we treat everyone. We would not jeopardize the trust of our friends and partners.

Because of this, I immediately met with travel agent leaders, and I assured them that Garuda will treat them fairly. When it was discovered that online bookings were getting special treatment that was prejudicial to travel agents, we removed those inequitable facilities.

QUESTION:  What did your investigations after your appointment reveal?

ANSWER:  Look, I am a CEO, not an investigator. When I hear all kinds of complaints and rumors, I quickly conclude that many people feel they are being mistreated. Whether the actual practice was fair or not is difficult for me to say.

Later, I looked at the terms of the ticket sales agreement and discovered inequities. For example, travel agents, including online sales, were not allowed access to sub-class fares. You cannot allow some access to your best available tickets while barring others.

I also met with Umroh travel agents. For reasons that made sense to me at the time, Umroh tickets were handled on a wholesale basis available only through certain companies and individuals. This had been the situation at Garuda for Umroh tickets for decades.

It was decided this must stop, and all travel agents could access Garuda tickets without working through an intermediate party. However, those agents that are prepared to make a bigger commitment on ticket sales will receive preferred treatment. That was the model we put in place. For example, buy ten tickets, the price is 100 silver pieces. Buy 1,000, and the price is 98 silver pieces. If you buy one million, then the price is 90 silver pieces. That was our offer.

Fairness is important to me and the management at Garuda. We are aware that some policies in place have a tendency to be unfair. This is what we are working to address, but there are individuals taking action that may create inequities. 

That why I give my handphone number to friends who can contact me. That’s the number of the Company’s Director. If someone sees a member of my team acting unfairly, please let me know. If you know the boss is working unfairly in his role as CEO, then please contact the Chief Commissioner and the BUMN Minister. It's that simple. It doesn’t have to be complicated.

QUESTION:  What about females working at Garuda Indonesia?

ANSWER: We must be thankful that the BUMN Ministry appointed Ibu Yenni Wahid as a Commissioner of the Company. We have also commenced a dialogue with union leadership and management. Along the way, we discovered several interesting facts. Once again, I am not an investigator. We have made unambiguous statements to our associates.

The management and commissioners know we want to end all unfair behavior and any harassment in the Company. We have created a mechanism for reporting such occurrences. But, once again, if you feel you are being mistreated, please contact me directly. If I am not available, then you can also contact Ibu Yenni Wahid.

I have also taken the opportunity to meet with the female cabin crew and made statements announcing that no group will be allowed special treatment. This is not going to happen again. We will never again consider someone’s close association in making decisions but only look at their job performance. We have also change the organization, appointing people to make sure the new rules operate efficiently.

This is our commitment. We have spoken to the Union to help us ensure past mistakes are not repeated. Mistakes will still happen that manifest as forms of harassment. We have made sure that these things can be reported directly to senior management.

QUESTION: Two weeks ago, we spoke to the Indonesian Ambassador to Russia. He told us that there is a significant passenger potential for Garuda from the Russian market. He mentioned 160,000 Russians per year could come to Indonesia. Indonesia has no direct flight connection to Russia, but Thailand and other airlines do. Garuda explored flying three times a week to Russia, but this has not been realized. What are Garuda’s plans for the Russian market?

ANSWER: The Ambassador to Moscow has communicated with me together with several other Indonesian Ambassadors from other countries. I am fortunate to have close connections with the Department of Foreign Affairs. The Minister of Foreign Affairs has communicated the suggestions of various ambassadors.

Commercially Garuda has undertaken several studies that uncovered problems and obstacles in several destinations, such as Moscow, Frankfurt, and Paris. The marketing data is compelling. But our team found that while a market may exist, Garuda will be brutalized from a business perspective if we enter these markets. We investigate the market size and also look at its composition and seasonality. Like cities in Indonesia, some destinations have potential but only in limited seasons.

When it’s the winter seasons there, they want to travel. When it’s the summer season, only a few want to go to tropical destinations. The Russians target Bali as a destination. When I visited Bali, I encountered a great deal of Russian language and Russian restaurants. But, this is a seasonal business. It will be busy when it is cold in Russia, but quiet when it’s summertime in Russia.

We also need to find out if Indonesians wish to visit Russia. If we want an inbound business, we also need an outbound market. We have to fill the airplanes both ways when flying to a destination. We have to do an internal analysis of any new destination while also measuring the amount of support we will receive from the respective Indonesian Embassy and the Ministry of Tourism.

This supports is being discussed with Tourism Minister Wishnutama. If we open a new route, the Minister of Tourism also needs to help us promote. I truly understand the Ambassador’s excitement, but opening a new air route is not an easy matter. We don’t want to start a new route and then (quickly) end it. I don’t know what happened in London. We started flying to London, then reduced frequencies, and then stopped flights only to begin again. Amsterdam was also changed from a direct flight to the current route of Jakarta, Denpasar, Medan, and Amsterdam. 

I told the Minister of Foreign Affairs that we are a little late. We want to be "solid" as an airline and not seen to be kidding around. If there is a request and we don’t handle it to successful completion, we will earn a bad reputation.

Several destinations in Europe are offering interline agreements to Garuda Indonesia. This means someone from Barcelona can fly to Jakarta or Denpasar via Amsterdam. In this way, you can order a ticket to Jakarta from Garuda’s Website. This will also encourage trips to other onward destinations in Indonesia. For instance, from Amsterdam to Jakarta and then onward to Labuan Bajo or other domestic destinations in Indonesia. This is what is being suggested. 

Perhaps there is a loss of national pride because there is no Indonesian aircraft parked at the foreign airport. But, we are asking, what comes first? Pride or profit? I want to balance both. There is so much to be considered in opening a new air route.

QUESTION:  Maybe we need to be prepared to not only promote Bali to the Russians but also promote other destinations in Indonesia?

ANSWER: That’s very correct, they (the Russians) only know Bali and not Indonesia. We need to work together on correcting this.

QUESTION: There are some interesting developments in connection with Haj pilgrimage travel. The Saudi Arabian Ministry of Religious Affairs is asking Indonesia to just wait to discuss haj flights. In fact, the Haj Season of June and July is already almost at hand. We are asking Garuda what’s is actually happening?

ANSWER: We have already signed an agreement with the Ministry of Religion. Cooperation on the Haj will continue as usual with agreed numbers, prices, terms, and conditions. The coronavirus has been a wake-up call. At the end of the day, we need to be ready. I am most worried that if it is decided to once again open travel again to Saudi Arabia, we will not be prepared to act. For Garuda Indonesia, it is essential to make sure that the Haj Pilgrims flying with us receive excellent service. 

That is our commitment, and to do this, we need to complete a lot of preparations. I have heard that there are calls for many improvements in how the Haj market is served. While I have no problem waiting, but let’s not wait only to open the gate at the last minute. If that happens, we will be in confusion. I worry most that we will not be able to deliver what we have promised.

This is all under discussion. All parties need to know that we are ready to perform our assigned duties. We will follow the many processes that include, for instance, recruiting manpower to operate these flights. We can’t just switch existing staff. And we can’t send staff we don’t have, only to serve the haj flights.

QUESTION: But aren't the Haj flights routine occurrence?

ANSWER:  Yes, it is already a routine. But today’s current situation is unfortunate for all concerned parties. Hopefully, there will soon be a positive sign. The biggest problem of the pandemic is not the actual virus, but the fear it is creating. The panic mode is making everyone frightened.

Secondly, I always fear that the current situation will be used by certain groups or individuals as a stage for actions that will have even larger implications.

QUESTION: We see that your track record is mostly in the telecommunications and mining sectors. When the Minister of BUMN invited you to manage an airline, how did you initially react? Why were you prepared to accept this challenge?

ANSWER: Many have asked the same question. Aviation is not an industry in which I had a background. But I’d say I have a track record that saw me move between new industrial sectors and new working environments. I have worked for a multi-national company, the private sector, and state-owned enterprises (BUMN). I have worked in telecommunications, in IT, in mining, and even as a mining contractor. These experiences left me with a sense of self-confidence to work in any new industry. For me, knowing all the fine details of an industry is not essential; there will always be others more accomplished in this regard. What’s important to understand is the fundamentals of the industry where we work. What's maters actually understanding what we are selling and how to compete. That is my personal capital, I was a president director already at 38, and now I am 55. At this stage, my intent in entering the company is to study, understand and put in order those things that are not in order. I also want to continue those programs that are successful and form close relationships. That’s comprises an exciting journey for me. When Pak Erick offered me this job, I was actually surprised.

But when a State Minister asks you for your help, you should not refuse. I have taken on this job as a mandate. I must do my best and then let the shareholders decide if I deserve to be allowed to continue in the position or be replaced. My view is that if there are people who are dissatisfied with my performance, well, then no hard feelings. We try our best to do the job and try to bring people to a better direction.

QUESTION: There tends to usually be a tug of war when offers come for a CEO post. Did Erick come back with repeated offers, or did you quickly agree at his initial proposal?

ANSWER: Yes, at the initial communication, I was simply asked to help the BUMN Ministry and do several other things. The Minister then said he had read many positive references about my work. I just said I was honored and would be willing to help. Then the name "Garuda" came up. Then we talked about a lot of things - the organizational structure of the Airline, what the Minister wants, and so on.

Tug of war? I am not a push and pull type of person. If the government of the Republic of Indonesia, through the BUMN Ministry, makes me an offer, I would not reject it.

QUESTION: You have a background in telecommunications and mining. Did you go directly to Garuda, or were there other offers?

ANSWER: There were other offers, but nothing specific. There are opportunities for younger people, but at 55, I think it’s time for me to lead. I am already aging, but for professionals like me, I bring lots of experience with me.

The challenges offered by present circumstances are always changing. I was involved in IT when I worked at Cisco. I am among the first to say that Facebook makes the near distant and the distant to near. I have used social media in commercial settings.

When I was at Cisco, social media was looked upon as “play.” Today everyone is focusing on social media.

QUESTION:  From your CV, you generally only stay with one job for two years. How long will you stay at Garuda?

ANSWER: I tend to say, “I may not be here for too long, but I intend to be here long enough.” If people look at my CV, they’re sure to call me a ‘job hopper.’

People might think I am easily bored, or I encounter problems and then leave. In fact, I work with companies hoping to have one to five-year contracts to complete. But you never know what develops and if there is an attractive offer that comes along, I say ‘why not?’.

One interesting opportunity is always there - to rest and play with my grandchildren. When taking a new job, there must be a good match between the president director and the commissioners and shareholders. I am the kind of person who knows himself. When I am unliked, I don’t want to make it difficult for the commissioners and shareholders by waiting around for a general meeting of shareholders to fire me. Just talk to me. Life goes on.

5-10 years ago there were benefits, or you could become the culprit at the center of the Company’s problems. It was like that. So if you ask, "How long will I stay?" - I’d like it to be forever, but the fact is you’ll see that it won’t be very long. I have spent 6.5 years working in two companies, Bank Niaga and Cisco.

QUESTION: What targets did Erick give you for Garuda, and what are your personal goals?

ANSWER:  When Pak Erick invited me in, some of the turmoil taking place at Garuda was not real; much was being blown out of proportion by the media. The actions of one of two people are not representative of everyone in the Company. Certain parties wanted to exaggerate the situation. Some of the battles were very private in nature.

I agreed with Pak Erick is that we wanted Garuda Indonesia to be a source of pride for the Indonesian people. I am not saying that the public is not proud of the Airline, we just wanted them to feel more pride in the national carrier. People like to argue about the Airline and complain that it is expensive to fly Garuda. But these are the "red and white colors" of our flag - a matter of our national consciousness. Pak Erick told me to clean it up.

If I see Pak Erick as the BUMN Minister, when he says ‘clean things up’ - I know what he wants. The Minister holds the portfolios for hundreds of state-owned companies and their subsidiaries. You can just imagine what it's like for the Minister if one of the BUMN companies is always appearing negatively in the news.

I am lucky to be able to speak with Mr. Erick directly and freely.

QUESTION: In terms of age, Pak Eick is actually younger than you?

ANSWER: Yes, he is younger. It can be difficult if your boss is younger than you. But that’s OK. It’s not a problem.

QUESTION: You have said that the coronavirus will make it difficult to predict the future of airlines and identify which will go bankrupt. Is this a form of natural selection?

ANSWER: Maybe it is cruel and sadistic to call this "natural selection." What is nature, anyway? But what’s happening right now does show the ability and need to adapt to a dynamic market. Nobody can stop the change that is taking place.

For Garuda, it is time for us to ensure our survival. We will do everything within our power to survive well into the future.

QUESTION: How optimistic are you that Garuda can survive?

ANSWER:  Business trends are always very challenging. I am fortunate to be working in a Company where, on a day-to-day basis, I never encountered anyone who is pessimistic about the future. There’s lots of optimism at Garuda. I personally, and the management of Garuda as a whole, know the challenges ahead but also understand we must stay energetic and optimistic.

What’s also essential in the struggle for survival is how we prepare for the future. What I want to emphasize to the public and to everyone at the Airline is that Garuda Indonesia is a safe airline. What’s important is that everyone who boards a Garuda flight feels safe. It’s always safety first. We must make take every step to enhance safety and let the passengers see that safety is essential to us.

If you fly with Garuda, you can be sure that this is a Company that is ready to serve and is safe.

And, yes, our finances remains challenging.

Thank You.

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