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Garuda buffeted by more turbulence as president is jettisoned

Indonesian airline braces for third CEO in 2 years, leaving reform up in the air

Allegations of smuggling a Harley-Davidson motorcycle into Indonesia shot down Garuda's previous CEO, Ari Ashkara.   © Reuters

JAKARTA -- The president of Garuda Indonesia has been dismissed over charges of trying to smuggle a disassembled Harley-Davidson motorcycle into the country earlier this month on a newly delivered plane.

Ari Ashkara had been in his post since only last year, but had received kudos for his efforts in righting the troubled airline by improving service and mending ties with unions angered over the previous CEO's austerity measures.

Now, with rumors swirling that other senior management members may be axed, Garuda's operations are likely up in the air again.

Indonesia's State-Owned Enterprises Minister Erick Thohir dismissed Ashkara on Dec. 5 and installed board member Fuad Rizal, who is in charge of finance, as acting CEO. New management will be formed during an extraordinary shareholders meeting in late January.

On Nov. 17, a new Airbus A330-900 that Garuda had purchased departed the French city of Toulouse to Jakarta on its maiden journey. Most of the passengers were board members, including Ashkara. The smuggling attempt was revealed when Jakarta customs officers found boxes that had not been declared. Among them were 15 containers containing a disassembled vintage Harley-Davidson motorcycle.

The customs office publicly revealed the violation in early December. At the time, authorities had yet to say who the cargo belonged to, but theonly passengers were board members and other Garuda staff. Immediately after the announcement, Garuda admitted that the items were indeed on board but denied smuggling allegations, claiming that the goods had been declared.

In talking with reporters, Thohir said that if transport of the Harley motorcycle is proved illegal, all members of Garuda's board will be sacked. Apparently unable to quell his anger, the minister said that like a disgraced samurai, all person's who had dealings with the individual must also atone for the misdeed -- in this case, leaving the company.

Under Ashkara, who became CEO in September last year, Garuda had been trying to turn itself around. Seeing how worker morale had deteriorated under the ruthless cost-cutting of his predecessor, Pahala Mansury, Ashkara tried to improve profitability, not so much by cutting worker pay and benefits but by expanding services and flights. After posting lackluster results through most of 2018, Garuda achieved positive results over the first three quarters of 2019.

With business improving, management engaged more with labor, boosting worker morale. However, it was revealed in July that accounting errors made in 2018 forced results for the year to be revised downward to show a sizable loss. Now, the Indonesian anti-monopoly watchdog Komisi Pengawas Persaingan Usaha is probing Garuda on suspicion of trying to form a cartel aimed at maintaining airline ticket prices.

Garuda's sloppy management was also evident in the fractured ties with Sriwijaya Air, another Indonesian airline, in which Garuda had effectively taken over. Sriwijaya had second thoughts on the arrangement, as Garuda had done little more than provide board members and failed to form a capital partnership. Sriwijaya sacked the Garuda-installed board members and the partnership dissolved.

Since Joko Widodo was elected president of Indonesia in 2014, Garuda has changed CEO's almost every year. Meanwhile, passenger counts on domestic flights have neared 100 million, intensifying competition from the likes of Lion Air, the country's top domestic airline, and other low-cost carriers.

At a time when sound leadership is needed to streamline operations, Garuda finds itself embroiled in yet another management fiasco. The airline has already floated a few names to replace Ashkara, among them a former cabinet member during President Widodo's first term in office.

Ashkara's efforts at turning Garuda around have been dealt a serious blow. It is up to the new CEO to carry on with reforms, minus the alleged lack of compliance that brought about Ashkara's downfall.

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