Case study : Garuda

John Jairo AGUIRRE GONZALEZ - Vairea ATCHAPA - Alexia EUTROPE -

Ahmad Bahrawi MARZUKI - Hai Hien NGUYEN
MSMA & MSMTA 17
Summary
1. Presentation of the company

2. Market environment and airline industry regulation

3. Key issues, risks & Economic drivers

4. Recommendations

5. Q&A - Annexes
Presentation of the
company
 Presentation of the company
Created in 1949 History

Legacy airline

1997 asian financial crisis

2001 creation of Citilink (low cost)

2007-2009 banned of european countries

2009-2014 expansion plan

2014 5 stars airline Skytrax

 Presentation of the company
PAHALA NUGRAHA MANSURY Management & Ownership
President & CEO of Garuda indonesia

Total Employes : 7.988

(whole group: 16.735)
 Presentation of the company

Garuda's fleet In order :

75 B737-800 B737- Max8

10 B777-300ER A330-900
2 B747-400 A320neo
17 A330-300 for Citilink
7 A330-200
18 CRJ1000
15 ATR72-600

Average age of the fleet :

5.7 years

Garuda : 144 a/c

Citilink: 52 a/c
 Presentation of the company
Network 64 Domestic flight routes
19 International flight routes

Main hub: Jakarta (capital), Denpasa Bali (tourism), Medan

Melbourne, Sydney, Perth, Bangkok, Kuala Lumpur, Singapore, (NorthWest- Sumatra island), Surabaya (Java), Balikapan
Beijing, Chengdu, Guangzhou, Hong Kong, Osaka, Seoul, Tokyo, (Kalimantan island), Makassar (East Sulawesi island), Yayapura
Amsterdam, London (Heathrow), Jeddah, Madinah (far East- Papua island)

4,433,089 carried passengers (FY2016) 19,487,372 carried passengers (FY2016)

Presentation of the company

Latest airline to join Skyteam in 2014

Presentation of the company
Leading operational figure
Presentation of the company
Market shares
Economy of scale, scope & density >< competition
 Market environment &
airline industry regulation
 Market environment and airline industry regulation
Environment analysis
Political
Garuda benefits from a strong support from the Indonesian Government (60.51% of the shares)
Domestic political turbulence might be a risk affecting Indonesian economy and Garudas prospects

Economical
Economic indicators favourable to Garuda: GDP growth of 4.9%
and air passenger growth of 15%

4th most populated country in the world

Indonesia is an attractive market in the South-Eastern Asia region.

12th worlds biggest market for passengers

and 5th on the domestic market

Tourism in Indonesia is expected to grow which depends

on transportation
 Market environment and airline industry regulation
Environment analysis
Social
Because Indonesia is an archipelago state the airplane is the preferred way to move
Democratization of the air transportation sector (middle class)
Flight tickets prices are low due to the boom of the low-cost airlines
 Market environment and airline industry regulation
Technological Environment analysis
New and emerging technologies that can enhance business efficiency and improve customer
experience (artificial intelligence, robotics, virtual and augmented reality, drones)
Garudas agreement with IT companies: SABRE, SITA

Environment
Many regulations are implemented by the Indonesian government and
the different air transportation association Garuda is part of.
Frequent natural catastrophes in Indonesia may affect
the economic growth (earthquakes, volcanos eruptions)
Garuda Indonesia is a member and one the founders of Indonesia Business Council for
Sustainable Development
The company focuses its environment sustainability strategy on three pillars: People, Planet, Profit
Increased use of alternative/renewable sources of energy to reduce Carbon footprint

Legislation
Air transportation in Indonesia is mainly regulated under Law No. 1/2009.
Others air transportation regulations (ICAO)
Market environment and airline industry regulation
Competitive environment

3/5

5/5 5/5

1/5
Key issues & risks
 Critical Economic Drivers
National geography, macroeconomic of 4th most populated country ->

inherent growth driver

National brand name -> high pricing position by great service quality

Competition with low cost airlines -> emergence of Citilink, vertical

business model with other support aviation service owned

National interest -> State mangement, pick up strong grow since

Quantum leap (restructuring)

 Key issues & risks
SWOT analysis
Strong support from High price
the Government Low load factor (~73%)
National brand Low awareness abroad
Young fleet
Maintenance Facility
Citilink huge perform

Expansion of Asian Low-cost fierce

market competition
Skyteam member Currency fluctuations
Growth of Domestic Lion Group expansion
Passengers
 Key issues & risks
Competition with low cost airlines

Low load factor

2016
Liquidity pressure

Challenges in route
expansion
Foreign Exchange

Fuel
Recommendations
 Recommendations
1. Establish more domestic routes singularly for Eastern Indonesia

New flights to/from the

main Eastern Side hub:
The city of Makassar.

Strengthen the
connectivity from the
capital of the Papua island
with the purpose of
establish this as the main
entry for the East.
 Recommendations

2. Combine efforts with Citilink and other subsidiaries

in order to reinforce domestic market
Map routes in terms of schedules and
destinations for both Garuda
Indonesia and Citilink.

Passengers / same loyalty program.

Contribute profits from Garudas

related aviation subsidiaries
through operational competitiveness
leverage (grow in vertical intergation)
 Recommendations
3. Reinforce flight routes to China, adding new frequencies and opening
new profitable destinations from Bali to other populated Chinese cities:

Bali Chengdu (4th largest airport) Bali Kunming (5th largest airport)
 Recommendations
4. Increase revenue and further connectivity with Skyteam alliance and
codeshare partnership

Look forward to negotiate new

agreements with competing alliances
airlines but would like to participate
with Garuda regarding codeshare and
interline.

Notable out-of-alliance codeshare:

- Star Alliance: All Nippon Airways, Turkish Airlines, Singapore Airlines
- One world: Malaysia Airlines
- Non aligned: Emirates Airways
 Other notable Recommendations

Strengthen premium brand positioning by operational excellence: timeliness, in-flight

service, e-commerce

Increase diversed business unit: Umrah, Hajj, charter, Cargo

Fleet cost management (leasing negotiation) >< Yield management

Route optimization for Aircaft hour utilisation, increase Load factor

Q&A
 Annex 1:
Makassar
to remote
Eastern Indo
 Annex 2: New route: pilot charter flight to China
New route
Expansion New route
Bali-Kunming study
hypothesis Bali-Chengdu study

Financial impact of new route Bali - Chengdu:

 Annex 3:
Strategic Public Release

action
Oct 2017

conducted