Garuda Indonesia is the biggest national airline in Indonesia and has state-owned status. Its name clearly comes from the giant bird Garuda of Hindu and Buddhist mythology, which was the carrier of the god Vishnu. It is also the first and largest carrier in Indonesia, flying to more than 43 domestic and international destinations. With its service-oriented approach, Garuda Indonesia aims at becoming the leading service provider for air travelers and air cargo shippers in the nation. It has a total fleet of 48 aircraft consisting of three B-747-400s, six A-330-300s and 39 B-737s (300, 400, 500 and 800 series) as of 31 December 2007. With a Head Office at the Soekarno-Hatta International Airport, Garuda Indonesia currently employs 5,808 people and provides more than 93,000 departures serving more than 9 million customers each year.
The current issue facing all Indonesian airlines, including national carrier Garuda Indonesia, is that the European Union banned them in June 2007 from flying in Europe. Not only Garuda Indonesia was unable to fly to or from Europe, but EU citizens were also warned not to use the airline elsewhere in the world. The primary reason for the ban, according to the European Union’s Air Safety Committee, was the Indonesian airlines’ poor flight safety record. Many Indonesian airlines did, in fact, suffer a series of accidents in 2007, including Garuda Indonesia indeed . Nevertheless, this ban was lifted by the European Union Commission for Garuda Indonesia and three other Indonesian airlines after two years, namely in the beginning of July 2009.
This paper will explain the progress of Garuda Indonesia’s flight safety standards by examining its 2008 annual report. This annual report gives insight into the flight ban issue because of its timeline. The author of the report states that the flight ban was took effect in 2007 and lifted in July 2009. It is very interesting to analyze what Garuda Indonesia did to gain the EU Commission’s trust in lifting a part of this flight ban. The main parts to analyze are those contents of the report that regard safety.
Compared to other Indonesian airlines, Garuda Indonesia has had the best track record in safety since their launch in 1950. From 2000 until now, Garuda Indonesia has had only three plane crashes, specifically in 2002, 2004 and 2007 . The worst accident was in 2007, when a Garuda Indonesia aircraft (Boeing 737-400) crashed and burst into flames upon landing at Yogyakarta International Airport on Java Island, killing 22 people. BBC correspondents reported that the jet had started shaking violently before landing and the crash happened at about 07.00 am local time. The main cause was bad weather as well as errors made by the pilot and co-pilot. In addition to this incident, there were many other plane crashes involving Indonesian airlines in 2007, which caused the Indonesian flight safety record to be put in the spotlight .
Indonesia has more unpredictable weather than many other regions in the world, although it only has two seasons each year: wet and dry. As laid forth by the Ministry of Environment of the Republic of Indonesia, the country’s geography position has resulted three factors that cause difficulties for aircraft flights. First is its tropical climate, characterized by high precipitation and humidity. This has caused an increasing number of flights to delay out of safety concerns. Secondly, there is El Nino and La Nina every three to five years, which makes weather harder to predict . The last factor is a periodic increase in air pressure, which encourages cooling and followed by the emergence of low-pressure centers that turn into tropical storms (e.g. Fiona and Hape) . These factors explain the difficulty posed by weather condition to flight operations in Indonesia. Yet, plane crashes rarely result from a single failure, but rather from a combination of events.
With its Aviation Safety Policy, the EU seeks to ensure that all of its citizens enjoy the same level of safety in the sky around the world . The EU aviation safety system is a collaboration between the European Commission, the European Aviation Safety Agency, Eurocontrol and national civil aviation authorities of member states, as well as the aircraft manufacturers and airlines themselves. This system consists of a set of common safety rules which provide uniform requirements for operators, manufacturers and aviation personnel concerning products, services and industry . This policy applies not only to European airlines, but also to non-European airlines inspected at European airports. Implementation of this policy includes, for example, random ramp checks and subsequent flight bans within Europe if safety is judged to be below a minimum level.
Garuda Indonesia’s 2008 annual report provides data about the actions taken by the company that precipitated lifting of the flight ban by the EU in 2009. First of all, Garuda Indonesia proved that they were able to maintain their fleet of 54 aircraft through 31 December 2008, meaning there were no accidents or crashes that year. At that time, the fleet consisted of 52 aircraft for main brand flights and two aircraft for Citilink flights. This included nine wide body aircraft and 45 narrow body aircraft. Garuda Indonesia’s flight safety record has been at the highest position since 2002.
Garuda Indonesia further demonstrated its commitment to safety by upgrading the infrastructures facilities, and security and safety procedures. The most important of these upgrades was the addition of 25 Next Generation Boeing 737-800s (B 737-800 NG), ten Boeing 777-300 ERs (Extended Range) and four Airbus 330-200s . These orders were made in 2008, when Garuda Indonesia was experiencing an increase in income from operations of 437% over the previous year (around Rp. 1.186,9 billion) . It must be highlighted this profitability occurred in the midst of the global finance crisis, the company was facing challenges such as high fuel prices, depreciation of the Rupiah (Indonesian currency) and intense competition. Ultimately, these difficulties proved to be opportunities amidst uncertainty.
Garuda Indonesia decided to invest its profits into improving safety and services, although they were still unable to pay off long term loans (25,3) and other liabilities (48,6) . Despite an increase in income in 2008, Garuda Indonesia experienced a loss of 11, 8% in current assets, mostly due to a 12, 6% decrease in Cash and Cash Equivalents. This was followed by a decrease in Trade Receivables and a 20, 4% decline in Advances and Prepaid Expenses pertaining to the operational activities . Nevertheless, they were still able to both generate a profit and address safety concerns.
The turning point of the company’s transformation occurred when Garuda Indonesia was successful in obtaining IOSA certification and inclusion on the list of IOSA operators as of May 14, 2008. The IATA Operational Safety Audit (IOSA) certificate is an international accreditation of the safety and security of flights, which analyzes eight operational aspects of an airline, covering 900 flight operational standards. ‘Having secured the IOSA international flight safety certification standard, we are confident in our ability to enhance our partnerships with international airlines to expand our flight network and prepare Garuda Indonesia to become a member of global alliances’ (Emirsyah Satar: 2008).
Garuda Indonesia had been seeking IOSA certification since 2004, and in 2008 was able to show a decreasing trend in incident rate. This rate was 0, 41 incidents per 1000 departures, the lowest figure since 2002 . Garuda Indonesia was able to attain this rate by improving their Safety Management System and Security Management System (SEMS), as well as by updating the Mandatory Company Operations and holding obligatory Safety Recurrent Training for cabin crew. Besides that, Garuda Indonesia implemented an Operational Hazard Report (OHR) in an effort to reduce incidents or accidents. This reduction in incident rate was made possible by successful projects in two directorates, namely the Directorate of Operations and the Directorate of Engineering.
Improvements carried out by the Directorate of Operations include finalization of the Environmental Program Manual and auditing of four domestic stations, improvement of the Operational Communication Network in 21 domestic stations, and the reduction of delays through the On Time Enhance Program. Flight Attendance performance standards were implemented by expanding a Coaching and Counselling Program for cabin crews and monitoring customer complaints. For their part, the Directorate of Engineering was responsible for Aircraft Availability, which included integration of maintenance function with marketing and operation units, as well as for reducing maintenance costs by improving business process cost controlling, and creating and monitoring Service Level Agreements (SLAs) with each maintenance provider .
All of these improvements influenced the EU in its reversal of the flight ban on Garuda Indonesia. However, the next question is whether these efforts suffice to meet further EU standards. According to the common strategy of the European Aviation Safety Agency (EASA), standards are developed and their implementation is monitored via inspections by member states based on common safety and environmental rules . This means that as long as EU member states and the European Commission are satisfied with the safety inspections, the airlines do not have to worry about any future flight bans.
Now, the main task of Garuda Indonesia is to maintain and improve its safety level so that they are able to obtain full four-star safety status and guarantee its position. The main challenge to this is the maintenance and overhaul expenses which totaled Rp. 1.867,32 billion in 2008 due to increasing costs of ticketing, sales, promotion, user charges and stations. These expenditures are in line with the company's commitment to improving safety a standard, which means improving maintenance quality as well .
Sources:
In March of 2007, Garuda Flight 200 crash-landed in Yogyakarta killing 21 people including five Australians.
Garuda Airlines, Mandala Airlines and two charter operators, Airfast Indonesia and Prime Air, could be successfully complying with the EU's safety standards.
Adaptation from Center of Data and Analyst of TEMPO Magazine on http://www.pdat.co.id/hg/political_pdat/2005/09/05/celaka-pesawat.htm, accessed on April 5, 2010
“Indonesia Jet explodes on Landing”, on http://news.bbc.co.uk/2/hi/asia-pacific/6425419.stm, accessed on April 5, 2010.
El Nino is the condition where wet season is longer than dry season. La Nina is the opposite condition of El Nino
Adaptation from the mapping of Indonesian air/weather condition from Ministry of Environment of Republic of Indonesia, 2003, on http://www.menlh.go.id/banjir/Berita/InfoFeb17.htm, accessed on April 5, 2010.
Beyond ensuring a high level of safety, the EU air safety policy promotes rules that are cost efficient and facilitate the free movement of products, services and persons involved in civil aviation. Source: http://ec.europa.eu/transport/air/safety/safety_en.htm, accessed on April 2, 2010.
“Transport: European Aviation Safety Rules” on http://ec.europa.eu/transport/air/safety/rules_en.htm, accessed on April 2, 2010.
Management Discussion and Analysis, Annual Report 2008 of Garuda Indonesia, page 38.
Report from the Board of Directors, Annual Report 2008 of Garuda Indonesia, page 24.
2007 was the worst year for all Indonesian airlines, including Garuda Indonesia.
In million Rupiah, from the Financial & Operational Highlights, period of 2004-2008.
Financial Review of Management discussion and analysis, Annual Report 2008, page 59
Safety and Other Operational Aspects, Management discussion and analysis, Annual Report 2008, page 41
Ibid, page 43. Author cited only some of their responsibilities in this case.
“Euroepan Aviation Safety Agency (EASA), on http://www.easa.europa.eu/ws_prod/g/g_about_more.php, accessed on April 6,2010.
Expenses of Financial Review, Management Discussion and Analysis of Annual Report 2008.
*It was made as an assignment for subject Approaches to International Business in Metropolitan University Prague, Czech Republic (2010)
