Garuda Indonesia is one of the largest national carriers in Indonesia, which naturally faces many external threats and internal challenges. The company has a rich long history, during which it has gained experience in crisis management and economic growth (Munir et al., 2011). However, modernity dictates new conditions, within which all major air carriers must again look for reactive solutions to emerging challenges. They are mainly related to new safety requirements due to the pandemic, complex and unpredictable fuel price dynamics, supply chain disruptions, and the environmental agenda (Xuan et al., 2021; Kang et al., 2021; Hassan & Nadeem, 2022). In addition, the industry continues to be affected by labor costs, policy decisions regarding industry regulation and restrictions on doing business, and international agreements on freedom of flight and open skies (Munir et al., 2011). Although the Indonesian government has generally been promoting the development of the industry, reflected by a spike in the 2000s and one of the highest percentages of growth in the world, companies have faced market saturation, labor requirements, and international competition as a result of the growth of the industry (Munir et al., 2011). By 2011, Garuda faced organizational rather than operational challenges, the need to correctly position and direct marketing campaigns to maintain the success achieved in the five years from 2005 to 2009.
Despite this success, Garuda Indonesia needs to continue improving its business processes efficiency to remain competitive and grow. One of the indicators of the correct direction of the company’s activities is financials, which reflect both the operational efficiency and liquidity of the company as a whole. One of the most critical problems is the high amount of debt, which affects the organization’s ability to repay its short-term and long-term obligations: the company’s long-term dynamics are significantly positive and equal to 1.3 in the ratio, while in the short term, the current ratio is 0.5 by 2019 ( Garuda Indonesia, 2020). By 2021, the situation had worsened significantly due to lockdowns and restrictions at the global level, which completely paralyzed the work of airlines (Xuan et al., 2021). The current ratio fell ten times, and the total assets/total liabilities ratio was 0.54 (Garuda Indonesia, 2022). Airlines, including Indonesian ones, have been forced to significantly reduce their staff to stay afloat, making it difficult to return the corresponding supply with demand rising back (Mustapha et al., 2020). However, going back to 2011 and applying various operational management theories, one can imagine different options for dealing with external challenges for Garuda Indonesia.
First, by applying a Six Sigma approach, a company can fundamentally rethink its approach to security. Statistically speaking, Indonesia had a relatively high percentage of disruptions in air travel, which often led to tragedies (Munir et al., 2011). By revising the philosophy of the approach to human resources, Garuda can focus not only on training and professional development, as it has already implemented quite successfully in its business processes, but also on corporate responsibility and culture (Munir et al., 2011). For example, adapting a company’s employee-importance approach even over its customers, as at Southwest Airlines, can form the basis of a value culture upon which a company’s relationship ethics will be built (Cote, 2018). Leadership, in this case, is transformative not only in terms of professionalism in the operational area but also significantly develops soft and communication skills, contributing to efficiency (Sadq, 2019). As part of this approach, the attractiveness of vacancies for specialists who will be kept on wages during the crisis will increase, giving better efficiency and dedication from the personnel responsible for security. Thus, the standard deviation values will decrease for a given tolerance field in the area of failures in the company’s operations.
Secondly, with the help of the lean management methodology, in the new reality, it is possible to optimize work and leave as a development priority only those projects and sectors that guarantee the company’s growth with virtually no risk. This approach is necessary to view Garuda’s extremely high debt, which, as financial data has shown, will only increase in the future due to global crises (Garuda Indonesia, 2020; Garuda Indonesia, 2022). For example, Garuda may focus on hajj flights as a niche company that has not attracted other international and local market leaders (Munir et al., 2011). These flights can bring an exceptional reputation to the company, which will be able to implement its experience in other countries and on other routes, providing high-quality international services with options for staff communication in different languages and appropriate flight support. At the same time, Garuda should pay attention to the environmental agenda and direct profits towards less environmentally harmful opportunities for passenger transportation. This approach will allow receiving state support within the framework of international programs, give a reputational advantage over competitors, and have a unique offer in the local market (Hassan & Nadeem, 2022). At the same time, the international and local markets have other leaders who will be challenging to remove from their positions due to the different positioning of Garuda.
As a result, solutions to external and internal challenges lie in the plane of organizational optimization, which is more aimed at positioning the company in the market. To some extent, it will be necessary to take a step back and give up positions in less profitable business sectors in order to focus on unique and relevant offers in the market. These include hajj flights and the environmental agenda. Combined with improvements in safety and human resource management, the company could become more resilient, which will be essential in the face of the post-2011 crises, including the pandemic and total flight bans. Although many air carriers have suffered massive losses, Garuda, due to these innovations, has every chance to maintain its presence in the market and return the previous asset-liability ratio while implementing Six Sigma approaches and Lean manufacturing with the specifics of application in this area. These changes will make it possible to distinguish the company from others, which is a significant marketing advantage for the buyer, given the current trends in the field of safety, ecology, and attitude towards employees.
While the debt restructuring process could backfire on the company’s future, Garuda needs to launch it on favorable terms for creditors to stay in the market and minimize the organization’s short-term commitment to going forward. By optimizing specific sectors, a niche of the most profitable activity in air transportation will be achieved, less dependent on the threats of competitors, the emergence of new players and suppliers, according to Porter’s five forces, while having growth potential in the face of international trends. At the same time, Garuda must create a specific risk-responsible sector that constantly assesses the financial situation, calculates the worst-case scenarios, and maintains operational reporting in communication with crucial company management. This innovation is necessary due to the difficult financial situation of Garuda Indonesia, but at the same time, it operates in the country’s critical infrastructure, on which many other related processes of the state and business rely.
References
Cote, R. (2018). Leadership Analysis: Southwest Airlines-Herb Kelleher, CEO. Journal of Leadership, Accountability & Ethics, 15(1). Web.
Garuda Indonesia. (2020). Consolidated Financial Report 2018-2019. Web.
Garuda Indonesia. (2022). Consolidated Financial Report 2020-2021. Web.
Hassan, S. U., & Nadeem, M. (2022). The environmental impacts of airline industry & passengers’ perception on it. DASC Research Center, 1(2). Web.
Kang, W., de Gracia, F. P., & Ratti, R. A. (2021). Economic uncertainty, oil prices, hedging and US stock returns of the airline industry. The North American Journal of Economics and Finance, 57, 101388. Web.
Munir, N. S., Prasetyo, A., & Kurnia, P. (2011). Garuda Indonesia: To becoming a distinguished airline. Emerald Emerging Markets Case Studies.
Mustapha, N. N. S. N., Yazid, M. F. M., & Shamsudin, M. F. (2020). How airline industry may rise post covid-19 pandemic.Journal of Postgraduate Current Business Research, 1(1). Web.
Sadq, Z. M. (2019). The role of leadership soft skills in promoting the learning entrepreneurship. Journal of Process Management and New Technologies, 7(1). Web.
Xuan, X., Khan, K., Su, C. W., & Khurshid, A. (2021). Will COVID-19 threaten the survival of the airline industry?. Sustainability, 13(21), 11666. Web.