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(PERIOD 2012 - 2016)

Theo Karunia Putra Sianipar and Ratna Ari Setia Budi

School of Business and Management
Bandung Institute of Technology


Garuda Indonesia is the national airline of Indonesia. The carrier operates an extensive domestic and
regional network of services throughout Asia, Australia, Europe, and the Middle East. Garuda Indonesia
has undergone a thorough restructuring in what it labelled "The Quantum Leap", which involved a
dramatic redesign of the airline's strategic direction, network, brand and fleet. The airline launched an
IPO in 2011 which was substantially under-subscribed at the relatively aggressive pricing sought. Garuda
Indonesia serves 64 domestic and 19 international destinations across 14 countries and become a
member of the SkyTeam alliance. According to data from the Center for Asia Pacific Aviation (CAPA).
Garuda Indonesia was ranked second from bottom on the list of Southeast Asia's publicly listed airlines in
terms of financial performance. This research aims to determine the financial performance using DuPont
Analysis during the period 2012-2016. The best financial performance of PT. Garuda Indonesia was in 2012
which ROE reached the highest ratio by 11.75% and turn into the healthy company category. Meanwhile,
in 2014 the financial ratio shown that ROI extremely dropped by -676.10%. In fact, it caused of the total
operating reached out $4.292.344.955 while net income has suffered loss of $(368.911.279) in line with
declining financial performance of the company. In other hand, the external aspects caused of poor
financial performance to the weakening of the rupiah against the US dollar and the rising price of AVTUR,
which touched a record high last year. Apart from the external aspects, Garuda Indonesia was in an
investment stage in 2014, which brought 35 new aircraft for the expansion of both Garuda and its low-
cost arm Citilink. Furthermore, PT. Garuda Indonesia should launch several new short-haul, medium-haul,
long-haul international routes expansion, Instead the carrier aims to codeshare with SkyTeam member.
Moreover, Garuda Indonesia Group should launch a new domestic route on the direct flight that be able
to increase the number of tourist visit to serving the airlines network in both eastern and western
Indonesia wherein it become a potential tourism areas to the further domestic expansion. According to
the International Air Transport Association (IATA), Asia-Pacific carriers saw demand in freight volumes
grow 9.8% in 2016. The increase in demand is captured in the positive outlook from business surveys in
the region. In terms of demand, Garuda Indonesia group should expand more freight across the nation in
order that boosted by solid year-end performance.

Keywords: Financial Performance, Financial Ratio, Garuda Indonesia Airline, DuPont Analysis


Airlines industry is one of the most important sectors worldwide which play a major role in this world and
continues to grow rapidly. In the recent years, the airline industry has experienced the new conditions of
liberalization; increasing competition, economic and traffic growth, acquisition and merger, bankruptcy,
volatility in earnings, considerable profits and losses, innovation and the emergence of low cost carriers.

Because of the global competition in the mentioned new era: corporate finance and financial analyses
play an essential role in maintaining efficient airline operations in short also long-term decision-making
and results.

PT. Garuda Indonesia (Persero) Tbk, is one flag carrier in Indonesia and serves as a full-service airline that
has a worldwide reputation in aviation industry. It is the pioneer of airline company which was previously
ruled by the government but now it has become a public company and join the Skyteam Alliance on 2014
which being the largest airline in Southeast Asia. In 2011, Garuda Indonesia became a publicly-listed
company following a successful Initial Public Offering (IPO) process and was able to show a marked
improvement in its performance, in areas of operations, service to customers and financial. It is a good
start for the company in its journey towards the objectives of Quantum Leap Strategy (2011 - 2015).

Problem Identification
Regarding to the declining operating revenues on 2014, Garuda Indonesia was ranked second from
bottom on the list of Southeast Asia's publicly listed airlines in terms of financial performance, according
to data from the Center for Asia Pacific Aviation (CAPA). Garuda Indonesia was among the worst
performers with US $419 million in operating losses, ranking second from bottom above Thai Airways,
which recorded US $523 million in operating loss, the data showed. It would remain hard for the national
airline to improve its performance that year despite the plunging oil price, as Transportation Ministry's
Regulation No. 91/2014 on a price ceiling mechanism had begun to take its toll on the country's airline
industry. Therefore, this research aims to reveal in the study to compare their profitability for the 2012 -
2016 periods. It suggested to display the impact of financial ratios and airline-specific ratios on profitability
rates for the airline companies.


BUMN Financial Scoring

As the one of state-owned companies, the financial scoring of PT Garuda Indonesia (Persero), Tbk is
regarded to decision regulation of state-owned from ministry of BUMN. The financial scoring is based to
the ministerial decree state-owned enterprises number: KEP- 100/MBU/2002.


AA 80 < TS 95
A 65 < TS 80

BBB 50 < TS 65
BB 40 < TS 50
B 30 < TS 40

CCC 20 < TS 30
CC 10 < TS 20
C TS 10
Source: The regulation of Ministerial of State-Owned Enterprise No. KEP-100/MBU/2002

Return on Equity (ROE) 15 20
Return on Investment (ROI) 10 15
Cash Ratio 3 5
Current Ratio 4 5
Collection Periods 4 5
Inventory Turnover 4 5
Total Asset Turnover 4 5
Solvency 6 10
Source: The regulation of Ministerial of State-Owned Enterprise No. KEP-100/MBU/2002

Financial Performance
Financial performance is informed by its financial statement. A financial statement is intended to provide
information on the resources available to management, how these resources were financed, and what
the firm accomplished with them (Brown and Reilly, 2009).

Financial Ratio Analysis

Ratio analysis is a way to determine several aspects of the companys operating and financial performance
such as liquidity, profitability, solvency, and efficiency. The ratio analysis of the company will be compared
to the ratio analysis on previous period, other companies or industries, and the economy. Financial ratio
or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's
financial statements (Groppelli and Nikbakht, 2000).

Time Series Analysis

Time series analysis is commonly used to summarize the historical financial ratios which have been
calculated during the period of 2012 to 2016. This analysis assesses the financial ratios within the selected

DuPont Analysis
DuPont Analysis (also known as the DuPont identity, DuPont equation, DuPont Model or the DuPont
method) is an expression which breaks ROE (return on equity) into three parts (Matt Phillips, 2015).
DuPont system is a financial statement analysis technique that useful because it is assisting managers in
evaluating company financial condition (Keown et al, 2005).

DuPont Analysis is a method to measure the firms performance and financial condition. It uses both
income statement and balance sheet and combines it into two summary measures of profitability, return
on total asset (ROA), and return on common equity (ROE). ROE is affected by three components; operating
efficiency (measured by net profit margin), asset utilization (measured by total asset turnover), and
financial leverage (measured by equity multiplier).



Return on Equity
The return on equity ratio is a financial leverage ratio that measures the amount of net income that
compared by total equity. ROE indicates how well PT. Garuda Indonesias management is deploying the
shareholders capital.





20 11.75 8.2
2.15 0.93

-202012 2013 2014 2015 2016


Figure 1. Return On Equity

The total equity of PT. Garuda Indonesia in 2012 was $1,073,955,300 and increased $1,094,133,594 in
2013, and dropped by $879,467,591 in 2014. Total equity was straightly increased $950,723,185 in 2015
and $1,009,897,219 in 2016.

Based on figure 1, ROE trend risen by 11.75% in 2012 then fell to 2.15% and sharply decreased -41.95% in
2014. During 2015 ROE increased by 8.2% then fell into 0.93%.

Return on Assets
The return of assets ratio is an efficiency ratio that measures by comparing the net income to total assets
during a period.


5 2.36
0.78 0.25

2012 2013 2014 2015 2016
-5 Years

-10 -11.85


Figure 2. Return On Assets

Return on Assets measures how efficiently PT. Garuda Indonesia could manage its assets to produce
profits. In 2012 was the biggest net income $126,187,114 during 5 years, then decreased into $23,531,387
in 2013. And extremely decreased $(368,911,279) in 2014, then increased rapidly $77,974,161 in 2015.

Based on Figure 2, ROA trend risen by 4.91% in 2012 then fell into 0.78% in 2013 and extremely fell -
11.85% in 2014. During 2015, ROA increased by 2.36% then fell out 0.25% in 2016.

Return on Investment
The return on investment is a profitability ratio that measures that generate net income by comparing
investment. The investment during 5 years has gradually decreased. The biggest investment was in 2012
by $1,179,564 then fell into $972,087 in 2013, decreased $545,647 in 2014, and dropped by $399,772. In
2016 the investment increased $427,479.

300 195.05
200 106.98
100 24.21 21.91
-1002012 2013 2014 2015 2016

-300 Year
-600 -676.1

Figure 3. Return on Investment

Based on Figure 3, ROI trend risen by 106.98% in 2012 then fell out into 24.21% in 2013 and extremely
dropped by -676.1% in 2014. After crisis, ROI has slightly increased 195.05% in 2015 then decreased by
21.91% in 2016.


Profitability ratio used to assess how effectively and efficiently the company utilize its assets and operating
to generating profit. There are several fundamental measurements to assess the companys performance,
those are Net Profit Margin, EBITDA Margin, Operating Profit. Net profit margin is a profitability ratio that
measures the amount of net income earned with each dollar of sales generated by comparing the net
income and the total operating revenues that calculated in order to calculate ROA.

Net Profit Margin VS Ebitda VS Operating Profit


9.07 9.02
10 6.81
5.35 4.42
5 2.03 2.56

-5.49 Net Profit Margin

3.6 0.63
0 2.04 0.24
2012 2013 2014 2015 2016 Ebitda
-5 Operating Profit


Figure 4. Profitability Performance

Based on figure 4, trend on Net Profit Margin, EBITDA Margin, Operating Profit shown the trend was
rapidly decreased in 2012 through 2014. Thus it extremely decreased at 2013 to 2014. Nevertheless, in
fact that the biggest revenue was in 2014 by $3.933.530.272, although net income was losses into
$(368.911.279), EBITDA was dropped by $(215.797.963) and operating income was also losses by
$(395.228.121). Afterward, in 2015 trend has shown that profitability performance increased among net
income by $77.974.161, EBITDA by $344.026.198 and operating income raise into $168.745.441.


Liquidity Performance basically assessed by trending of cash ratio and current ratio. Both of it is
comparison equation. The cash ratio is the ratio of a company's total cash and cash equivalents to its
current liabilities. The metric calculates a company's ability to repay its short-term debt; this information
is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking
party. The cash ratio is generally a more conservative look at a company's ability to cover its liabilities than
many other liquidity ratios because other assets, including accounts receivable, are left out of the
equation. The current ratio is a liquidity ratio that measures a company's ability to pay short-term and

long-term obligations. To gauge this ability, the current ratio considers the current total assets of a
company (both liquid and illiquid) relative to that companys current total liabilities.

43.73 48.09

30 35.62 37.01
2012 2013 2014 2015 2016
Years Current ratio

Cash Ratio

Figure 5. Liquidity Performance

According to figure 5, the trending of cash ratio and current ratio flow with almost same pattern from
2012 and 2016. The difference pattern shown on 2013.Current ratio was decreased and cash ratio was
increased. From Figure 5 the decreasing happened on 2016 and for both ratio it was the worst, Current
ratio went down to 66,47 % and Cash Ratio was going down till 35,62 %. On 2015 current ratio and cash
was increased till 84,28% and 43,48 %. The second decreasing occurred on 2016, when current ratio went
down till 74,52% and cash ratio went down till 37,01%.


Activity Performance consist of Inventory Turnover ratio, Total asset Turnover and Collection Period. the
Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as
a year. The equation for inventory turnover equals the Revenue divided by the inventory. The total asset
turnover ratio measures the ability of a company to use its assets to efficiently generate sales. A company
with a high total asset turnover ratio is considered efficient in making money using its assets. collection
period is the average number of days between the date that a credit sale is made, and the date that the
money is received from the customer. The average collection period is also referred to as the days' sales
in accounts receivable.

Inventory Turnover vs Total Asset Turnover vs Collection Periode

50 50
45 46.17 45 Inventory Turnover (Times)
40 41.61 41.17 41.63 40
35 35 Total Asset Turnovern
30 30 (Times)

25 25
Collection Periode (Days)
20 18.07 20
15 14.13 14.13 15
10 11.19 11.63 10
5 1.03 5
0 1.37 1.25 1.26 1.15 0
2012 2013 2014 2015 2016

Figure 6. Inventory Turnover vs Total Asset Turnover vs Collection Periode

Based on Figure 6, The Trending of Inventory is simply volatile. From 2012 till 2013 it went down from
41,61 to 41,17 and from 2013 to 2014 it increased till 46,17 and for 2 years ahead it went down to 41,63
and 35,46. It is quite different with Total Asset Turnover trending. It steady in the first two years with
amount 14.13 and went down in 2014 amount 11.19 but in next two years it increased to 11.63 and 18.07.
Consider with collection period the trending smoother. Shown on graph the trending from 2012 till 2016
went down from 2012 until 2013 amount 1.37 to 1.25. It increased in 2014 amount 1.26. For next two
years it went down to 1.15 and 1.03.


45 41.82
40 36.5
28.25 28.72
30 27.02

2012 2013 2014 2015 2016

Figure 7. Solvency Performance

Based on figure 7, the solvency performance from 2012 to 2013 decreased from 41.82 to 36.5. In 2014
The Solvency performance continue decreased until 28.25. In the next years in 2015 the solvency
performance up to 28.72. The added value was just 0.47 point. At the end of 2016 the solvency
performance decreased to 27.02.


BUMN framework basically to asses the financial performance of national company itself. The ending of
Performance evaluation will generate the description how healthy the company is. Basically there are
several attributes that used to evaluate and calculate the BUMN financial performance. These are the
ratio: (i) Profitability Ratio consist of ROI and ROE; (ii) Liquidity Ratio consist of Cash Ratio and Current
Ratio; (iii) Activity ratio consist of Collection Period, Inventory Turnover, and Total Asset Turnover; (iv)
Solvency ratio consist of Solvency.

Calculation of Those each Attributes will generate each score of the ratio. Each score of the ratio would
be summed to become Total Score. Due to Garuda Indonesia is National company that segmented as non
infrastructure, maximum of the weight is 70. To get the total weight of each years the total score divided
70. According to the result of total weight, the value level and healthy category would be generated by
using BUMN scoring table shown on Table 1. The result of the financial performance shown on table 3


2012 56.5 70 80.71 80<TS< = 95 AA HEALTHY
2013 45.5 70 65 65<TS<=80 A HEALTHY
2014 24.8 70 35.36 30<TS<=40 B LESS HEALTHY
2015 50.8 70 72.5 65<TS<=80 A HEALTHY
2016 40.8 70 58.21 50<TS<=65 BBB LESS HEALTHY
Source: Primary Data


Best performance was in 2012 (ROE) reached the highest scoring number at 16 of 20 on the AA level,
which means during that time PT. Garuda Indonesia was in healthy company category. In addition, while
in 2012, GA has the highest net income $ 126,187,114, operating income $ 187,508,582 and lowest debt
$ 616,002,012.

The worst performance occurred in 2014 because several reasons, it was the Increasing of Airbus Purchase
in terms of Citilink expansion, Price competition among low cost carrier (LCC), expenses operations
increased due to the Avtur Purchased and spare part. There was poor financial performance to the
weakening of the rupiah against the US dollar and the rising price of fuel, which touched a record high last
year. the regulatory aspects that were less favorable to the country's aviation industry. Apart from the
external aspects, Garuda Indonesia was in an investment stage in 2014, during that time which they
brought 35 new aircraft for the expansion of both Garuda and its low-cost arm Citilink.

On the other hand, external factor was one of the biggest challenge was the rupiah fragile while the
extremely weakened since the middle 2013 because of tightening monetary in the us, so as to make
import Avtur and spare parts aircraft be expensive, even though the negative effects of the weakness of
rupiah in Avtur reduced by falling prices oil. The government's decision to scrap import duties for airport
components and spare parts managed to support the financial performance of local airlines. However,
aviation fuel in Indonesia has remained relatively expensive compared to prices in its neighboring
countries. Another matter that puts pressure on local airlines corporate earnings is the ongoing discount
war between the low-budget carriers. Therefore, airlines hope that the government will raise the
minimum and maximum allowed ticket prices for air travel. Moreover, in Aviation Business Financial
Performance also influenced by amount of seat that sold. In this case in 2014 has the highest seat sold, as
shown at figure 6 Inventory turnover, but the financial performance on that time is the worst from 2012
to 2016. This thing happened because in that time Garuda Indonesia also buy the airbus.


Garuda Indonesia is accelerating expansion in Indonesias under-served international market as part of an

initiative to build its international profile ahead of entry into the SkyTeam alliance. Garuda should launch
several new short-haul international routes within Southeast Asia and new medium-haul routes. The long-
haul expansion is made possible by the delivery of Garudas first batch of 777-300ERs that will be Garuda
Indonesias new flagship and the only aircraft in its fleet featuring a three-class cabin with economy,
business and first-class sections. Garuda also continues to expand its A330 fleet, which it uses primarily
within Asia-Pacific.

The Garuda Indonesia Group transported only 3.6 million international passengers in 2012 compared to
16.9 million domestic passengers (includes 14 million at the Garuda brand and 2.9 million at Citilink). The
growth in recent years has been significantly higher on the domestic side despite the very small
international base. Even when excluding Citilink, which started pursuing rapid expansion in 2012 as part
of a new domestic strategy aimed at competing more aggressively against another low-cost carrier (LCC)
airline, Garudas domestic traffic has nearly doubled in four years.

Garuda Indonesia Group should launch a new domestic route on the direct flight that be able to increase
the number of tourist visit to serving the airlines network in both eastern and western Indonesia wherein
it become a potential tourism areas to the further domestic expansion, so it would make easier for people
to reach that isolated area. The availability of the new route will increase tourism, business and peoples
mobility to be faster in order to improve the local economy. With the new direct flight on the isolated
area, passengers dont have to make a transit in another city anymore. Meanwhile the new route has
been improving quite well.

As a Garuda Indonesia group, domestic traffic grew by 19% to 6.2 million passengers. Garuda Indonesia is
aiming to grow group passenger traffic by 15% to 20%, which would give it approximately 24 million
passengers. Available seat kilometres (ASK) are also expected to grow by 15% to 20%, reflecting the faster
growth than recent years in the international network.

Establishing a profitable presence in Europe will be challenging. The Indonesia-Europe market is growing
and has high potential given the rapid growth of Indonesias economy and middle class. However, the
market is still relatively small and can be well served with one-stop products. Garuda also has ambitions
to operate more non-stop flights to Europe as part of the next phase of its international expansion that
being considered as Garuda takes the six additional. Instead the carrier aims to codeshare with SkyTeam

member. A larger network, membership in SkyTeam and its new fleet of 777-300ERs will certainly be
successful in raising Garudas international profile. But achieving profitability across its expanded
international network will be challenging as Garuda faces stiff competition from carriers across Asia-
Pacific and the Middle East that have more established international brands and much larger widebody
fleets, providing economies of scale that Garuda cannot match.

According to the International Air Transport Association (IATA), Asia-Pacific carriers saw demand in freight
volumes grow 9.8% in December 2016 compared to the same period in 2015 and capacity grew by 5.7%.
This contributed to a growth in freight demand of 2.1% in 2016 compared to 2015. This was slightly below
the 2.3% increase seen the previous year. However, seasonally-adjusted volumes are now back to the
levels reached in 2010 during the post-global financial crisis bounce-back. The increase in demand is
captured in the positive outlook from business surveys in the region. In terms of demand, 2016 was a
good year for air cargo. That was boosted by solid year-end performance. Looking ahead, strong export
orders are good news. The most significant is stagnant world trade which also faces the risk of
protectionist measures. Therefore Garuda Indonesia group should expand more freight across the nation
in order that the trade is a powerful tool for growth and prosperity.


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