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17th March 2005, 20:05
Garuda the first to feel heat of reform
Andrew Burrell JAKARTA
549 words
18 March 2005
Australian Financial Review
First
56
English
© 2005 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.
The axing of the 13-member board of Indonesia's national airline, Garuda, including chief executive Indra Setiawan, is the first bold move by new State Enterprises Minister Sugiharto, who has promised to reform Indonesia's often corrupt and inefficient state firms.
The entire board was sacked on Wednesday amid mounting financial problems and a high-profile investigation into the murder of an acclaimed human rights activist on one of its flights
"I would like to position Garuda as the national flag carrier rather than being marginalised," Mr Sugiharto, a former finance director at leading private oil company Medco, said.
Garuda has struggled to meet the terms of a $US1.4 billion debt restructuring in 2001, mainly due to soaring fuel prices, competition from budget airlines and a tourism downturn caused by terrorism fears.
The company said yesterday it had no comment on the management shake-up.
Although it has yet to release its 2004 results, Garuda is believed to have recorded a loss its first since the Asian financial crisis despite an increase in revenues and passenger numbers.
Garuda has reportedly planned to seek an extension beyond 2010 for the repayment of its $US827 million in debt, owed mainly to European export credit agencies.
The government is preparing Garuda and a smaller state-owned airline, Merpati, for partial privatisations later this year.
Garuda's reputation suffered a another blow this month when a government-backed investigation implicated employees of the company in the death by arsenic poisoning of human rights activist Munir Said Thalib on a flight to Amsterdam in September.
The government's decision to replace the board is believed to have been made before the investigative team's report was handed to President Susilo Bambang Yudhoyono.
A Garuda employee, Pollycarpus Budhari Priyanto, was yesterday being grilled by police for the fourth consecutive day over his alleged role in the murder.
Mr Priyanto, a Garuda pilot with suspected links to military intelligence, was on Mr Munir's flight and convinced the activist to switch seats from economy class to business class, where he later died.
The government-sanctioned investigation found Garuda was probably involved in a conspiracy with intelligence agents to murder Mr Munir, a frequent critic of Indonesia's security forces.
It also alleged Mr Setiawan, the since-ousted CEO, and other executives played a role in the conspiracy.
Police have yet to officially name any suspects in the case, even though Mr Munir died more than six months ago.
Mr Sugiharto said he would replace Mr Setiawan as CEO with a former Garuda executive, Emirsyah Satar.
Mr Satar was Garuda's finance director before joining Indonesia's fifth-largest bank, Bank Danamon, as its vice-president.
Timothy Ross, a transport analyst at UBS Securities, told Bloomberg: "The move by the government shows that it thinks Garuda can be better managed, better guided.
"The company has spent the last decade trying to reshape its finances and generate profit, and it has not managed to do so."
Along with other major regional carriers such as Singapore Airlines and Malaysian Airlines, Garuda is facing strong competition on key routes from budget operators including Valuair, AirAsia and Lion Air.
:ouch:
Andrew Burrell JAKARTA
549 words
18 March 2005
Australian Financial Review
First
56
English
© 2005 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.
The axing of the 13-member board of Indonesia's national airline, Garuda, including chief executive Indra Setiawan, is the first bold move by new State Enterprises Minister Sugiharto, who has promised to reform Indonesia's often corrupt and inefficient state firms.
The entire board was sacked on Wednesday amid mounting financial problems and a high-profile investigation into the murder of an acclaimed human rights activist on one of its flights
"I would like to position Garuda as the national flag carrier rather than being marginalised," Mr Sugiharto, a former finance director at leading private oil company Medco, said.
Garuda has struggled to meet the terms of a $US1.4 billion debt restructuring in 2001, mainly due to soaring fuel prices, competition from budget airlines and a tourism downturn caused by terrorism fears.
The company said yesterday it had no comment on the management shake-up.
Although it has yet to release its 2004 results, Garuda is believed to have recorded a loss its first since the Asian financial crisis despite an increase in revenues and passenger numbers.
Garuda has reportedly planned to seek an extension beyond 2010 for the repayment of its $US827 million in debt, owed mainly to European export credit agencies.
The government is preparing Garuda and a smaller state-owned airline, Merpati, for partial privatisations later this year.
Garuda's reputation suffered a another blow this month when a government-backed investigation implicated employees of the company in the death by arsenic poisoning of human rights activist Munir Said Thalib on a flight to Amsterdam in September.
The government's decision to replace the board is believed to have been made before the investigative team's report was handed to President Susilo Bambang Yudhoyono.
A Garuda employee, Pollycarpus Budhari Priyanto, was yesterday being grilled by police for the fourth consecutive day over his alleged role in the murder.
Mr Priyanto, a Garuda pilot with suspected links to military intelligence, was on Mr Munir's flight and convinced the activist to switch seats from economy class to business class, where he later died.
The government-sanctioned investigation found Garuda was probably involved in a conspiracy with intelligence agents to murder Mr Munir, a frequent critic of Indonesia's security forces.
It also alleged Mr Setiawan, the since-ousted CEO, and other executives played a role in the conspiracy.
Police have yet to officially name any suspects in the case, even though Mr Munir died more than six months ago.
Mr Sugiharto said he would replace Mr Setiawan as CEO with a former Garuda executive, Emirsyah Satar.
Mr Satar was Garuda's finance director before joining Indonesia's fifth-largest bank, Bank Danamon, as its vice-president.
Timothy Ross, a transport analyst at UBS Securities, told Bloomberg: "The move by the government shows that it thinks Garuda can be better managed, better guided.
"The company has spent the last decade trying to reshape its finances and generate profit, and it has not managed to do so."
Along with other major regional carriers such as Singapore Airlines and Malaysian Airlines, Garuda is facing strong competition on key routes from budget operators including Valuair, AirAsia and Lion Air.
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