Case Study 4 Garuda Indonesia

BACKGROUND OF THE STUDY

On January 6, 1988, Mr. Mohammad Soerparno (50) was appointed by the government of Indonesia to succeed Mr. Lumenta as President Director of Garuda Indonesia Airways. In spite of the rapid growth in both passengers the traffic and fleet during the oil boom of the 1970's, thus making it the "largest airline in the Southern Hemisphere", Garuda, as it was known then, had been plagued by a bad reputation as well as heavy losses year after year. Having been a member of Mr. Lumenta's management team of Garuda since November 17, 1984, Mr. Soeparno had the opportunity to involve himself with the management in its efforts to develop and implement new strategies to turn around the airline, which posted a net loss of U.S.$7 million in 1984 (exhibit 9), into profitability. He was therefore very pleased to see the company making a profit for the first time in more than a decade, to the tune of a modest rupiah 300 million (exhibit1). This result confirmed Mr. Soeparno's confidence in the effectiveness of the policies adopted by Mr. Lumenta upon the latter's appointment as President Director of Garuda in 1984.

As the newly appointed President of Garuda, Mr. Soeparno is caught in the middle of a dilemma of whether to continue Mr. Lumenta's successful policies or to formulate a new set of policies which would enhance the company's ability to deal with the challenges it may face during his term and beyond.

MAIN PROBLEM

The weaknesses of their system were the manually produced passenger tickets and failure of reservation system.

AREAS OF CONCERN

a. Strength

• Good management

• Their business was expanding