Garuda to the rescue as Sriwijaya struggles to stay afloat

INDONESIAN flag carrier Garuda Indonesia Group will support Sriwijaya Air Group, as problems ranging from safety to finances mount, forcing Sriwijaya to stop operations for more than half of its fleets.

The decision to resume management partnership was made in a process that the State-Owned Enterprises Ministry facilitated, said Juliandra Nurtjahjo, the president director of Citilink Indonesia, the low-cost carrier arm of Garuda Indonesia. It resolved a recent management partnership dispute between the two airline groups.

“Hopefully with this good commitment and momentum this could be a turning point for us to be recommitted and for both parties to prioritise safety, airplane airworthiness, customers, and this is part of rescuing the country’s assets to support the state of Sriwijaya,” Juliandra told a press briefing on Tuesday.

Sriwijaya, owned by tycoon Chandra Lie, has debts it has yet to pay out with various state firms, including $118 million with Garuda and $52 million with Garuda’s aircraft maintenance company GMF AeroAsia as of June.

Other outstanding debts were booked with energy giant Pertamina, lender BNI and airport operators Angkasa Pura (AP) I and AP II.

Sriwijaya turned around a 1.6 trillion rupiah ($113 million) loss it booked last year to a profit in the first quarter of this year after it signed a management partnership agreement with Garuda in November.

However, Sriwijaya ran into a dispute with Garuda on September 25, announcing it would remove its logos from all Sriwijaya aircraft on “differences in services standards”.

Afterward, a leaked internal letter dated September 29 showed director for quality, safety and security Toto Soebandoro’s plea for Sriwijaya to stop operations temporarily to solve its operational standard and safety issues, as the Transportation Ministry would recommend, according to the letter.

It was followed by the resignation of two Sriwijaya directors Fadjar Semiarto and Romdani Ardali Adang, who drafted the letter with Toto, as Sriwijaya failed to address issues raised in the letter.

The letter explains points of concern, such as Sriwijaya’s decision to do line maintenance on its own with limited resources after GMF AeroAsia backed down from serving Sriwijaya and Civil Aviation Directorate General findings that Sriwijaya’s tools, equipment, spare parts and number of qualified engineers did not meet requirement standards.

The issues forced Sriwijaya to fly only 12 aircraft out of the 30 it owned.

Sriw ijaya acting president director Jef ferson Jauwena said t he renewed management partnership with Garuda could improve t he airline’s conditions.

“Once again we are thankful that the partnership can be formed again. Also thanks to GMF for being willing to provide its services again to Sriwijaya Air, thus safety and security aspects can be fulfilled,” he said.

GMF AeroAsia president director Tazar Marta Kurniawan said one of the immediate measures to be ta ken to support Sriw ijaya pertained to maintenance, repair and overhaul ser v ices.

“Starting from today, we will be handling [maintenance] for Sriwijaya Air Group’s fleets, including NAM Air. Hopefully, with the continuation of this agreement, it would improve the quality of Sriwijaya Air flights,” Tazar said.

Aviation expert Alvin Lie said although Sriwijaya was facing difficulties in operations and finances, its physical and human resources, priority routes and customer loyalty would be the backbone for potential growth in the future.

“It would be more beneficial if Sriwijaya’s health is restored, including for all the debts with GMF, Pertamina, AP I, AP II – the chance for recovery is much higher if Sriwijaya is alive. Otherwise I’m sure Garuda would not even bother to help Sriwijaya,” said Alvin, who is also the Indonesian Ombudsman commissioner.

The Garuda-Sriwijaya partnership would result in a market share of around 46 per cent, allowing it to inch closer to Lion Air Group, which controls the airline industry in Indonesia with 51 per cent share, according to 2017 data from the Indonesia National Air Carrier Association.

“Without Sriw ijaya, Garuda will be left too far behind i n market share when compared with Lion,” Alv in said.

“For Sriwijaya, being managed under Garuda will see Garuda’s management doing business manoeuvres that are legal and ethical, including restructuring Sriwijaya’s debts, efficiency measures, increasing human resources performance and optimising its assets.”