The Impact of COVID-19 on Garuda Indonesia’s Operation
Rizky Multazam Ahmad1,2*
1 Bandung Institute of Technology, Bandung, Indonesia
2 Rennes School of Business, Rennes, France
*Corresponding Author: [email protected]
Accepted: 15 September 2022 | Published: 1 October 2022
DOI:https://doi.org/10.55057/ijaref.2022.4.3.19
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Abstract: The research purpose is to study and identify the impact of the COVID-19 pandemic, in the form of new policies and restrictions, on the airline Garuda Indonesia. The research which has been undertaken is done with interpretivism using the abduction technique considering the dynamic and changing character of operation. This technique is intended to assist the researcher in comprehending the many interpretations of the influence of COVID-19 on Garuda Indonesia's operations that are affected by the societal viewpoint on the event. In this occurrence, the researcher is looking through the perspective of the interviewee, and the comparison approach has been performed to analyze the data in this instance. The information has been gathered via documents, reports, and operations, as well as an interview with a source from Garuda Indonesia, who provided the information. Following the study, it was discovered that several of the independent factors had a significant impact on the dependent variable, where the independent variable is the COVID-19. Flight activities, the number of planes, the number of passengers, the number of crews, the company's debts, government aid, and future strategy, are the dependent variables. It has been found that there exists a negative relationship between the COVID-19 pandemic and the flight activities, the number of planes, the number of passengers, the number of crews, the company’s debts, government aid, and the future strategy. The impacts are considered severe and there are some new policies that the company did and still do carry out as efforts to preserve the company.
Keywords: operation, covid19, management, aviation industry
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1. Introduction
Operation is one of the most critical components of any business since it ensures that everything runs properly. Operation deals with how companies provide goods or services to the market, as well as how they manage to do their daily activities, especially if it deals with tangible things.
Most of the product-selling companies consider operations as one of its main aspects of business. In this case, the operation activities include manufacturing, distribution, and even selling the products itself (Wolniak, 2020).
In today's industrial companies, operation management is critical to the overall management of the company's organization. There are a variety of activities that may be classified as being within the scope of interest of operation management. From the beginning of the twentieth century till the present day, the importance of such types of activities has increased year after year. As a result, we can now define seven major activities of operation management in an industrial enterprise: planning and scheduling; purchasing; controlling; quality assurance and
inventory control. Operations managers should make a large number of decisions that have an impact on the overall effectiveness of the business in each of those domains (Wolniak, 2020).
However, it does not limit to just selling products, companies that provide services often also have operations in which they see crucial. One of the industries that consider operations is the aviation industry. Operations in this industry include dispatch, flight planning and watch, weather data provision, operations control, ground to air communications and integration with crew, airport and ATC management, as well as schedules and maintenance planning (Agifors, 2022).
Airlines and airports have used operations management strategies to operate accurately.
Models of operations management and operations research have had a significant impact on airline and airport operations planning and management. They have been able to handle more intricate problems and deliver solutions in a much shorter amount of time thanks to advancements in computer technology and optimization methods. These mentioned technologies and optimizations are also some of the things that will open up further opportunities for airlines to operate in the future more effectively and efficiently. These efforts add mass to the airline industry as well as its area of development. This has been a step towards a more sustainable aviation industry and an automated one (Koksalmis, 2019).
Without planned government and industry assistance, according to CAPA, most airlines throughout the world would go bankrupt. After being hit by the COVID-19 epidemic, numerous airline firms have gone bankrupt and filed for Chapter 11 protection, according to the CAPA study (Mustapha et al., 2020). The following is a list of airlines that have declared bankruptcy. If the COVID-19 epidemic does not cease soon, that list may get much longer as more and more airlines begin to suffer. Shown in table 1 is a list of companies that did get affected by the pandemic, but in reality, there are a bunch of other airlines as well. Aside from the bankruptcy announcements from various corporations, some airline companies have asked their employees to take unpaid voluntary leave as a cost-cutting strategy. AirAsia is the most recent airline to encounter the same problem. The low-cost airline sector is planning huge layoffs, with 60 percent of cabin personnel and pilots among those affected. Several countries, including Italy and Malaysia, have eased travel restrictions and prohibitions after several months of constraints. Prime Minister Giuseppe Conte declared on June 3 that the restriction on travel between the country's regions and the borders had been lifted.
Table 1: List of Airlines That Got Affected by the COVID 19 Pandemic
No List of Airlines
1. South African Airways
2. Avianca Holdings, Air Mauritius
3. Virginia Australia
4. Miami Air International
5. Flybe
6. Thai Airways
Travelers from EU members, also the United Kingdom (UK), may now visit Italy without having to undergo a 14-day quarantine, according to the source. Malaysia, on the other hand, has implemented a Recovery Movement Control Order (RMCO) that would be in effect from June 30 to August 31. Malaysians are now able to move across the country and within the country, but the border remains blocked. The government has a strategy under RCMO to improve public health, reopen all areas of the economy, embrace the new normal, and safeguard vulnerable people (Mustapha et al., 2020).
However, these changes do not only occur in the EU, UK, or Malaysia, but also Indonesia as COVID 19 is also growing rapidly in the country. New regulations from the government began to emerge that affected the operation of Garuda Indonesia's business. Initially, the government banned the use of all modes of transportation which caused no income from regular flights.
However, the government still allows cargo flights and charter flights. Later, flights began to be allowed by fulfilling the COVID 19 protocol such as physical distancing, the use of masks, and free of COVID 19 symptoms by showing non-reactive rapid tests and negative PCR results.
With the implementation of physical distancing from the existing capacity, a limitation on the number of passengers is applied to 50%, but now it can reach a maximum of 70%. (Gunawan, 2022)
Garuda Indonesia is one of the airlines from Indonesia that is still running today. Garuda Indonesia is considered as one of the biggest airlines, especially in Asia, as the airline has a lot of routes ranging from Asia to Europe. As the airline has broad routes and network, it automatically has an extensive range of operation activities as well. As a result of the COVID- 19 pandemic, many impacts affect the company's performance, particularly in the operational.
So far, flight activity has decreased over time (Gunawan, 2022). Passenger data from 2 time periods obtained from the International Air Transport Association (IATA, 2020) shows a decrease in the number of passengers of Garuda Indonesia by 45% between 2019 and 2020.
The frequency of flights, in general, was as many as 300-400 flights per day, but now the frequency is decreasing. There was even a drastic reduction in passengers to 70-100 flights per day. This, however, may have contributed to the occurrence of some effects resulting in an unfortunate situation for the airline including new policies and restrictions. These policies and restrictions are not only applicable for Garuda Indonesia alone, other airlines also get the effects of it as well. That is why, most airlines need to adapt and make some changes regarding their operations to suit the new requirements.
Various efforts aimed at increasing efficiency were carried out by Garuda Indonesia. Internally, they set many new policies such as reducing hotel bookings for the crew who were shifted to commuting/round-trips. Some contract employees are terminated from contract extension and others are dismissed before the contract is completed. These contract employees include the cabin crew and ground staff. A salary deduction is also applied for employees. Debt restructuring and payment delays were carried out to reduce the amount of expenditure.
In general, all airlines in the world are threatened because of the COVID 19 pandemic, but some solutions can be utilized to sustain the business. One example is with government loan funds. Since Garuda Indonesia is a State-Owned Corporation, quoted from the CNBC Indonesia (2020), the Ministry of State-Owned Corporation (BUMN) said that Garuda Indonesia would get a loan worth Rp 8,5 trillion from the government.
As many impacts affect the company’s performance, particularly in the operations, the possibility of bankruptcy may now threaten the company. It is certainly challenging for the company to adapt and survive seeing many new policies and restrictions emerge.
Research Question
How has the COVID-19 pandemic, in the form of new policies and restrictions, affected patterns of operational activities of Garuda Indonesia?
Research Objective
Given the current situation, brief examples, and the background as to why this issue is critical, the research objective is to identify every factor that correlates to the COVID-19 pandemic, in the form of new policies and restrictions, that threatens the company’s operations. Matters from simply what effects does the pandemic cause to the concept of how it affects the business operations.
Research Limitation
The research is carried out from the mid 2021 until early 2022. However, the data used in this research were collected from the year 2019 to year 2022. This particular research question is emphasizing on How/the process. Garuda Indonesia has multiple aircraft fleets that are being used for its activities, but mainly Boeing 737 airplanes. Therefore, the research is focusing more on the Boeing 737 fleet.
2. Literature Review
Operation Management
The operation function is in charge of manufacturing items and providing services (Wolniak, 2019; Wolniak & Skotnicka-Zasadzie, 2014; Wolniak et al., 2017). However, it will require assistance and feedback from other divisions of the business. Finance, marketing, and operations are the three core functional areas that may be found in a typical corporate organization. There are three functions described inside every firm (Pacana et al., 2014;
Skotnicka-Zasadzie et al., 2017a; Skotnicka-Zasadzie et al., 2017b; Szczucka-Lasota &
Wolniak). The finance department is in charge of budgeting, reviewing investment ideas, and providing funding for operations, as well as acquiring financial resources at attractive prices and dispersing those resources throughout the firm. The marketing department is in charge of determining consumer demands and requirements, as well as selling and promoting the company's goods and services. The goal of marketing is to sell and/or promote an organization's goods or services. Marketing is also in charge of determining client desires and requirements, as well as presenting them to operations (short-term) and design professionals (long term). To successfully execute design modifications and create and produce new goods, divisions of marketing, design, and production must work closely together. Marketing can provide you vital information about what your rivals are up to. Marketing may also provide knowledge about consumer preferences so that design can determine the kind of products and features required;
operations can provide throughput information and assess the manufacturability of designs.
And the operation department is responsible for producing the goods or providing the services offered by the organization (Knod & Schonberger, 2000).
Bellgran and Säfsten (2009), Galvin (2009), Gunether (2017), Stevenson (2002), and others have defined operations management as the following. It is the administration of systems or processes that are used to produce commodities or deliver services. Also known as production management, it is a branch of management that is involved with developing and regulating the manufacturing process, as well as rethinking company activities in the manufacture of goods and services. It entails the planning, organizing, coordinating, and regulating all of the resources required to manufacture a company's goods and services. It includes the management of people, equipment, technology, information, and all other resources required in the manufacture of goods and services. Managing the process of creating goods and services is the primary responsibility of this business function, which serves as the essential core function of every organization. Operation management is the process by which diverse resources employed in the company's production/operations subsystem are combined and transformed into value-
added products/services in a regulated way in accordance with the policies of the organization.
The process by which an organization transforms its input resources into final goods (or services) through a set of defined, controlled, and repeatable policies is also referred to as the transformation of a range of input sources into the required (products/services) with the required quality level is also referred to as the transformation process. Resources, which are moving through a specified system, are merged and converted in a regulated manner in order to generate value in line with policies established by management, which is referred to as the value creation process.
Even though it is primarily concerned with finance and marketing, operation management also interacts with other functional areas of the business such as legal and accounting, information technology, human resources, and public relations, among others.
The Aviation Industry
It is the aviation industry that comprises practically all elements of air travel as well as the activities that assist in its facilitation and advancement. This implies that it encompasses the whole airline sector, aircraft manufacturing, research firms, military aerospace, and a slew of other industries. In the most popular usage, the term 'aviation' refers to mechanical air transportation that is accomplished via the use of an airplane. Aerial vehicles such as airplanes and helicopters are the most common forms of aircraft, although most current definitions of the term "aviation" go beyond this to encompass the usage of autonomous vehicles such as drones.
Keeping this in mind, the aviation industry might be defined as the collection of industries that support and complement these activities. Although the phrases "aviation industry" and "airline industry" are sometimes used interchangeably, they really refer to two distinct fields of endeavor. An airline is a business that provides air transportation services for passengers or freight, with the airline industry being the phrase used to refer to the whole group of enterprises that provide these services. The airline business, on the other hand, is only a small fraction of the larger aviation sector. Aviation sector members include aircraft manufacturers, scientists, air safety professionals, enterprises involved in military aerospace, and, progressively, organizations that develop and build drones and/or use them in a variety of applications.
The definition of the aviation industry mentioned in this paper is narrowed down into commercial flight activities in airports. This industry deals with a very wide range of operations as it includes many things such as the airport, aircrafts, airlines, customers, crews, and a lot more others. As an airline, the people in charge need to first consider the acquisition of their planes, either by purchasing or leasing aircrafts from manufacturers. Then they would also have to monitor the logistics and transport activities of their aircrafts as in most cases, companies buy aircrafts from some specific manufacturers (typically Boeing or Airbus, but could also be some other manufacturers) which are located overseas (from the point of view of an airline in Indonesia). This also applies to the acquisition of spots, warehouses, or hangars in the airport.
Those mentioned aircrafts would then be modified to suit the company’s preferences, this includes the modification of the interior as well as the livery. The company needs to inspect the aircrafts regularly and provide necessary maintenance to sustain the life of the aircrafts itself. When it comes to the service, the company would need to handle the distribution of the customers as well as their baggage as the airport is not necessarily a small place. Taxis and hotels also often become some other factors that add up to the operation activities of the airline for the customers. For the flight crews, the company needs to handle, either by cars or bus, their pickups as well. This means that an airline would also have the responsibility to manage
not just aircraft fleets but also buses and cars. Some other ground vehicles also include the cars specially designed for flight activity purposes. Communication between the company and partners are also essential as some services are provided by the partners. This includes the food catering provided for each flight as well as the fuel needed to run the aircraft. The company needs to set operational plans that guide them for the operational activities, to manage routes for both aircrafts and ground vehicles, keep in touch with other parties involved, and to always monitor the flight activities.
Research Proposition
From the literature review, the researcher has made a proposition as follows: the COVID-19 pandemic, in the form of new policies and restrictions, is severely affecting patterns of operational activities in Garuda Indonesia.
3. Methodology
Research Approach
The researcher is using the qualitative approach by using interpretivism through the abduction approach considering the dynamic and changing nature of operation. The research process begins with an incomplete set of observations with the encounter of a phenomena (the pandemic). Then, the researcher would compare the observation with the data from the source, and generate a probable conclusion from what the researcher has found.
Data Collection Method
• Time Horizon: Longitudinal and Cross sectional
This study is carried out both longitudinally (the document) and in cross sectional (the interview). The document analysis will be carried out in a one-year period of time, before and during this pandemic (from 2019 to 2020). This will provide a snapshot of the differences between the two situations and focus on the effect, hence the presence of the time interval.
However, the interview will be a type of observational study that analyzes data from the source at a specific point in time (during the pandemic).
• Document analysis
Document analysis will become the data to support this research. Shown from previous studies, this type of analysis is pertinent for the context of the COVID-19 impacting business as it provides detailed factual data. The document from before and during the pandemic will be compared to conclude the effects of COVID-19 pandemic, in the form of new policies and restrictions, on Garuda Indonesia’s Operation and answer the research question.
• Interview: Interview with source from Garuda Indonesia
An interview will be conducted with a source at Garuda Indonesia. This interview will discuss other potential aspects that are not covered in the documents, see the perspective of the business itself, conclude the effects of COVID-19 pandemic, in the form of new policies and restrictions, on Garuda Indonesia’s Operation, and also answer the research question. The interview will be conducted with the Chief Pilot of the Boeing 737 fleet, Capt. Ahmad Gunawan. He is in charge of the operational activities of the Boeing 737 fleet as a subordinate of the VP Flight Operation, under the Director of Operation. As Capt. Ahmad Gunawan has been working with the company for more than 20 years, he is able to provide the necessary information needed for the research. The main open-ended questions that were asked to the interviewee, include:
1) What are the impacts of COVID-19, by considering the new policies and restrictions, on Garuda Indonesia’s operation?
2) How do these impacts affect Garuda Indonesia’s operation?
However, there were also some follow-up questions asked to further explore the topic.
Data Analysis
Field notes will be taken of the researcher’s observations and will also be coded using the constant comparison method as a thorough process of data analysis. By using the interview and document analysis, the researcher is trying to point out the difference between Garuda Indonesia's operation condition before and after the COVID 19 pandemic. Therefore, the comparison method is relevant and can answer the research question.
4. Findings
COVID 19 has a tremendous effect on the company Garuda Indonesia, especially in the operation by considering the new policies and restrictions, as quoted from the interviewee,
“Yes, indeed, it (the COVID 19 pandemic) has been affecting the company severely.”
(Gunawan, 2022)
One thing that is clearly seen is the lessened activity of the flight itself. In terms of the number of flights, flight frequency for Garuda Indonesia before COVID-19 was 300-400 flights per day. During the peak of COVID-19, the frequency was drastically reduced due to the decline in passengers to 70-100 flights per day. The number of passengers had fallen dramatically in several months in 2020, here is the data obtained from the International Air Transport Association (IATA).
Period Jan-Apr 19 Jan-Apr 20 Growth
Total Pax 5,658 3,138 -45%
*Source from IATA DSS, in mio
From the 2 different periods, there was a decrease in the number of passengers by 45%. From 5,658 million passengers in January - April 2019 to 3,138 million passengers in January - April 2020.
Internally, Garuda Indonesia is carrying out several initiatives to support the changes and adaptation. The company is trying to both preserve the employees and save the company itself from declaring bankruptcy. Hence some new adjustments that could essentially do both of those things. There are a lot of new policies, the first one being to reduce hotel bookings for the crew who were shifted to commuting/round-trips. This way, instead of staying at a hotel for a couple of days, the crews are expected to come home on the same day, making it more effortly for the crews to remain mobile but less money consuming as it cuts some of the costs.
This is done to allocate some of the budget and to meet the current more urgent needs. Next, it is about some contract terminations. This applies to most of the employees. Some contract employees are terminated from contract extension, and others are dismissed before the contract is completed. These contract employees include the cabin crew and ground staff. Another thing that has been done as an effort to cut even more expenses is salary deduction that is applied for employees. There are also some other efforts done that are related to financial and
administrative measures. Debt restructuring and payment delays were carried out to reduce the amount of expenditure.
The government plays a huge role in maintaining the continuity of business activities. On the other hand, the wellbeing of the citizens is also the main priority. This has become a dilemma for the government since doing an effort on one of the initiatives might contradict the others.
But still, the government is currently working on lessening the impact of COVID-19. There are also mitigation measures imposed by the government that make the business operation paralyzed. At the beginning of the pandemic, the government banned the use of all modes of transportation to help achieve the goal of stopping the spread of the COVID-19 virus, which resulted in no entry from regular commercial flights. However, the government at that time still allowed cargo flights and charter flights, making it the only source of income for the company (from transporting activities). Later, flights began to be permitted by fulfilling the COVID 19 protocol such as physical distancing, the use of masks, and free of COVID 19 symptoms by showing non-reactive rapid tests and negative PCR results. With the implementation of physical distancing from the existing capacity, a limitation on the number of passengers was applied to 50% before then it could reach a maximum of 70% (Pusparisa, 2020).
The COVID 19 epidemic poses a threat to all airlines throughout the world, but there are ways to keep the industry going. A good example of this is the government loan. A loan of Rp 8,5 trillion has been announced for Garuda Indonesia, highlighting the fact that it is a State-Owned Corporation (BUMN), according to information published on the CNBC Indonesia website.
From the interview with the Chief Pilot of the Boeing 737 fleet, Capt. Ahmad Gunawan, there is some information that can be obtained. The patterns of operational activities of Garuda Indonesia have been affected by the COVID 19 Pandemic. Based on the perspective of the interviewee, there are several impacts caused by the COVID-19 pandemic, by also considering the new policies and restrictions, on Garuda Indonesia’s operation. Some patterns include the decrease of the flight activities, the number of planes, the number of passengers, and the number of crews, also the company’s debts, government aid, as well as the future strategy.
a. Flight Activities
As mentioned before, flight activities have decreased as the COVID-19 got worse in Indonesia.
However, the flight activities itself are considered needed regardless of the pandemic as Indonesia is a country that has a lot of islands. That is why the presence of the airline is still considered essential. Although it is essential, the decrease during the peak of the pandemic was dramatic, there was once where the flight activities only reached 50 flights per day.
b. The Number of Planes
From the interview, right before the pandemic, Garuda Indonesia had 142 aircrafts spread over several fleets including the Boeing 777, Airbus, Boeing 737, Bombardier CRJ, and ATR.
Because of the COVID-19, some the aircrafts had problems with the lessor were sent back to them. Now, there are only around 70 aircrafts left in total. In the Boeing 737-800 fleet, initially there were 73 aircrafts of the Boeing 737-800 NG model and 1 aircraft of the Boeing 737 Max model. After the pandemic hit, 36 aircrafts of Boeing 737-800 NG were sent back to the lessor because of the problems related to the contract, as well as debts, considering the company couldn’t find a solution with the lessor during the negotiation process. There are now 37 aircrafts of Boeing 737-800 NG and 1 aircraft of Boeing 737 Max. Even though the company still has several Boeing 737 aircrafts, some of them are unavailable and grounded, either by
lessor or by maintenance. This leaves them with just 20-25 aircrafts. This was a drastic reduction in the number of aircrafts operated by the company.
c. The Number of Passengers
In terms of the number of passengers, Garuda Indonesia relies heavily on the government as the company is considered a state-owned enterprise. Any regulations implemented by the government would most likely be impactful to the company. Because of the COVID-19 pandemic, the government implemented some regulations and restrictions related to people’s traveling activities. These regulations include the closure of some airports, the capacity limitations, the complexity of the administration process, the new requirements related to health regulations, and many others. Due to these issues, the number of passengers also decreased. Normally the usual number of passengers before the pandemic could reach 50.000 passengers per day. However, after the pandemic hit, the best-case scenario for getting the most passengers could only reach 15.000 passengers per day, not to mention it could only reach 700- 900 passengers per day during the peak of the pandemic.
d. The Number of Crews
As we move on to the number of crews, the pandemic also had a tremendous effect on this matter. At first, Garuda Indonesia had 1200 pilots. But as the number of aircrafts decreased, plenty of pilots became less productive, this clearly became a problem as the huge difference in the ratio between the pilots and the aircrafts made the process not optimal. The company then slowly decreased the number of pilots though several ways. Firstly, some pilots are laid off from working. However, this would only apply to some pilots from several categories. The first would be the upper age pilots, which are the pilots at the age of retirement that are still working, this would lie between the age of 60 to 65. And the other categories would be the contracted pilots. These pilots had a certain amount of time to work at the company, not permanently. Their contracts would either be terminated or stopped from extending. But even after the implementation of this new policy, the number was not enough. The next policy would apply for permanent employees. The company offered a program called early retirement. This program was offered to pilots that were not yet in the range of retirement age. Pilots under the age of 60 are the ones who would accept this offer, considering the company was facing several problems. And yet, it was indeed not enough. The company needed to carry out other alternatives. An example was the implementation of the unpaid leave programs for pilots. In this program, pilots would work substitutes with some other pilots, meaning that their schedule would be different than before. Some pilots would work in even months and the others in odd months. During the free months, they would not get paid, hence the name being unpaid leave.
This program was aimed to be a good alternative and ease the burden of the company, as well as the employees as they would not need to stop working. It turned out this program helped the company survive the downside. This program is, as of now, still being carried out.
e. The Company’s Debts
The COVID-19 pandemic also has some effects on the company's expenses and debts, as it greatly affects the company’s profitability. As the number of passengers decreases, so does the company’s profitability. It is certainly difficult for the company to handle their debts and expenses, let alone make substantial profits. The company has been having difficulties paying their debts to the lessors, making some of the aircrafts need to be grounded for a while. Another thing that is making it worse is that the cost of leasing the aircrafts is not adequately affordable as there were some policies implemented since the beginning of the contract in the past. The price is currently above the market price and it certainly adds the burden of the company.
f. Government Aid and Future Strategy
Garuda Indonesia nearly went bankrupt, but its historical values and legacy as the national flight carrier play a significant role in helping the company survive. The government then considered the efforts to save the airline by providing some help. The problem started when Garuda Indonesia was unable to pay the debts to the lessors and asked for help from the government. As mentioned in the previous section, the government was to provide loans for the company for the amount of Rp 8,5 trillion. But at first, the government was only able to provide Rp 1 trillion due to some unexpected reasons. Garuda then had 4 options to continue operating during the crisis. The first option was for the government to provide further loans and capital injections, but this was a long shot since it was not easy for the government as they were also facing a lot of issues at that time. The second approach involves the Postponement of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang in Indonesian). This alternative is intended to avert bankruptcy, by giving debtors the opportunity to continue their business without any pressure from creditors, and develop their business. This approach would end up in 2 possibilities. It is either the lessors agree which results in Garuda continuing operating, or the lessors disagree which results in bankruptcy for Garuda Indonesia. The third option was for the company to do restructuring and appoint another airline to be the national flight carrier. And the last option was to liquidate the company, meaning that the business would have come to an end, assets would also be distributed, and the absence would be filled by private sectors. The CEO of Garuda Indonesia then took the second option, which was the Postponement of Debt Payment Obligations. The approach is still in process until now. The negotiation process can take as fast as 45 days. But then the negotiation process was extended several times. The maximum time will be 270 days before finally reaching a decision. Garuda Indonesia is now trying to develop a strategy for its future operations. The company will make sure to optimize the operation with the remaining routes and aircrafts, with the ideal number of employees.
5. Conclusion
According to the findings in the previous section, the COVID-19 pandemic, in the form of new policies and restrictions, has severely affected patterns of operational activities in Garuda Indonesia. Several regulations including the shutdown of some airports, the constraints on capacity, the complexity of the administration procedure, and the new health laws present significant challenges for the company. Additionally, there was a drop in flight operations.
Aircrafts were reduced leaving only 50% of its initial quantity. Passengers were also reduced;
the worst was less than 1000 passengers per day. Lastly, the implementation of new policy was carried out related to the company's debts, employees, government subsidies, and future strategy. As government regulations started to become normal, no test requirement and capacity limitation, the flight activity is no longer affected. However, the profitability is still affected because of the limited resources (including aircrafts). That is why the most reasonable strategy for the company is to make use of the remaining resources to keep recovering.
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Appendices
The transcript of the interview
R: Good afternoon, my name is Rizky, can you please say your name and position for the recording? If that’s alright
G: Good afternoon, my name is Ahmad Gunawan, and I am currently working at Garuda Indonesia as the Chief Pilot of the Boeing 737 fleet.
R: Alright, Capt. Ahmad, it is a pleasure to talk to you, I am going to ask you a few questions that are going to be used for my research. I would like to thank you in advance for participating in this research, and we can start right away.
G: It is also a pleasure to help, yes, we can start now.
R: Okay, as we all know the COVID-19 pandemic has been a pretty horrible disaster for all of us regardless of our occupation. But here I would like to dig deeper into the impact of the COVID-19 pandemic itself on the company in which you are currently working at. Firstly, I would like to ask you about what are the impacts of COVID-19, by considering the new policies and restrictions, on Garuda Indonesia’s operation?
G: Okay, yes, I would agree with you, the pandemic, indeed, has been an unfortunate situation for all of us, especially for Garuda Indonesia, as it is directly impacted by it. So I have come to learn that the pandemic itself has had some effects on these aspects. However, there might be some other factors that I can’t provide due to some reasons of my knowledge or capability.
The aspects include the flight activities, the number of planes, the number of passengers, the number of crews, the company’s debts, government aid, and perhaps also the future strategy as we are currently faced with a different level of resources.
R: Alright, that is a lot of aspects to worry about, I certainly hope that it does not get worse over time. But how, would you say, has it affected the company?
G: Well, first of all, I am sorry that I cannot disclose the exact data that the company has due to some reasons. However, I am able to help you with some general data that you can use. So there are several regulations that present significant challenges for the company. There has been a decline from 300-400 flights per day to 70-100 flights per day, and there was even a time when there were just 50 flights per day. Due to the COVID-19, some of the leased aircraft experienced issues with the lessor, and there are currently just around 70 aircrafts remaining in total. Initially, there were 73 Boeing 737-800 NG aircraft and 1 Boeing 737 Max aircraft in the Boeing 737 fleet. After the pandemic struck, 36 Boeing 737-800 NG aircraft were returned to the lessor due to contract-related issues. Even though the airline still possesses a considerable quantity of Boeing 737 aircraft, a few of them are unavailable and grounded due to lessor or maintenance issues.
As a state-owned firm, Garuda Indonesia is highly reliant on the government for support. The government enacted a number of laws and limits pertaining to people's travel activities, such as the closure of some airports, capacity restrictions, the complexity of the administration process, and the inclusion of additional health regulations-related requirements, among others. Due to these challenges, the number of passengers plummeted from 50,000 per day to 15,000 per day (best case scenario), and could only reach 700-900 per day at the climax of the outbreak.
R: Okay, it seems to be affecting the company severely. However, how does the pandemic affect the pilots, and perhaps any other aspects?
G: Yes, indeed, it has been affecting the company severely. Initially, Garuda Indonesia employed 1200 pilots. However, as the quantity of planes reduced, many pilots became less efficient. The corporation then gradually reduced the number of pilots through a variety of means. First, layoffs of senior and contract pilots. The corporation then provided an early
retirement scheme. The adoption of unpaid leave programs for pilots was the final step. In this scheme, pilots would work as replacements for other pilots on alternate months. During the free months, they would not be compensated. This initiative is currently being carried out. As the quantity of traveller declines, so does the company's profitability. It is extremely difficult for the corporation to manage their obligations and costs, let alone generate considerable profits. The firm has had trouble paying its bills to the lessors, resulting in the temporary grounding of many aircraft. As a result of measures enacted since the commencement of the contract, the cost of leasing the aircrafts is no longer sufficiently reasonable. The price is presently over the market price, which surely increases the company's financial burden.
Garuda Indonesia nearly went bankrupt, yet its historical values and history as the national airline play a crucial part in ensuring its survival. The government then contemplated offering assistance to the airline's rescue attempts. The situation began when Garuda Indonesia was unable to pay its obligations to lessors and approached the government for assistance. The government was to supply the firm with loans totaling Rp 8.5 trillion. Initially, however, the government could only provide Rp 1 trillion owing to unforeseen circumstances. Consequently, Garuda had four choices for continuing operations throughout the crisis. The first alternative was for the government to offer more loans and capital infusions, but this was a long shot. The second strategy includes Penundaan Kewajiban Pembayaran Utang. This approach is meant to prevent bankruptcy by allowing debtors to operate and expand their firm without pressure from creditors. This strategy would result in two possible outcomes. Either the lessors agree, resulting in Garuda's continued operation, or they disagree, resulting in Garuda Indonesia's insolvency. The company's next option was to restructure and designate another airline as the national flight carrier. And the final alternative was to liquidate the corporation, meaning that the business would cease to exist, assets would be divided, and the void would be covered by private sectors. The CEO of Garuda Indonesia selected the second alternative, which was the Deferral of Debt Payment Obligations. The strategy is currently under development. The duration of the negotiating process might be as short as 45 days. The bargaining process was then repeatedly prolonged. Maximum decision-making time is 270 days. Garuda Indonesia is now attempting to formulate a plan for its future operations. The corporation will ensure that the remaining routes and planes are operated with the optimal amount of personnel.
R: Alright, it seems that we have talked through all of the aspects. I genuinely hope that the company will recover any time soon, and continue to operate. I thank you for the time and information, it has been a pleasure, once again. I hope we can talk in the future. Thank you, and stay safe Capt. Ahmad Gunawan.
G: I am very honored to be interviewed, and I certainly hope that the company will recover.
And the pleasure is mine as well. It has been nice and I wish you the best as well
