Roberto Akyuwen
Senior Lecturer, Finance Education and Training Center Yogyakarta,
Ministry of Finance Republic Indonesia
Yogyakarta, Indonesia
Abdulgani
Commissioner of Garuda Indonesia
Jakarta, Indonesia
Marthin Nanere
Senior Lecturer, Regional School of Business
Latrobe University, Bendigo Campus
Bendigo, Australia
Abstract
Garuda Indonesia is an airline company owned by the Indonesian Government. The airline has been vastly developed and established since 1950. The remarkable growth was achieved mainly due to the fact that at that time a fair competition in the airline industry in Indonesia did not exist yet. Being the first airline company, Garuda Indonesia monopolised the commercial air transportation services, and this situation had increased the company performance continuously. However, since the government introduction of widely domestic airline industry in 1990, Garuda Indonesia started to face difficulties in competing against a number of private airlines, possessing expansive strategies in developing routes as well as increasing the number of aircrafts. The performance of Garuda Indonesia was gradually decreased and became worst when operation profit and cash flow reached negative figures in the period of 1993 to 1997. Further, the seat load factor and on time performances were also worsening. To overcome these problems, first restructuring was undertaken during 1998 and 2001. The first restructuring was quite successful in reinventing the performance of Garuda Indonesia, indicated by positive operation profit and cash flow of the company. Unfortunately, Garuda Indonesia’s performance had decreased once again after the appointment of new management since 2002. The new management tended to be inconsistent in implementing company’s business strategies. An operation profit appeared to decrease since 2003 and continued to decrease in 2004 and 2005. The financial and operation conditions of the company were considered to be worse than the previous problems faced in 1997. To improve the performance, the new management had been appointed again in 2005. This new management then started the second restructuring of Garuda Indonesia. The effort was also quite successful by bringing Garuda Indonesia in surpassing turnaround phase in 2007. Since then, the company performance has always improved until today. The main purpose of this research paper is to analyse the internal and external factors influencing the success of Garuda Indonesia in improving its performance through two times restructuring processes. Both primary and secondary data were used in the analysis. 185 respondents (57%) were selected from the total of 385 managers of Garuda Indonesia businesses. Interviews and focus groups were also conducted with 35 respondents, of which 23 were from the top management and 12 from the selected respondents. A structural equation modeling (SEM) was employed. The findings suggest that both external and internal factors have influenced the performance of Garuda Indonesia. The most appropriate indicator to represent the performance of Garuda Indonesia is the improvement of operation management followed by the improvement of corporate culture and the improvement of consumer relation. The economy condition is considered as the most valid variable of external factor in influencing Garuda Indonesia’s performance. The next variables are competition among airline industry and fuel price. As for internal factors, it is found that the strategic fit, leading change, and entrepreneur orientation are the three variables which have impacted on the performance of Garuda Indonesia. The most valid indicator in representing the strategic fit variable is the company positioning indicator followed by environment adjustment and company value improvement indicators. The leading change variable is represented by the motivated leader, anticipatory leader, and inspirational leader. The most valid indicator to represent entrepreneur orientation variable is the capacity to manage risks and problem solving. The second valid indicator is the initiative capacity and risk taking bravery behavior, while the last indicator was the self confidence and working spirit.
Keywords: restructuring, turnaround, performance, fuel price, economic condition, airline industry competition, strategic fit, leading change, entrepreneur orientation.
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