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Garuda gets new CEO after Harley smuggling incident

Jakarta

GARUDA Indonesia picked former telecom executive Irfan Setiaputra as its new president director, after the airline's previous chief executive was fired for allegedly smuggling a classic Harley-Davidson motorcycle on a flight to Jakarta.

At an extraordinary general meeting on Wednesday, shareholders of Indonesia's flag carrier also decided to keep interim CEO Fuad Rizal as finance director and chose Triawan Munaf, a former head of the country's Creative Economy Agency, as chairman.

Mr Setiaputra, 55 years old, joins from Sigfox Indonesia and was previously CEO of state-owned PT Industri Telekomunikasi Indonesia.

Challenges for the new CEO, who hasn't worked in the airline industry before, include restoring Garuda's reputation and bringing down high leasing costs: the carrier spends more on aircraft rentals as a percentage of revenue than any of its global peers.

"The appointment of the new CEO for Garuda Indonesia could help remove one of the key uncertainties in the company," said Jessica Pratiwi, an analyst at RHB Securities Indonesia. "Investors and the public are expecting the new leadership to improve corporate governance."

Mr Setiaputra is Garuda's fourth CEO since Emirsyah Satar - who served the company for nearly a decade - stepped down in 2014. Mr Satar was credited with turning the airline around and restoring its credibility, though he was later arrested for corruption.

Garuda went on to report net losses in three of five years through 2018, with about a quarter of revenue being spent on aircraft rental, the highest ratio among any airlines in the world, according to data compiled by Bloomberg. I Gusti Ngurah Askhara Danadiputra was fired in December.

"Keeping those rental costs in check will be a key priority for the new CEO, along with making sure international routes are profitable," said Lee Young Jun, an analyst at PT Mirae Asset Sekuritas Indonesia. "The company has been trying to renegotiate contracts with aircraft lessors, but that didn't happen fast enough to bring down costs."

The new management will need a sharper focus on fleet utilisation, according to Gerry Soejatman, an aviation analyst and technical adviser at NeoSky Aviasi Digital. Garuda said it would cancel orders of 49 Boeing Co 737 Max aircraft, which have been grounded globally since March following two deadly crashes, including a PT Mentari Lion Airlines flight that plunged into the Java Sea in 2018. Garuda hasn't decided how to replace the order, which it booked to succeed its older 737-800 models.

"The new CEO needs to put the right aircraft in its fleet, many of the existing ones are becoming old and inefficient, or no longer the right tools to do the job," Mr Soejatman said. "This is one of the starting points to improve costs, competitiveness and in the end profitability." BLOOMBERG