GMF Aero Asia: aiming for the

Middle-East base
Harriman Saragih and Fransisca Sinaga

Introductory paragraph Harriman Saragih is based

at Business School,
Already in his fifties, Iwan Joeniarto had shown no loss of enthusiasm for the business Universitas Prasetiya
development of GMF Aero Asia (GMF), a subsidiary of the national airline, Garuda Mulya, South Tangerang,
Indonesia, which had a successful Initial Public Offering (IPO) in 2017. He revealed that Indonesia.
GMF was preparing for a partnership with five airline clients at the end of 2018, especially Fransisca Sinaga is based
with airlines from Russia and India (Reuters, 2018a; Silviana, 2018). He also revealed that in at GMF Aero Asia,
Tangerang, Indonesia.
the next five years, the income portion derived from foreign airlines would increase from 12
to 30 per cent (Reuters, 2018a). One of Iwan’s initiatives for the expansion of GMF was to
reach the Middle East markets during 2018 (Pratomo, 2018). One partner, GME Aviation,
which was led by Kalyan Tewari, stated that “The aircraft maintenance in the Middle East
region is promising and having GMF as our partner was the right choice since GMF had all
the capabilities and qualities” (Desfika, 2018). Fidiarta Andika, VP Corporate Secretary of
GMF, expressed the view that as the Middle East was one of the fastest growing marke ts
with two-digit growth in the next five years compared to the global projections, GMF must
consider this forecast (Shay, 2018). Iwan must ensure that GMF should be the domestic
market leader (Kumparan Bisnis, 2018; GMF, 2018), the strategic base he would use to
support his plan for expansion in the Middle East was strong and the market expansion thus
proceeded according to plan.

The history of GMF Aero Asia

Initially in its early beginnings in 1949, GMF was a technical division of Garuda
Indonesia Airlines with operations based in the Kemayoran and Halim Perdanakusuma
airports in Jakarta, Indonesia. Next, 35 years later in 1984, GMF was relocated to
Soekarno-Hatta International Airport (initially named Kemayoran Airport) and rebranded
itself as that airport’s Maintenance and Engineering Division. As time progressed, GMF The authors of this study are
largely benefited from
eventually developed into an independent business unit (GMF Aero Asia, 2019; Research Office Universitas
BandaraSoekarnoHatta.com, 2015). Prasetiya Mulya and the con-
structive comments from Ibu
Dwi Sosronegoro, Learning
In 1998, the Maintenance and Engineering Division transformed into a Strategic Business Center, Universitas Prasetiya
Unit-GMF (SBU-GMF). In its new role, SBU-GMF handled all of Garuda Indonesia’s fleet Mulya.
maintenance activities. In 2002, independent and no longer a part of Garuda Indonesia, Disclaimer. This case is written
solely for educational purposes
SBU-GMF changed its name to PT. Garuda Maintenance Facility Aero Asia. In 2013, the and is not intended to represent
European airplane manufacturer, Airbus, certified and granted GMF the certification as a successful or unsuccessful
managerial decision-making.
maintenance training center for the A320 narrow-body aircraft and A330 jets. Only GMF and The authors may have dis-
Singapore Airlines were granted this certification for the Southeast Asian region (GMF Aero guised names; financial and
other recognizable information
Asia, 2019). to protect confidentiality.

DOI 10.1108/EEMCS-12-2018-0257 VOL. 9 NO. 1 2019, pp. 1-24, © Emerald Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 In 2015, GMF opened the world’s largest hangar for narrow-body aircraft. Occupying
60,000 m2, GMF’s hangar was able to accommodate 16 narrow-body aircraft. The company
also opened a 22,000-m2 maintenance hangar for wide-body aircraft and a 23,000-m2
hangar for light maintenance that included facilities for the A330 (GMF, 2018).
In a 972,123 m2 total work area, GMF accommodated state-of-the-art international-standard
facilities. GMF obtained international certifications, such as ones from Federal Aviation
Administration (FAA) Approved Repair Station No. WGFY076F, Indonesia Directorate
General of Civil Aviation (DGCA) No. 145/0100, European Aviation Safety Agency (EASA)
Approved Repair Station No. 145.0062 and the Australia Civil Aviation Safety Authority
(CASA) Approved Repair Station No.1-VLRQ9.
GMF had various facilities such as spare parts, stores, engine and component workshops,
an engine test cell, utility buildings, ground support equipment building, chemical stores, a
water waste treatment facility, aircraft parkings, training center and an office complex. It
also held certifications from safety and airworthiness authorities, including those from
Singapore, Thailand, Malaysia, India, Vietnam, Yemen, Pakistan, Bangladesh, Nigeria, UAE,
South Korea, Bahrain, Oman, Islamic Republic of Iran, Iraq, and other nations, totaling 25
countries (see Exhibit 1 for GMF’s clients) (GMF, 2018).
GMF served domestic and foreign airlines such as Garuda Indonesia, Citilink, Sriwijaya, Air
Asia and IndiGo. GMF considered itself to be the best and biggest maintenance company
in Asia. GMF claimed that it had the best-integrated solution for all its clients from around
the world. Backed up by GMF’s Values, GMF stated that each individual in their company
played an important role (GMF, 2018).
On the October 10, 2017, GMF conducted an IPO on Indonesia’s Stock Exchange. GMF
then offered 2.82 billion stocks each priced at IDR 400. Fidiarta Andika, GMF’s VP
Corporate Secretary, stated that the margins from the IPO’s stock sales would be used for
refinancing, working capital and GMF’s business expansion (Shay, 2018). Iwan, as CEO,
added that the income from the IPO would soon be used to build aircraft maintenance
facilities on a few continents, and one of those focuses would be the Middle East (Setiawan,
2017).

Business operations
The maintenance, repair and overhaul (MRO) global market share was estimated to grow at
a CAGR value of 4.33 per cent in the subsequent five years based on the 2016 CAMRO
study. In 2017, the global market of MRO reached US$80.2bn and would grow to US$95bn
in 2021. In its Annual Report, GMF’s market share in 2017 was 72 per cent from the
domestic market and 12.7 per cent from the global market (GMF, 2018). This figure was an
adjustment based on GMF’s revenue in 2017 compared to the market share that complied
with GMF’s criteria, which
䊏 corresponded to GMF’s capabilities;
䊏 not limited to any geographical limitations; and
䊏 did not possess MRO and was not affiliated to original equipment manufacturers (OEM)
(GMF, 2018).

Iwan explained further that “We would like our domination of the domestic market to reach
50 per cent. However, for this year, 40 per cent is enough, and we will gradually increase it”
(Kumparan Bisnis, 2018). Thus, it could be concluded that the figures in the annual report
could not be used as the basis for generalization of the calculation of GMF’s market share
by investors when scrutinizing this industry on the macro scale.
As a growing company in the aircraft maintenance business, GMF prepared and refined its
marketing strategies using a marketing mix approach (GMF, 2018). GMF hoped that the

PAGE 2 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019

use of an appropriate strategy would increase GMF’s market share (Exhibit 2). Given the
four main products of GMF, the market share of engine and APU maintenance was
predicted to have the most substantial increment in 2021 at US$32.56bn, followed by
component maintenance at US$29.16bn, line maintenance at US$20.28bn and base
maintenance at US$13.01bn (GMF, 2018).
Indonesia was predicted to pass Singapore as the leader in Southeast Asia for MRO
expenditures in 2027 according to Frost & Sullivan. The expenditure of MRO in Indonesia
was predicted to double to US$2.1bn from US$1.1bn in 2017. In Singapore, that figure was
predicted to increase by approximately 40 per cent to US$1.7bn during the same period
(Silviana and Setboonsarng, 2017).
GMF allocated 65 per cent of its funds (US49.1m) to develop its corporate business. This
funding came from the IPO past October 2017 (GMF Aero Asia, 2018). Iwan said that some
of the IPO funds had been used for investment. He added that this investment fund would
be used for some of the company’s operational needs, including the improvement of ICT
infrastructure, tools and equipment, the company’s capabilities and other facilities to
support aircraft maintenance. These initiatives were done along with GMF’s business
expansion plan as an effort to develop the corporation.
Iwan had also attempted to finalize the International Footprint Australia Project so that it can
be put in operation (GMF Aero Asia, 2018). GMF also optimized the use of the hangar
owned by the Merpati Maintenance Facility (Amin, 2018). This was done to increase GMF’s
service as the market for propeller planes and general aviation there was still good
(Himawan, 2016). Iwan was optimistic about targeting revenue growth to be approximately
15 per cent in 2018 (Merdeka, 2018). He also hoped that the net profit would stay double
digits (Merdeka, 2018). To reach all these goals, Iwan conducted some strategic initiatives.
Iwan admitted that it was still difficult to expand into the international market. So far, GMF’s
market share was only 2 per cent in terms of global MRO business (Kumparan Bisnis,
2018). Meanwhile, GMF in Indonesia was still leading with a good competitive position
(Kumparan Bisnis, 2018). “We have a lot of demographic advantages with the huge
population and young workforce in Indonesia,” explained Iwan Joeniarto, the President and
CEO of GMF, to Nikkei Asian Review (Ono, 2018). The nation’s 261 million population is the
largest in Southeast Asia, and the average salary of engineers in Jakarta is one-sixth of their
counterpart in Singapore according to a survey conducted in 2017 by the Japanese
External Trade Organization. As aircraft maintenance was a labor-intensive business,
Joeniarto stated that the low labor cost gave the company a competitive advantage over
Singapore (Silviana and Setboonsarng, 2017).

Responding to low-cost carriers

Low-cost carriers (LCCs) were the force behind the rapid growth of Asia’s civil aviation
market, but most – including leading players such as AirAsia, the largest budget operator in
the region – could only conduct minimum maintenance and divert the bulk of its work to
companies either affiliated with its competitors or independent service providers.
Generally, commercial aircraft had to be checked and maintained after each flight and
overhauled once every few years. As aircraft did not make any profit when being
maintained, airlines (especially budget airlines) could only reach fast and efficient turn-over
with the intensive use of labor. This was an opportunity for players with a competitive power
in terms of finance (Silviana and Setboonsarng, 2017; Ono, 2018).
Iwan explained that the growth potential of the domestic air travel market in Indonesia was
large because the country’s landscape spread across a large area and thus could be
considered a major market potential. GMF planned to spend US$400m in the following five

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 3

 years to expand its maintenance facilities, focusing on narrow-body aircraft, a type of
airplane which was popular among LCCs.

Maintaining operational performance

From an operational aspect, GMF recorded 100 per cent for three indicators, i.e. the
fulfilment of contract at the service level, turnaround time and the ability and development of
capacity. In line with the business theme in 2017 “Strengthen the Core Business,” the
development of GMF’s business scale in its main sector also succeeded with an increase in
the use of hangars of 33 per cent in its basic maintenance business line, 19 per cent from
the use of laborers, 36 per cent in its engine maintenance business line and 58 per cent in
main engine utilization in the business line, which contributed the largest revenue via
component maintenance (GMF Aero Asia, 2017).
Iwan added that any increase in the investment would create a faster rate of return. He
explained that “Hangar and Major Machine are high-valued investments, and therefore,
their use needed to be maximized. At this moment, GMF still had an extensive area for
utilization to increase its revenue, especially from component and engine maintenance”
(GMF Aero Asia, 2017). Some of the local competitors in Indonesia such as Batam Aero
Technic and FL Technic still do not possess competitive strength like GMF. However, there
are several competitors in the Asian Region, such as Singapore Technic Aerospace, Hong
Kong HAECO, Sepang Aircraft Engineering, GAMECO China or SATAIR, that offered higher
prices compared to GMF.
The extraordinary operational performance of GMF in 2017 was also marked by a number of
new aircraft maintenance contracts received by various domestic and foreign airlines and
the extension of contracts with its existing customers. In the same year, there was also a 5
per cent increase in business volume derived from international customers. Iwan explained
that this increase showed the world trusted the quality of GMF in providing its services. “We
hope GMF’s revenue from the international market will increase by 30 per cent in 2021,” he
added (GMF Aero Asia, 2017). He also explained that the growth of revenue from non-
affiliated companies reached 41 per cent, and therefore, the non-affiliated companies’
contributions to the revenue increased to 37 per cent of the total GMF revenue and were
predicted to continue increasing to 55 per cent by 2021 (GMF Aero Asia, 2017).

Marketing operations
Products
GMF had ten main products to offer (GMF Aero Asia, 2017):
1. Line Maintenance.
2. Base Maintenance.

3. Component Services.
4. Material and Logistics Services.

5. Cabin Maintenance Services.

6. Engine and APU Maintenance.

7. Engineering Services.
8. Learning Services.

9. Aircraft Support.
10. Power Services.

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Line Maintenance handled aircraft maintenance such as a pre-flight check, transit check,
daily check, A-Check (maintenance until 600 flight hours) and various types of other
maintenance services. Aside from light checks on aircraft series B737, B747, B777, A320,
A330, CRJ1000 and ATR72, Line Maintenance also handled overnight transits and
emergencies for Aircraft on Ground (AOG). Base maintenance handled routine heavy
checks, modification, painting of the aircraft’s exterior including decorative finishes,
modifications and major structural repairs, as well as aircraft maintenance and overhaul.
The Unit Component Services repaired and overhauled aircraft instruments, electronic
control, radar and navigation, flight data recorders, gyros, wheel brakes and landing gear.
Engine Workshop, Engine & APU Test Cell and Engine Maintenance served to conduct
aircraft engine and Auxiliary Power Unit (APU) maintenance on engine types, such as
CFM56-3 and APU GTCP85 installed in B-737-300/400/500; engine type CFM56-7 and APU
GTCP131-9B installed in B737NG; and APU GTCP131-9A installed in A320. Cabin
Maintenance services given by GMF included aircraft cabin maintenance (including in-flight
entertainment) for domestic and international flights. Material Services offered spare parts
supply, aircraft component management, sale and purchase of materials and AOG services
(GMF, 2018).
Engineering Services provided standard maintenance services, modification and control,
reliability control programs, data communication from aircraft to land services, aircraft
maintenance manual management and distribution and expertise services. Since 2010,
GMF had held the DOA (Design Organization Approval) certification from DKU-PPU.
Learning Services were established to strengthen the position of GMF in the MRO industry.
It developed a training curriculum in collaboration with some of the world-class aviation
companies and several aircraft manufacturers, such as Boeing, Airbus, General Electric,
Rolls-Royce and CFMI. Aside from meeting the requirements of the FAA and EASA, GMF
Learning Services also had been approved by DKPPU, as an AMTO (Aircraft Maintenance
Training Organization) with CASR 147 certification.
GMF Aircraft Support Services also had developed the capability for manufacturing
business, such as high leave truck, dollies, baggage trolley, lavatories cart, water service
cart, thrust reverser stand, APU stand and wheel and brake change stand. Service areas
were added to cover all outstations in Indonesia. GMF Power Services is involved in aircraft
engine maintenance, which primarily focused on the non-flight sector. The service covered
gas turbine maintenance for industries (GMF, 2018).

Place
GMF’s operations base was located at Soekarno-Hatta International Airport in Indonesia,
where almost all production activities were executed. The location gave GMF an advantage
to serve aircraft flown to and through Indonesia. Geographically situated between two
continents and two oceans, it put Indonesia right in the center of the trade route (GMF,
2018).
GMF also had several hangars spread across the Indonesian islands. The main hangars,
aside from the one in Cengkareng, could be found in main cities like Medan, Denpasar and
Surabaya. Cengkareng still dominated business transactions in 2017 for Base Maintenance
or Line Maintenance areas. Customers would send aircraft, engines and components to
GMF for major maintenance. Several stations outside Cengkareng also handled Line
Maintenance for foreign airlines, such as Air China, China Airlines, Korean Air, Xiamen,
Virgin Australia, Malaysia Airlines, Japan Airlines, Hong Kong Airlines and Asiana Airlines.
Transactions also occurred overseas for engineering service and Line Maintenance in
Nigeria for Max Air (GMF, 2018).

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 5

 Promotion
GMF conducted promotions with two objectives:

1. to create brand awareness; and

2. to increase product sales.

GMF adjusted its promotion pattern and media to the characteristics of the target market of
the product. The promotion was done based on the needs of the market and the customer’s
business characteristics. These activities were executed using mass media, electronic
media and printed media. In its promotional activities using electronic media, GMF also
created an accessible website to promote and provide information on GMF products. These
activities were supported by Account Manager and Sales (AMS) which functioned as Sales
Promotion by visiting prospective customers to offer GMF products (GMF, 2018).
In maintaining its brand awareness and existence, GMF also conducted promotional
activities at international events. Until the second quarter of 2017, GMF participated in
exhibitions such as Aviation Africa, MRO East Asia, CAPA Australia, CASEA Thailand, MRO
Asia Pacific Singapore, and CAPA Asia Aviation Summit Singapore. Aside from that focus,
GMF also attended other events, such as IATP Dublin, MRO Middle East, Hamburg Aircraft
Interior Expo and Business France Indonesia – MRO Event. GMF successfully pioneered
events for engineering communities in Indonesia through IAECE (Indonesia Aviation
Engineering Conference and Exhibition) and co-hosted the Jet parts Cost Savings
Conference and AMROI (GMF, 2018).

Price
GMF offered flexible prices with due consideration to the production costs and the
company’s cost efficiency program, which in the end increased its profit margin. Prices
offered were adjusted to the objectives of each business unit or type of product to maximize
revenue or increase the market share of certain products. In Southeast Asia, Singapore had
long been the center of MRO and dominated the market in that region by becoming a full-
service operator. However, with lower labor costs, larger areas and promising domestic
market, GMF could emerge as an alternative for LCCs (GMF, 2018).

Partnership initiatives
GMF had a long history of forming partnerships. A year before Iwan was appointed as the
CEO, GMF partnered with the signing of an MoU between GMF and PT. Avia Technics
Dirgantara (FL Technics Indonesia) in 2017 (Himawan, 2017). This MoU formed strategic
cooperation between these two companies in MRO works and other supporting services
(Himawan, 2017). To support GMF operations in 2017, GMF aggressively conducted
partnership initiatives with various companies in other countries.
In January 2018, GMF’s VP Corporate Secretary, Vidarta Andika, explained that GMF had
officially formed a partnership commitment to conduct line maintenance in Australia
(Desfika, 2018; Dwijayanto, 2018). This service was intended for Boeing 737 and 787, as
well as Airbus A320 and A330, aircraft. However, the business impact of this partnership
needed to be analyzed further. Iwan explained that he hoped this new strategic partnership
with Australia would enable GMF’s expansion overseas (Dwijayanto, 2018).
In October 2018, GMF formed a partnership with the aircraft maintenance unit of the Air
France KLM group and China Communications Construction at a joint value of US$900m
(Reuters, 2018b). This strategic partnership between GMF Aero Asia and Air France KLM
Engineering and Maintenance focused on the main facility of GMF in Jakarta, and it had a
potential business value of more than US$400m over 10 years (Silviana, 2018). Based on
the new contract – which was signed on October 11, 2018, during the Indonesian

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Investment Forum 2018 – both partners would intensify their joint efforts on engine support,
components and airframe support. This collaboration was designed to increase GMF’s
capability and strengthen Air France KLM’s presence in the MRO sector in Asia (Macrae,
2018).

Awards and recognitions

GMF’s reputation has received acknowledgment and appreciation from various institutions.
It had proven GMF’s commitment to the services it provided. In Indonesia, GMF had also
received several awards, among which were the followings (GMF Aero Asia, 2018):
䊏 Bronze Winner: Best of Private Company In-house Magazine (InMA) 2018 “Presisi –
January 2017 Edition” The 7th SPS Indonesia In-house Magazine Awards (InMA) 2018
Serikat Perusahaan Pers (SPS).
䊏 Silver Winner PRIA 2018 Category: Internal Printed Media, Sub Category: State-Owned
Enterprise Subsidiary “Presisi –October 2017 Edition” Public Relations Indonesia
Awards (PRIA) 2018.
䊏 Gold Winner PRIA 2018 Category: Profile Video, Sub Category: State-Owned
Enterprise Subsidiary, Public Relations Indonesia Awards (PRIA) 2018.
䊏 The Big 7 Indonesia Corporate Secretary and Corporate Communication Award III
2018.
䊏 Platinum Winner Category: SOE’s Subsidiary Score 95.00/Indonesia Corporate
Secretary and Corporate Communication Award III 2018.
䊏 Gold Winner Category: SOE’s Subsidiary Score 84.65/Indonesia Information and
Technology Award I 2018.
䊏 Platinum Winner SOE’s Subsidiary Company Score 86,60/Indonesia CSR Award II 2018.

Financial performance
During 2017, GMF recorded revenue of US$439m. This figure increased by 13 per cent
from the 2016 ledger (US$388m). The increase experienced by GMF in 2017 was followed
with a net profit increase of 15 per cent from the previous year from US$44.2m to US$50m in
2017 (GMF Aero Asia, 2017). Iwan declared that this achievement was proof of GMF’s
commitment to the public and its stakeholders. He added that the message conveyed by
this achievement was that GMF had successfully answered all challenges given it each year
(see Exhibit 10 for GMF Financial Report).
Iwan stated that all business lines operated by GMF supported this achieved success.
Proportionally, the most significant revenue was derived from aircraft component
maintenance (31 per cent), followed by base maintenance (22 per cent), line maintenance
(21 per cent) and engine maintenance (19 per cent). He also added that the company’s
financial achievement was supported by an operational efficiency program implemented by
the company each year (GMF, 2018). GMF also experienced a significant increase in
assets in 2017. Compared to 2016, GMF’s assets rapidly increased by 22 per cent,
reaching US$539m from US$442m. This increase was due to the sale of the company’s
stock to the public in October of 2017 (Kumparan Bisnis, 2018).

Middle East market

GMF aggressively tried to form a joint-venture company with a local non-airline partner in
the United Arab Emirates. Iwan explained that this partnership was expected to be signed
shortly so that the operation could start around 2020. He also added that although the

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 7

 Middle East was an important center for air transit and home to “super connectors,” such as
Emirates, this region lacked the facilities for aircraft maintenance and full and partial repairs
due to the high cost of labor. Demand for aircraft maintenance for various types of aircraft
was also predicted to increase in the next few years (Exhibit 3) (Statista, 2018).
The future looked promising for the MRO industry in the Middle East in 2018 (Exhibit 4).
However, there would still be challenges ahead. The global MRO market was expected to
grow 4.1 per cent annually to more than US$100bn by 2026. The MRO market in the Middle
East was also expected to double to around US$11bn in 2026. GMF would continue to grow
in the Middle East focusing on OEM (Cooper et al., 2018).
Oliver Wyman conveyed that in 2015-2035, the CAGR of the Middle East would reach 4.8
per cent (Exhibit 6). Based on the information obtained for the next five years after 2018, the
demand for MRO in the Middle East would grow around 9.1 per cent CAGR (MRO Network,
2018). This growth would be boosted by engine maintenance, which would reach US$13bn.
Engine maintenance alone is expected to increase in CAGR by 11.8 per cent in total until
2022 (MRO Network, 2018).
Such an optimistic view of the global aviation industry also helped to create a healthy
performance in the regional MRO industry. The International Air Transportation Association
(IATA) predicted that the industry’s global net profit would increase to US$38.4bn in 2018 –
an increase from US$34.5bn in 2017 (IATA, 2017). The industry would expect an increase of
9.4 per cent in total revenue to US$824bn in 2018 from US$754bn in 2017. Middle East
operators were expected to see an increase in net profit to US$600m in 2018 from US
$300m in 2017 (IATA, 2017). The demand in 2018 is also expected to increase by 7 per
cent, thereby exceeding the capacity expansion that was announced as 4.9 per cent (see
Exhibit 5 for MRO Spending Growth) (IATA, 2017).
Iwan further explained that the UAE’s hangar belonging to GMF would provide light and
heavy maintenance for wide and narrow body aircraft, but with a stronger focus on narrow-
body aircraft. He went on to say that LCCs – which generally narrow bodied – benefited
more from the local maintenance center than from full-service operators’ flying to Asia or
Europe. Engineers and technicians would be hired from countries like Indonesia, Pakistan,
Bangladesh and Filipina to keep the labor costs low (Silviana and Setboonsarng, 2017).
Oliver Wyman also revealed that passenger traffic would rapidly grow in the Middle East to
reach 11.1 per cent in 2015 (Oliver Wyman, 2016). Aircraft deliveries would also reach more
than 2,100 by 2025, and during the same period, around 800 aircraft units would be
grounded (Oliver Wyman, 2016). This study further revealed that in Africa and the Middle
East, the latest aircraft technology would emerge in 2025 and need newer and more
advanced expertise and capabilities from MRO services (Exhibit 7).
However, by penetrating the Middle East region, GMF should acknowledge the fact that
there are also several main direct competitors in that region. Expansion into the Middle East
with several megahubs and key MRO players, thus, remains quite challenging. Many of the
major actors have had bases there including Etihad Engineering, Emirates Engineering,
and Qatar Airways’ Aircraft Maintenance Facility. All three are major and key players in the
commercial airline industry and located in some of the most strategic megahubs in that
region.
Further, MRO providers needed to pay special attention to the new technology needed in
2020. Among these technologies are aircraft health monitoring systems, predictive
maintenance, “live” maintenance through wearable and mobile technology, composite
repair capabilities, new repair technology, additive manufacturing, artificial intelligence, and
drone-supported maintenance (Cooper et al., 2018; Oliver Wyman, 2016). GMF had to face
the challenges in meeting the demands of these technologies. These include available
capital, innovative capabilities, minimal labor competency, and the company’s reluctance to
change.

PAGE 8 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019

MRO market forecast
Before making any move, Iwan needed to analyze the MRO future trend (Exhibit 8). There
were five issues Iwan needed to analyze regarding the future development trend of MRO
Global, namely, Outsourcing, Merger, MRO IT and OEM company dynamics as follows:
䊏 Outsourcing: In the years to come, outsourcing would be an ideal option for MRO. It
was supported by the fact that 65 per cent of aviation activities were supported by
outsourced parties and was labor-intensive. Studies revealed that line maintenance
would be the fastest sector to use to implement the outsourcing approach in its
operations.
䊏 Merger: The merger option would directly influence market coverage, which in turn
would affect profit. For GMF, this was perhaps an attractive option. However,
considering its identity as a subsidiary of Garuda Group, the role of the government
was still vital for determining the company’s future.
䊏 MRO IT: The development of IT in the MRO industry was also something that Iwan
needed to consider. This aspect is in line with the message that he conveyed that GMF
was trying to materialize its vision to become the Top 10 MRO in the world in 2020 by
applying various strategies through its three main pillars of business – human-centric,
business expansion and technology-driven (Exhibit 9).
䊏 Dynamics of the OEM company: Of the revenue gained by an OEM, 90 per cent was
derived from the manufacturing activities. Iwan also needed to understand that the
OEM companies have started to shift from goods producers to service providers. This
shift means that MRO companies would not only compete with their direct competitors
but also with its suppliers, thereby creating tougher competition (Brown, 2017).

Prepare for taking off?

GMF’s long history had started in 1949 and has continued until the present time. It had
grown from being a small division to a business unit, until becoming a separate business
entity. Iwan understood that he needed to utilize GMF’s strong potential to compete in the
local and foreign market.
Realizing the extensive development of the MRO industry, Iwan’s plan to expand
internationally was not without sound bases. Iwan realized that the potential was huge.
Given all the opportunities and challenges, he needed to consider whether expansion into
the Middle East was a sustainable alternative or whether focusing on the regional market
was better. Also, if international expansion was indeed an attractive option, what specific Keywords:
strategy should Iwan use? Strategy,
International business
Iwan was aware that GMF was one the best MRO service provider in Indonesia and
strategy,
Southeast Asia, but there were still risks he had to consider and bear when expanding GMF International marketing,
globally. Answering these questions would help Iwan determine the fate of GMF and help International market entry,
GMF become one of the ten biggest MRO companies in the world. Transport operations

Note
1. The International Air Transport Association’s (IATA) Location Identifier, a unique 3-letter code, is
used in aviation to identify mainly locations of airports throughout the world. www.nationsonline.org/
oneworld/IATA_Codes/IATA_Code_A.htm

References
Amin, I. (2018), “GMF perluas kerja sama perawatan pesawat”, available at: https://ekbis.sindonews.
com/read/1323941/34/gmf-perluas-kerja-sama-perawatan-pesawat-1532219470

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 9

 BandaraSoekarnoHatta.com (2015), “Sejarah berdirinya bandara soekarno hatta”, available at: http://
bandarasoekarnohatta.com/sejarah-berdirinya-bandara-soekarno-hatta.info
Brown, R. (2017), “The MRO market and key trends”, available at: http://mromarketing.aviationweek.com/
downloads/mas2017/presentations/Oct_31_200p_MRO_Forecast_Brown.pdf
Cooper, T., Smiley, J., Porter, C. and Precourt, C. (2018), “Global fleet & MRO market forecast
commentary: 2018-2028”, available at: www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/
2018/January/2018-2028_Global_Fleet_MRO_Market_Forecast_Commentary_Public_Final_web.pdf
Desfika, T.S. (2018), “GMF segera buka cabang di Australia”, available at: www.beritasatu.com/ekonomi/
477543-gmf-segera-buka-cabang-di-australia.html
Dwijayanto, A. “GMF aeroasia resmi garap proyek di Australia” (2018), available at: https://industri.
kontan.co.id/news/gmf-aeroasia-resmi-garap-proyek-di-australia
GMF (2018), “Aero asia”, Annual Report 2018.
GMF Aero Asia (2017), “GMF recorded revenue increase 11.5%. 2018”, available at: www.gmf-aeroasia.
co.id/2018/03/03/2017-gmf-recorded-revenue-increase-11-5/
GMF Aero Asia (2018), “Raup pendapatan US$115,9 juta di kuartal I, GMFI fokus perbesar revenue Non-
Afiliasi”, available at: www.gmf-aeroasia.co.id/2018/06/01/raup-pendapatan-us-1159-juta-di-kuartal-i-
gmfi-fokus-perbesar-revenue-non-afiliasi/
GMF Aero Asia (2019), “GMF journey: over decades of experience”, available at: www.gmf-aeroasia.co.
id/about-gmf/
Harckham, J. and Toler, E. (2017), “Aviation industry overview”, available at: https://dyconsultants.com/
wp-content/uploads/2017/06/Aviation-Industry-1.pdf
Himawan, A. (2016), “GMF joint operation dengan MMF”, available at: www.suara.com/bisnis/2016/11/
12/135117/gmf-joint-operation-dengan-mmf
Himawan, A. (2017), “GMF teken kerjasama dengan avia technics dirgantara”, available at: www.suara.
com/bisnis/2017/01/20/182314/gmf-teken-kerjasama-dengan-avia-technics-dirgantara

IATA (2017), “Strong airline profitability continues in 2018”, available at: www.iata.org/pressroom/pr/
Pages/2017-12-05-01.aspx

Kumparan Bisnis (2018), “Kalah bersaing di luar negeri, GMF AeroAsia fokus garap pasar lokal”,
available at: https://kumparan.com/@kumparanbisnis/kalah-bersaing-di-luar-negeri-gmf-aeroasia-fokus-
garap-pasar-lokal
Macrae, D. (2018), “GMF seals MRO partnership with AFI KLM E&M”, available at: www.
aircosmosinternational.com/gmf-seals-mro-partnership-with-afi-klm-e-m-115913

Merdeka (2018), “GMF AeroAsia optimistis capai laba double digit tahun ini”, available at: www.merdeka.
com/uang/gmf-aeroasia-optimistis-capai-laba-double-digit-tahun-ini.html

MRO Network (2018), “Total MRO demand share Middle east: 2018-2022”, available at: www.mro-
network.com/maintenance-repair-overhaul/total-mro-demand-share-middle-east-2018-22

Oliver Wyman (2016), “Turbulence ahead: disengage the autopilot: 2015-2025 global fleet & MRO market
forecast”.
Ono, Y. (2018), “Aircraft maintenance market takes wing in southeast asia”, available at: https://asia.
nikkei.com/Business/Business-Trends/Aircraft-maintenance-market-takes-wing-in-Southeast-Asia
Pratomo, M.N. (2018), “Garuda maintenance (GMFI) ekspansi ke timur tengah”, available at: http://
market.bisnis.com/read/20180114/192/726299/2018-garuda-maintenance-gmfi-ekspansi-ke-timur-tengah
Reuters (2018a), “UPDATE 1-Indonesia’s GMF AeroAsia eyes deals with 5 new airlines by end-2018 –
CEO”, available at: www.reuters.com/article/indonesia-gmf-aero-asia/update-1-indonesias-gmf-
aeroasia-eyes-deals-with-5-new-airlines-by-end-2018-ceo-idUSL4N1TZ2XY
Reuters (2018b), “Indonesia’s GMF AeroAsia agrees to $900 million deals with air France KLM, C.C.C”,
available at: https://uk.reuters.com/article/us-garuda-airfranceklm-deals/indonesias-gmf-aeroasia-
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Setiawan, S.R.D. (2017), “GMF AeroAsia resmi melantai di bursa efek Indonesia”, available at: https://
ekonomi.kompas.com/read/2017/10/10/110705226/gmf-aeroasia-resmi-melantai-di-bursa-efek-
indonesia

PAGE 10 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019

Shay, L.A. (2018), “Fast 5: gMF AeroAsia’s progress to become one of the biggest MROs”, available at:
www.mro-network.com/maintenance-repair-overhaul/fast-5-gmf-aeroasia-s-progress-become-one-
biggest-mros
Silviana, C. (2018), “Indonesia’s GMF AeroAsia eyes deals with 5 new airlines by end-2018: cEO”,
available at: https://jakartaglobe.id/news/indonesias-gmf-aeroasia-eyes-deals-5-new-airlines-end-2018-
ceo/
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sector”, available at: www.reuters.com/article/us-asia-aviation-mro/cheaper-rivals-target-singapores-
aviation-maintenance-sector-idUSKBN1CL0QC
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available at: www.statista.com/statistics/679658/mro-market-share-by-segment-in-the-middle-east/

Further reading
Nugroho, E. (2018), “GMF catatkan lonjakan pendapatan operasional 13% serta laba bersih 15%
di 2017”, available at: http://indocargotimes.com/2018/tahun-buku-2017-gmf-catatkan-lonjakan-
pendapatan-operasional-13-serta-laba-bersih-15
Harrison, M. (2016), “MRO forecast and market trends”, available at: www.iata.org/whatwedo/
workgroups/Documents/MCC-2016-BKK/D1-1000-1030-mro-forecast-icf.pdf

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 11

 Exhibit 1. Several GMF clients by service

Table EI
Line maintenance Base maintenance Component services Engine maintenance

New customer per segment business

Xiamen Air Jeju Air Trans Nusa AerSale
K-Mile IndiGo Eastar Jet
Sky Angkor Airlines Biman
Cebu Pacific
Fly Baghdad
Biman Bangladesh Airlines

Customer with new contract in 2017

Garuda Eastar Jet Citilink Sriwijaya Air
Indonesia Virgin Australia Lion Air Lion air
Air Asia Xiamen Air Vietjet Air Aero Turbine
Air Asia X Qantas Vietnam Airlines Batam Aero
Nam Air Fly mid Africa CFM Technic
Source: GMF (2018)

Exhibit 2. GMF Strategy and Business Roadmap, 2017-2021

Figure E1

2017
•Strengthen Core Business

2018
•Domestic Market Domination Through Business Network
Enhancement

2019
•Emerging MRO Provider in Asia Pacific and Middle East

2020
•Growth Through Group Synergy

2021
•Strengthen Value Added Services

Source: GMF (2018)

PAGE 12 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019

Exhibit 3. Distribution of Aircraft MRO Demand in Middle East from 2017 to 2021

Figure E2

MRO Market Share by Segment

Engine maintenance 33%

Line maintenance 22%

Components 21%

Modifications 17%

Airframe heavy 7%

Source: Statista (2018)

Exhibit 4. 20-Year GDP and RPK (Revenue Kilometer per Passengers) Projected
Annual Growth Rates

Figure E3

Africa 3.5%
5.9%
Latin America 3.0%
6.1%
Asia 3.9%
5.7%
Middle East 3.5%
5.6%
CIS 2.0%
4.3%
Europe 1.7%
3.7%
North America 2.1%
3.0%

GDP RPK

Source:Cooper et al. (2018)

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 13

 Exhibit 5. Difference in MRO spending, 2025 vs 2015 by global region

Table EII
Region Changes (in billion USD) % change

Asia Pacific (Excl. China) 7.9 71

China 6.4 93
Middle East 5.2 103
North America 3.2 17
Latin America 2.6 73
Eastern Europe (Inl. CIS) 2.2 72
Africa 2.0 85
Western Europe 1.2 10
Source: IATA (2017)

Exhibit 6. 2015-2035 Traffic CAGR and increase in annual passenger counts by

region

Table EIII
Region Increase in annual passenger (in million) Traffic CAGR (%)

North America 535 2.8

Latin America 192 3.6
Europe 566 2.5
Africa 189 5.1
Asia Pacific 1.831 4.7
Middle East 245 4.8
Source: Harckham and Toler (2017)

Exhibit 7. New technology of aircraft to 2025

Table EIV
Top 10 Middle East and Africa aircraft families Top 10 Middle East and Africa aircraft families 2025

777 777
A320C/NEO A320C/NEO
A330 A380
A340 737NG/MAX
747 A350
737NG/MAX 787
A380 A330
767 A340
737CL A747
A300 ATR
Source: IATA (2017)

PAGE 14 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019

Exhibit 8. The Primary inhibitors of innovation at MRO firms

Table EV
Key challenges (%)

Budget/capital availability 50
Inability to prove innovative process/product/service will offer margin benefits over current
techniques 44
Total cost/lack of clear payback 44
Organization resistance 35
Review and approval process 32
Lack of personal capability 21
Implementation difficulties 21
Lack of need for change 6
Source: IATA (2017)

Exhibit 9. GMF 2017 Strategic Initiative

Figure E4

Transformational
Leadership

Human Centric Service Transformation

GMF Academy
Strategic Initiative

In-organic Growth

Business Expansion

Organic Growth

Technology Driven MRO Based IT

Source: GMF (2018)

VOL. 9 NO. 1 2019 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 15

 Exhibit 10. GMF Annual report

Table EVI
Items 2015 2016 2017

Financial Position (in thousands USD)

Total ASSETS 312.995 442.589 539.151
Current Assets 210.749 328.214 402.682
Non-Current Assets 102.246 114.375 136.469
Total Liabilities and Equity 312.995 442.589 539.151
Liabilities 190.203 270.034 233.362
Short-Term Liabilities 91.707 146.780 135.366
Long-Term Liabilities 98.495 123.254 97.996
Equity 122.792 172.555 305.789

Profit Loss (in thousands USD)

Operating Revenues 305.590 388.663 439.281
Operating Expenses 260.789 301.294 373.055
Other Revenues (Expenses) 5.789 4.281 529
Operating Profit 50.590 83.088 65.697
Interest Income 2.540 6.089 2.052
Income Before Tax 48.050 76.999 67.749
Tax Expenses 11.865 19.527 16.803
Profit for the Year 36.185 57.742 50.946
Other Comprehensive Incomes 2.727 7.979 219
Income Current Year 33.458 49.763 50.727
Profit per share 0.00142 0.00227 0.00195
Net Working Capital 119.042 181.434 267.316
Source: GMF Aero Asia (2017)

About the authors

Harriman Saragih serves as Faculty Member in Prasetiya Mulya Business School. He is a
PhD candidate in the School of Business and Management, Bandung Institute of
Technology. His articles have been published in the Journal of Asia Business Studies, Asia
Pacific Journal of Marketing and Logistics, International Journal of Innovation Science and
International Journal of Business Innovation and Research. His research focuses on
collaborative value creation and innovation in the creative industries. He is a recipient of the
BPPDN Scholarship from the Indonesian Ministry of Research and Higher Education.
Harriman Saragih is the corresponding author and can be contacted at: harriman.saragih@
pmbs.ac.id

Fransisca Sinaga serves as Development Engineer in GMF Aero Asia. She holds MSc in
Aviation Safety from Cranfield University, UK, and BSc in Aerospace, Aeronautical and
Astronautical Engineering from Bandung Institute of Technology. Prior to joining GMF, she
has worked with Boston Consulting Group as Project Specialist Intern. She also has
volunteered as ITB Delegate for Harvard Project for Asian and International Relations in
Tokyo and voluntary staffs in Royal Aeronautical Society conference with a topic in
Managing Fatigue in Maintenance.

PAGE 16 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 9 NO. 1 2019