GARUDA INDONESIA: What’s happening with this airline?

Pre-pandemic, Garuda business class was my favourite way of getting to and from Bali. It has a great business class product with fully reclining seats, at reasonable flight times, and was competitive with airlines like Qantas and Virgin Australia that were both still running Boeing 737s with domestic style business class some of the time. With Denpasar to Sydney flights usually leaving late evening on the 6 and a bit hour flight, having actual lay flat business beds was a great advantage.

Looks like all that could change soon, with Garuda, the inevitable loss-making airline adopting a new business plan.

Garuda’s new business plan

The new plan of the corruption-plagued airline is to abandon most international flying, except to the Haj (only seasonal), and reposition themselves as a domestic economy, premium economy (which they currently don’t have) and business airline.

Seems like Indonesian State Enterprises Minister Erick Thohir doesn’t know much about the Indonesian domestic airline market, which is filled with cheap, profitable, and relatively efficient if sometimes unsafe competitors like Batik, AirAsia, Lion Air, SuperJet, and Pelita. Ok, some of these are low-budget, but Batik is a full-service domestic competitor with consistently cheaper service and a better business product. So WTF?

Also looks like Garuda will abandon its once highly regarded First Class on its Boeing 777-300ERs.

The aim of the plan

With a current debt of US$9.5 billion, and a colourful history of corruption, including the jailing of 2 past CEOs, the new plan is looking for an operating profit in 2023!

It’s true that the loss-making airline has been improving its performance lately, but that might be because it is only running 30 planes out of a pre-pandemic fleet of more like 120.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

For me, and some others, this does not seem like much of a plan. Firstly, there are lots of local competitors who charge wayyyy less than Garuda does for domestic airfares – even in Business Class. Expecting systemic corruption at the top to disappear is like wishing for a miracle.

A more appropriate model would be to make Indonesia a reliable hub like Singapore, or Bangkok, or those in the Arab states, like Qatar, or Emirates. They could win a bunch of Australian and New Zealand traffic, especially while Hong Kong and China are fairly much out of the picture due to ongoing pandemic restrictions.

The usual reliable suspects have chimed in with similar opinions – see OMAAT for some history and ET for a succinct summary.