EFFECT OF COVID-19 TO

PROCUREMENT MANAGEMENT :

AVIATION
INDUSTRY
PROCUREMENT MANAGEMENT (OPM554)
 NBO4B
AFIQ NAJMI BIN ROSMAN 2020878338
NURUL NABILAH BINTI AYOB 2021839444
NUR ADRYANA RATNA 2020270958
ARTICLE 1: Cover Story: AirAsia one year into the pandemic — clear skies
ahead?
WRITER: Adam Aziz
LINK : https://www.theedgemarkets.com/article/cover-story-airasia-one-year-pandemic-%E2%80%94-clear-skies-ahead
Unlike Malaysia Airlines or Singapore Airline Airasia
got no fund from big money share holder

AirAsia Took Loan From 3 Banks to

increase it capital

AirAsia Looking For New

Shareholder to sustain its
operations

Fundraising means that

Airasia is diluting its equity
ARTICLE 2: AIRLINE TRAVEL GROUPS WARN OF MORE JOB CUTS AS COVID AID
TALK STALL
WRITER: DAVID SCHAPER
LINK : https://www.scribd.com/article/479294088/Airlines-Travel-Groups-Warn-Of-More-Job-Cuts-As-Covid-Aid-Talks-
Stall
 ✓ Airlines and their employee unions are appealing
with Congress and the White House to enact a bill
extending government payroll support for the
sector after nearly 40,000 workers were recently
AIRCRAFT GROUNDED = ZERO JOB furloughed.

✓ One of the sectors most severely affected by the

Covid-19 outbreak is the airline and travel-related
business sectors. Since the epidemic started, there
has been a 70% decrease in air travel, and hotel
occupancy rates have also dropped significantly.

✓ Because of the mounting uncertainty about

whether President Trump and Congress will be
able to reach an agreement on relief for the
industry, anxiety is at an all-time high among
employees in the airline, travel, and transportation
businesses.

✓ The president also urged Congress to authorize

direct payments of $1,200 to many Americans as
well as an additional $135 billion for the Paycheck
Protection Program to aid small companies.
ARTICLE 2: Emirates Skycargo: Coronavirus Outbreak The Biggest Challenge
Faced By Air Cargo
WRITER: DAMIAN BRETT
LINK : https://www.aircargonews.net/airlines/emirates-skycargo-coronavirus-outbreak-the-biggest-challenge-faced-by-
air-cargo/
Emirates SkyCargo started developing a
strategy, and by the middle of March, they
had a network of potential starting points.
Whether it be for food or medicine, the goal
was to make sure that it deploys significant
capacity in those major production areas.
It changed from its dual-hub strategy to
using solely Dubai International (DXB) in
order to achieve operational and financial
efficiency.
This action might result in
annual savings of up to AED
160 million ($43 million).
In order to ensure that supply continues to
flow throughout the world, freight will be
at the center of transportation for the next
six to twelve months while passenger
demand grows extremely slowly.
 FOCUS ON COST STRUCTURE

• Since the price-conscious leisure

traveler is crucial to the recovery,
AirAsia will need to be very disciplined
about their cost structures.

• Particularly mainline carriers will need

to control their expenses and alter
their business plans.

• Airasia must prioritize their domestic

travel first upon overseas to slowly get
back on their feet.
 USE THE ADVANTAGE OF BEING
IN A CAPITALIST BLOC

• By being in that position in the world ,there's certain

things that in inevitable for America to be able to
pull off which is monetary recovery by the aids of
their trillion dollar company.

• Giant Company like Apple, Space Tesla can start an

OEM by phase to manufacture aircraft parts that can
be deteriorate by ages after being grounded.

• All this giant company can also invest in the smaller

company as in 2020 the vaccine is created and as the
smaller line or base maintenance company can be
saved this will create a huge profit in the long haul
for all of these company
 BENCHMARKING OF THE EUROPEAN TEMPORARY COUNTERMEASURE
o The Arabic airline can use the method of benchmarking the European
control method on controlling the airlines operational cashflow as a
temporary measures like below:

o Airport parking The EU has made efforts on a number of fronts to

support the aviation sector. One of the first steps it took was to prevent
situations where airlines would operate flights with extremely low load
factors in an effort to preserve their assigned take-off and landing slots
(under EU slot rules, airlines are required to use their assigned take-off
and landing slots at least 80% of the time during the scheduling period
(summer or winter); otherwise, these slots go back into the slot pool for
allocation, with underused slats).

o Very low load factors on flights at the beginning of the pandemic cost air
carriers more money and had a harmful effect on the environment. The
"use it or lose it" rule for slot allocation was suggested to be suspended
by the Commission on March 13 in order to resolve the issue. The EU
Slot Regulation amendment was agreed by Parliament and the Council
in late March 2020, and it became effective on April 1 of that same year.
The modification waives the usage requirement from 1 March 2020
through 24 October 2020, with the possibility of an extension by the
Commission by delegated acts up to 2 April 2021.
PROBLEM:
MOVEMENT CONTROL
ORDER
The pandemic of COVID-19 is not
just a health issue. It is also an
economic crisis. Governments
throughout the world imposed
tight travel restrictions, and
issued travel advisories in an
effort to limit the spread and
safeguard people's health, which
have resulted in a historic drop in
air travel demand.
PROBLEM:
SHORT OF REVENUE

The dramatic drop in air traffic

has put the aviation sector
under tremendous liquidity
strain, endangering its financial
sustainability and threatening
millions of jobs that rely on the
industry. Therefore, it is crucial
for aviation firms to move
quickly to strengthen their
financial situation and lessen
the effects of the massive
revenue shortfall.
PROBLEM:
HIGHER OPERATION COST

COVID-19 has caused 250% increase

in worldwide freight rates. Particularly
those between Asia and Europe, are
being affected by the conflict in
Ukraine and persistent pandemic,
which putting pressure on air freight
prices. The Shanghai lockdown
resulted in flight cancellations and a
loss in capacity. It was a sharp decline
in demand for air cargo, which offset
the increase in air freight prices.
CHALLENGE:
DIFFICULT TO GET
FUNDING
Each and every aviation
stakeholder, including but not
limited to airlines, airports, air
navigation service providers,
aerospace manufacturers, and
everyone else along the value
chain, has been dealing with
issues that might threaten their
survival. Therefore, it’s quite hard
to convince investor for funding
the business due to the higher
risk during COVID-19.
CHALLENGE:
LABOUR SHORTAGE

The aviation and travel-related

business sectors have been one
of the COVID-19 outbreak's most
seriously impacted industries. Air
travel has decreased by 70%
since the outbreak began, and
hotel occupancy rates have also
considerably decreased. Due the
tight budget, many company
decided to do massive layoff and
restructuring of the organization.
CHALLENGE:
LOWER PURCHASING
POWER
In comparison to 2019, worldwide
passenger traffic has dropped by nearly
60% for the year 2020, an equivalent of
around 2.7 billion fewer passengers.
People are unable to travel as a result of
the COVID -19, which limits their capacity
to spend money on holidays and other
forms of amusement. This lower customer
confidence and lower their purchasing
power. In the long run, this will
undoubtedly have a considerably greater
effect.
 Throughout the aviation value chain, the pandemic
caused financial ruin, particularly for airlines. In contrast

WE AGREE..
to freight forwarders and cargo carriers, every subsector
experienced enormous losses in 2020.

Additionally, because of their large fixed expenses and

mostly variable income streams, airlines are particularly
susceptible to outside shocks beyond their control. The
aviation industry was significantly impacted by the Gulf
War, 9/11, the Icelandic volcano explosion in 2010, and
the global financial crisis of 2008, albeit not to the same
extent as the COVID-19.

Companies that rely more on air travel for their income

nevertheless generated money from cargo flights and
flights with just half of the scheduled passengers on
board, and as a result, they were less negatively
impacted than businesses that relied more on passenger
flows. Similar to this, businesses with large fixed
expenses struggled more since it was harder for them to
shoulder the cost of maintaining efficient operations.
Revisit flight economics
✓ First, decreased commercial traffic may need network modifications.
Using small-size widebodies like the Boeing 787, airlines have
increased the number of flights between hubs and smaller locations
during the past few years. These flights are successful because of the
profitable business demand. Economic theory favours bigger planes
flying less frequently since business demand is weak. Larger aircraft
with lower unit costs, like the Airbus A350 or Boeing 777, may end
up becoming the foundation of an airline's long-haul network.

✓ Second, to meet the growing portion of leisure traffic, airlines may

also consider rearranging the layout of their cabins. Simply put,
decreasing demand for business class may call for smaller business
class cabins. Taking this a step further, goods may change to better
serve premium-leisure travellers, such as the development of
business-class seats more suited for flying in groups or as couples.
Be a constructive collaborator

❑ Airlines will have to work more closely with the authorities

as the state takes a more active role, whether as a creditor,
a direct shareholder, or a member of the board. Airlines may
approach this as a chance to work with a significant
stakeholder to influence how the industry develops rather
than seeing it as a need to access desperately needed
funding.

❑ Airlines and regulators can collaborate to establish

standards for a variety of problems. To make airlines more
resilient to future shocks, these could include increasing the
cash-on-hand requirements; more equitable value sharing
between airlines and other sectors, such as airports; or
adjustments to ownership caps that would allow greater
inflows of foreign capital and lessen the future reliance on
state capital.
Aim higher when it comes to IT and digital investment

o Regulators and airlines can work together to create standards for a range of issues.
Increased cash-on-hand requirements, more equitable value sharing between
airlines and other sectors, such as airports, or changes to ownership caps that would
allow greater inflows of foreign capital and reduce future reliance on state capital
are some ways to make airlines more resilient to shocks.

o Airlines could seek to expand their present IT and automation spending. In response
to the domestic and short-haul flying markets rebounding more swiftly, airlines
should, for example, engage in direct sales and seize control of the customer
relationship. It may be necessary to reevaluate relationships with IT and distribution
service providers.

o To reach the next level of efficiency, carriers can also make investments in support
services like revenue accounting and invoicing as well as the customer experience,
such as streamlining the check-in and boarding procedures. Beyond this, analytics
will be the next frontier. Analytics entails, among other things, leveraging data in
better ways to improve decision making, which will require some investment but
have a big payback.