Plans for a major restructuring were announced in mid- 2021. The airline had been losing money for a long time. I am not sure if this is going to end better for the airline.

Garuda Indonesia’s new business plan

New plans for a restructured Garuda Indonesia have been revealed by Indonesia's state enterprise minister. According to the report by Bloomberg.

  • Garuda Indonesia will stop flying most international routes, with few exceptions, including pilgrimage flights to Saudi Arabia; most long haul flights will instead be operated as part of codeshare agreements with other airlines
  • Garuda Indonesia will instead focus on selling business class, premium economy (which the airline doesn’t currently have), and economy seats, on “local” flights; Garuda Indonesia may no longer offer first class, but the writing was on the wall for that anyway
  • The airline currently only has around 30 planes, but intends to have the fleet return to the pre-pandemic size of roughly 120 planes; Garuda Indonesia will acquire additional planes from leasing companies
  • Garuda Indonesia needs to restructure $9.5 billion in debt, and a deal has allegedly been reached with creditors

There is a plan for Garuda Indonesia to turn a profit in the years to come.

Garuda Indonesia will end most long haul flying

This seems like a recipe for disaster

The management of the airline is terrible. In the past, two former CEOs of Garuda Indonesia were fined and arrested for corruption.

The issue is that Garuda Indonesia has put itself in a position where it no longer has a viable business model, like many government owned airlines. It is true that it is difficult to make money on long haul routes, and that Garuda Indonesia has operated too many routes for prestige.

How is Garuda Indonesia supposed to compete in the local flying market?

  • Indonesia has fast growing, efficient, and robust ultra low cost carriers, which serve virtually every regional route
  • I can’t imagine Garuda Indonesia can get its cost structure to the point where it competes with the likes of Lion Air and Air Asia; even with eliminating a lot of debt, Garuda Indonesia has so many legacy cost issues that can’t be fully addressed
  • Admittedly some people are willing to pay more to fly a full service airline, but that’s probably not a big enough market to create a sustainable business model; that’s especially when you consider other global Asian carrier fly to Jakarta, so the airline will be competing against Cathay Pacific, Singapore Airlines, etc.

It seems to me that the sweet spot of the airline would be an efficient global airline.

  • Stop hiring CEOs who are corrupt, and who look out for their own interests, rather than those of the airline
  • Have a simple, efficient fleet, and configure planes more viably as well, with an efficient economy layout, and a good business class product
  • Focus on operating routes that provide connectivity between other parts of the globe via Indonesia, as well as flights to & from Saudi Arabia; for example, Garuda Indonesia was never as efficient as it could have been with connecting Europe to Australia, even though that’s a big market

I think this would reduce the losses of the national carrier in Indonesia while still giving Indonesia access to the world. I don't believe the airline being focused on local flights will succeed given the competition.

Garuda Indonesia is expected to cut first class

Bottom line

The current plan for Garuda Indonesia is to focus on being a local airline and operate very limited long haul flights to Saudi Arabia. The company plans to increase its fleet to 120 jets and grow back to its pre-pandemic size. I don't think this ends well.

What do you think about the new business plan from the airline?

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