UNIVERSITY OF ZIMBABWE

FACULTY OF COMMERCE

BUSINESS MANAGEMENT SCIENCES AND ECONOMICS

CASHFLOW OPTIMIZATION STRATEGIES FOR AIRLINES AS THEY PLAN TO

EMERGE FROM THE COVID-19 CRISIS.

BY

DANIEL R211630X

SUPERVISOR: Dr KASEKE

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE

MASTER OF SCIENCE DEGREE IN CORPORATE FINANCE AND INVESTMENT
MANAGEMENT

HARARE, ZIMBABWE

©OCTOBER, 2022
DECLARATION

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ACKNOWLEDGEMENT

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ABSTRACT

This study discussed the cashflow optimization strategies for airlines as they plan to emerge
from the covid-19 crisis. The dissertation examined the current pricing strategies, the extent
airlines current strategies yielding network restructuring and optimization of operating
resources, the extent current airlines are managing contractual obligations, the state of fleet
planning and the manner of which airlines are resolving the issue of ecommerce
optimisation. To determine the overall sample size, the researcher used a sample calculation
formula known as the Andrew Fisher’s Formula. Thus, a total sample size of two hundred
and eighty-five (285) respondents. The study used non-probability sampling methodology
for the sake of this particular research topic. The study used a purposive sampling method in
which the sample size was chosen on the fly, i.e. based on a judgement basis. The researcher
employed E-views, Matlab and Excel to portray the information that has been gathered. The
results of the study were presented on 3D graphical illustrations and tables to enhance
thorough investigation and consistent comparison. The researcher further utilised multiple
regression analysis and hypothetical models to examine the relationship between cash flow
optimisation strategies and profitability in airline businesses. Correlation Analysis was also
employed to ascertain the degree of connection between central bank intervention and
exchange rate allocation mechanisms. The researcher used published financial statements of
the target population of Air Zimbabwe, RBZ auction reports, and Civil Aviation Authority of
Zimbabwe published results in order to be valid. The assessment found that the Zimbabwean
airline companies are facing cashflow issues since Zimbabwean Airline Companies does not
have sufficient liquid cash to meet its liabilities, cash flow issues arise. The study discovered
that the foreign exchange auction system, which airline firms can employ to maintain their
financial liquidity, was beneficial to them. The duration of the foreign exchange auction
system is uncertain, as is the system's long-term viability. Therefore, airline firms should try
to make the most of it and ensure they gain from it over the long term in order to have strong
cash liquidity in the near future and to be able to use it effectively even after the foreign
exchange auction has ended. The study evaluated airlines' plans for cash flow optimization as
they prepare to recover from the COVID-19 issue. This study serves as a foundation on
which subsequent studies can build to further their own investigations. Since there have been
few researches on this developing topic, this study can be regarded as a pioneer in the area
under consideration. Future research can evaluate the efficacy of the suggested cashflow

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optimization strategies and be based on a thorough analysis of the arguments for and against
the strategies' efficacy.

LIST OF TABLES

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LIST OF FIGURES

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LIST OF ABBREVIATIONS AND ACRONYMS

COSO - Control activities, Information and communication, and monitoring

EVA - Economic value added

GDP- Gross Domestic Product

NGO – Nongovernmental organization

ROA – Return on Assets

ROI- Return on Investment

RTGS- Real Time Gross Statement

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Table of Contents
DECLARATION..................................................................................................................................i
ACKNOWLEDGEMENT..................................................................................................................ii
ABSTRACT........................................................................................................................................iii
LIST OF TABLES..............................................................................................................................iv
LIST OF FIGURES.............................................................................................................................v
LIST OF ABBREVIATIONS AND ACRONYMS...........................................................................vi
CHAPTER 1........................................................................................................................................1
INTRODUCTION OF THE SUDY....................................................................................................1
1.0 Introduction...................................................................................................................................1
1.1 Background to the study...............................................................................................................1
1.1.1 Nature of airline business in Zimbabwe................................................................................1
1.1.2 Aircraft movement..................................................................................................................1
1.1.3 Extent to which it requires cash.............................................................................................2
1.1.4 Cost structure..........................................................................................................................3
1.1.5 Categories of expenses............................................................................................................4
1.1.5.1 Flight/cabin crew expenses..............................................................................................5
1.1.5.2 Maintenance costs............................................................................................................6
1.1.5.3 Other operating costs.......................................................................................................6
1.1.5.4 Indirect operating costs (IOC)........................................................................................7
1.2 Impact of COVID-19 on Zimbabwe’s aviation industry.............................................................8
1.3 Statement of the Problem............................................................................................................12
1.4 Research Objectives.....................................................................................................................12
1.5 Research questions......................................................................................................................13
1.6 Rationale for the study................................................................................................................13

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1.7 Assumptions.................................................................................................................................13
1.8 Delimitations of the study............................................................................................................13
1.9 Limitations...................................................................................................................................14
1.10 Definition of key terms..............................................................................................................14
1.11 Organisational structure...........................................................................................................14
1.12 Chapter summary......................................................................................................................14
CHAPTER 2......................................................................................................................................15
LITERATURE REVIEW.................................................................................................................15
2.0 Introduction.................................................................................................................................15
2.1 The Airline Industry in Perspective...........................................................................................15
2.2 The concept of cash......................................................................................................................15
2.3 The concept of Cash flow............................................................................................................16
2.4 Fundamentals of optimization....................................................................................................16
2.5 Cash flow optimization................................................................................................................17
2.6 Cash flow optimization strategies...............................................................................................17
2.6.1 Revenue optimization...........................................................................................................17
2.6.2 Pricing and seat inventory....................................................................................................18
2.6.3 Price discrimination..............................................................................................................18
2.6.4 Revenue optimization fences................................................................................................20
2.6.4.1 Advance purchase requirements (restrictions)............................................................20
2.6.4.2 Frequent flier mileage....................................................................................................20
2.6.4.3 Refundability..................................................................................................................20
2.6.4.4 Change fees.....................................................................................................................21
2.6.4.5 Airline schedule..............................................................................................................21
2.6.4.6 Revenue optimization Control Types...........................................................................21
2.6.4.7 Management of spoilage and spillage...........................................................................22
2.6.4.8 Overbooking...................................................................................................................22
2.6.4.9 Fare Pricing Optimization.............................................................................................22
2.6.4.10 Cost-based pricing.......................................................................................................23
2.6.4.11 Bundling.......................................................................................................................23
2.6.4.12 Unbundling and airline ancillary revenue..................................................................23
2.7 Management of contractual obligations.....................................................................................23
2.7.1 Obligations under financing contracts................................................................................24
2.7.2 Invoking force majeure in obligations under financing contracts.....................................25
2.7.3 Legally Invoking Hardship in financing service agreements.............................................25
2.7.4 Continuing airworthiness of the aircraft.............................................................................26
2.8 Fleet planning optimization........................................................................................................27
2.8.1 Fleet standardization............................................................................................................28
2.8.2 Fleet size................................................................................................................................28

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 2.8.3 Pooling the aircraft components..........................................................................................29
2.9 Relationship between Ecommerce and Cash flow in the airline industry...............................29
2.9.1 Electronic ticketing...............................................................................................................30
2.9.2 Internet based payment (Wire transfers)............................................................................31
2.10 Network Management (relationship between network management and Liquidity)...........32
2.10.1 Hub and spoke.....................................................................................................................33
2.10.2 Point to Point.......................................................................................................................34
2.10.3 Frequent-Flyer Program....................................................................................................35
2.10.4 Open Skies and Global Alliances.......................................................................................36
2.11 Conceptual framework..............................................................................................................36
2.12 Theoretical framework..............................................................................................................37
2.13 Empirical evidence.....................................................................................................................37
2.13.1 Cost containment measures................................................................................................37
2.14 Chapter summary......................................................................................................................38
CHAPTER 3......................................................................................................................................39
RESEARCH METHODOLOGY.....................................................................................................39
3.0 Introduction.................................................................................................................................39
3.1 Research Philosophy....................................................................................................................39
3.1.1 Positivism Research Philosophy...........................................................................................39
3.2 Research Paradigms....................................................................................................................40
3.2.1 Ontological Assumption.......................................................................................................40
3.2.2 Epistemological Assumption................................................................................................40
3.2.3 Methodological Assumption.................................................................................................40
3.2.3.1 Research Approach........................................................................................................40
3.2.3.2 Research Strategy..........................................................................................................41
3.2.3.3 Research Design.............................................................................................................41
3.2.3.4 Exploratory research.....................................................................................................42
3.3 Model Specification.....................................................................................................................42
3.3.1 The Cash Flow Optimisation Strategies Equation.............................................................43
3.3.2 The Pearson product-moment correlation coefficient (PPMCC) (r) Model.................44
3.3.3 Model Diagnostic Tests.........................................................................................................44
3.3.3.1 Normality Test................................................................................................................44
3.3.3.2 Correlation Test.............................................................................................................44
3.3.3.3 Unit Root Test................................................................................................................45
3.3.3.4 Cointegration Test.........................................................................................................45
3.3.4 Stability Test.........................................................................................................................45
3.3.4.1 Normality Test................................................................................................................45
3.3.4.2 Multicollinearity Test....................................................................................................45
3.3.4.3 Heteroscedasticity Test..................................................................................................46

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3.4 Time Horizon...............................................................................................................................46
3.5 Data Sources.................................................................................................................................46
3.5.1 Primary Data.........................................................................................................................46
3.5.2 Secondary Data.....................................................................................................................46
3.6 Population, Sample Size and Sampling......................................................................................46
3.6.1 Target Population.................................................................................................................47
3.6.2 Sample Size............................................................................................................................47
3.6.3 Sampling................................................................................................................................48
3.6.3.1 Purposive sampling........................................................................................................48
3.7 Data Analysis...............................................................................................................................49
3.8 Validity and Reliability of results...............................................................................................49
3.9 Chapter summary........................................................................................................................49
CHAPTER 4......................................................................................................................................50
DATA ANALYSIS, PRESENTATION AND DISCUSSION.........................................................50
4.0 Introduction.................................................................................................................................50
4.1 Demographic information...........................................................................................................50
4.1.1 Position..................................................................................................................................50
4.1.2 Gender distribution..............................................................................................................51
4.1.3 Age distribution....................................................................................................................52
4.2 Cash flow issues facing Zimbabwean airline companies...........................................................52
4.3 The present liquidity situation impact on business performance.............................................53
4.4 Benefits of foreign exchange auction trading system during the covid 19 epidemic...............54
4.5 Inferential statistics.....................................................................................................................55
4.5.1 Regression Analysis..............................................................................................................55
4.5.2 Correlations...........................................................................................................................57
4.5.3 Collinearity Statistics............................................................................................................59
4.5.4 Reliability statistics...............................................................................................................68
4.6 Chapter Summary.......................................................................................................................68
CHAPTER 5......................................................................................................................................69
SUMMARY CONCLUSION AND RECOMMENDATIONS.......................................................69
5.0 Introduction.................................................................................................................................69
5.1 Summary of the study.................................................................................................................69
5.2 Conclusions..................................................................................................................................73
5.3 Recommendations........................................................................................................................75
5.3.1 Maximises on the Foreign Exchange Auction.....................................................................75
5.3.2 Give customers incentives and penalties.............................................................................75
5.3.3 Cut unnecessary spending....................................................................................................75
5.3.4 Study cash flow patterns......................................................................................................75
5.3.5 Robust Internal Controls.....................................................................................................76

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 5.3.6 Revenue Optimisation..........................................................................................................76
5.3.7 Compassionate transformative airline Leadership............................................................77
5.3.8 Balance to be found between total centralisation and unconstrained decentralisation...77
5.3.9 Due Diligence.........................................................................................................................77
5.3.10 Optimise Supplier Relationship Management..................................................................78
5.3.11 Implement Internet of Things Devices..............................................................................78
5.4 Areas of further research............................................................................................................78
References..........................................................................................................................................80
List of appendices..............................................................................................................................80
Appendix 1 Questionnaire.........................................................................................................80

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 CHAPTER 1

INTRODUCTION OF THE SUDY

1.0 Introduction

This specific Chapter set the scene for the project will assess the cashflow optimization
strategies for airlines as they plan to emerge from the covid-19 crisis. The Chapter contains
introductory aspects such as the background of the study, research problem, justification of
the study, structure of dissertation as well as research problems.

1.1 Background to the study

The existing literature has analyzed the economic impact of the pandemic on the airline
industry from different perspectives, it remains to be further studied on the cash flow
optimisation strategies that should be adopted airlines in Zimbabwe.

1.1.1 Nature of airline business in Zimbabwe

The airline in Zimbabwe is composed of the scheduled and non-scheduled airline. Scheduled
Airline refers to any civilian aircraft operated by a civilian scheduled air carrier that flies,
maintains, and publishes tariffs for regular passenger service between named cities at regular
and specified times, on regular or chartered flights operated by such carrier, and that holds a
certificate, license, or similar authorization for civilian scheduled air carrier transport issued
by the country of the aircraft's registry. Scheduled airline in Zimbabwe are Air Zimbabwe,
Fastjet Zimbabwe Limited and Kuva Air. Some of the Scheduled airlines that fly into
Zimbabwe are Airlink, South African Aways, Emirates, Ethiopian Airways, Kenya Airways
e.t.c A non-scheduled airline is a business that provides ad-hoc air transportation services for
people or cargo for an hourly or per-mile or per-kilometer fee for chartering the full aircraft
with crew. Non-scheduled airlines in Zimbabwe are Altair Charters; Executive Air (Pvt) Ltd;
Guthrie Aviation, Halsted's Aviation Corporation; Falcon Air etc

1.1.2 Aircraft movement

International and domestic aircraft movements have significantly decreased as a result of
Zimbabwe's economic issues during the previous ten years and steep reduction in tourism.
From approximately 31,000 in 1999 to 16,000 in 2009, the former decreased. Due to the
decrease in domestic travel by tourists and the negative effects of the domestic economic
challenges, the reduction in domestic movements was much more pronounced. The number

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of foreign airlines that serve the Zimbabwean market has been drastically reduced as a result
of the significant decline in demand for air services to and from Zimbabwe.

Aircraft Movements 2021

6000

5000

4000
Axis Title

3000

2000

1000

Figure 1 Aircraft movement

Passenger movement
180000
160000 1
1
140000 1 1 1
1
120000
1 1
100000
80000 1 1
60000
40000
20000
0
0 2 4 6 8 10 12

Passenger movement

Figure 2 Passenger movement

1.1.3 Extent to which it requires cash

Cash is the most important resource in running a successful business, and cash flow is critical
for sustaining business operations. Tenant (2012) defined cash flow is the ability to generate
a sufficient supply of cash so that a business is able to meet its demand for cash. It is one of
the most important aspects of a company's survival. Cash flow has become a critical element
of many firms’ operational strategies (Quinn, 2017). According to Pino (2012) many
businesses become insolvent because they do not have enough cash to meet their short-term

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obligations. There is a continuous cycle of events in a business that can increase or decrease
the cash balance. Since there is no cashflow cycle like there is in other businesses, the risk of
cash misuse is increased in the airline industry where payments are made in advance of
flights. Greedy management will make bad financial decisions, which will result in shoddy
corporate governance and dubious purchases.

1.1.4 Cost structure

In managing cashflow of an airline it is important to understand the basis for cost
classification. fuel, labor, maintenance, and aircraft ownership costs are the four largest costs
for any airline. Components of costs are as follows Total costs, fixed costs, and variable
costs. Any financial analysis of the profitability of the airline industry suggests that the
industry should probably focus on its cost structure and should strive to achieve higher levels
of productivity. The cost categories (Swan and Adler, 2006) include pilot, cabin crew, fuel,
Landing fee, airframe maintenance, engine maintenance and the ownership costs of the
aircraft. The airline industry is highly capital intensive, and consequently its profitability is
strongly affected by fuel efficiency and aircraft utilization in addition to high labor costs. The
flight crew costs include all costs (Ssamula and Mistro, 2004) associated with the flight and
cabin crew including allowances, pensions, salaries, etc. Doganis (1989) states that the
costing of an airline service is an essential input to many decisions taken by airline managers
as to whether to run a service along a given route or whether the service will be making a
profit or not.

The way the costs are broken down and categorised will depend on the purpose for which
they are being used. The operating costs of airlines are divided into operating and non-
operating items which include the costs and not directly associated with airlines’ own air
services. The operating items are then further divided into direct and indirect operating costs.
Direct operating costs include all costs that are dependent on the type of aircraft being
operated and indirect costs include all the costs that have to be incurred irrespective of the
aircraft type.

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Figure 3 Types of cost
The costs an airline incurs to produce available seat miles (ASM) rely on the kind of
modifications it is able to make in the quantities of the different resources it uses. In the short
run, it is possible to swiftly change the quantities of numerous resources consumed, including
labor, fuel, and other things. However, the quantities of other resources require a longer
period of adjustment.

1.1.5 Categories of expenses

Direct operating costs are those costs that are directly attributable to the airline’s operations
and are incurred each time when the aircraft is flying. The major categories of DOCs are
listed below, and they will be discussed in more detail in the following paragraphs. • fuel
costs; • flight deck and cabin crew expenses; • direct maintenance expenditures; • other
operating costs, including landing fees and capital equipment charges; • en route (Air Traffic
Control expenses); • aircraft rentals.

 Fuel costs
As come out of the pandemic fuel costs represent the greatest share of an airline’s DOCs.
This was due to sustained high prices of oil due to the Russia Ukraine war. The general
formula for airline fuel costs is:

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 "Fuel accounts for a significant portion of an airline's total costs, and fuel efficiency is
critical to airline profitability." When fuel prices remain high, ticket prices will rise and
profitability will fall." 2012, Airlines for America (A4A). By utilizing more recent, fuel-
efficient aircraft instead of older, less-efficient ones, airlines can reduce their fuel
expenses. Zimbabwean airlines have the highest fuel costs per ASM, partly as a result of
their fleet's older fleet.

One strategy commonly employed by airlines is to use only one engine during normal
taxiing procedures, thereby reducing the fuel costs associated with operating an engine
during taxi. The more congested the airport is, the greater the amount of taxiing, and the
greater amount of savings such a program can provide the airline. Additionally, the airline
can selectively shutdown an engine(s) during ground delays when the aircraft will be
sitting idle.

1.1.5.1 Flight/cabin crew expenses

The recent downturn in the health of the aviation industry, crew costs constituted a much
greater proportion of an airline’s DOCs; however, mainly through bankruptcies, airlines have
recently been able to dramatically reduce their labor costs. block hours are the most common
measurement metric of crew costs in the airline industry.The general formula for flight
personnel costs is:

Cost Available Seat Mile is the most common metric used to standardize airline costs. An
available seat mile (ASM) is one aircraft seat, flown one mile, regardless of whether it is
carrying a revenue passenger. Costs per ASM, or CASM, are the cost of flying one aircraft
seat for one mile. CASMs can be created for a variety of costs, such as operating costs, total
operating costs, or simply crew costs. the TC per ASM representing the direct operating costs
(DOC) of fuel, labor, maintenance, and other operating and non-operating costs (typically
called overhead costs).

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1.1.5.2 Maintenance costs
Maintenance expenditures are typically not subject to as much cost-saving scrutiny because
safety is always the priority for airlines. Despite this, airlines still need to control the costs of
their maintenance activities and workforce levels while maintaining a high degree of safety.
A significant advancement in the maintenance sector has been the outsourcing of
maintenance tasks to outside suppliers, particularly for aircraft heavy checks, in order to
achieve this. The degree to which each airline outsources is distinct. For instance, Air
Zimbabwe performs the majority of its maintenance tasks internally and also contracts with
other airlines to complete their maintenance tasks. As opposed to this, Solenta Aviation
handles all of Fastjet Zimbabwe's aircraft maintenance.

Maintenance costs can be calculated by using:

On new aircraft, airlines enjoy a maintenance honeymoon since the pricey heavy checks are
postponed for a few years, but on older aircraft, the heavy checks are more common and
more expensive. As a result, there is a relationship between maintenance expenses and the
airline's average aircraft age. Maintenance checks are another factor that impacts maintenance
costs. These are more expensive for larger aircraft than for smaller aircraft, so airlines like
Frontier benefit from operating only narrow-body aircraft in terms of maintenance.

Aircraft commonality has a significant impact on airline maintenance costs. Airlines with
diverse aircraft fleets must typically keep spare parts for each aircraft type on hand,
necessitating a large inventory of parts. Segmenting aircraft markets is one solution to this
problem. This is the primary reason why fastjet Zimbabwe decided to only operate Embraer
ERJ-145 aircraft. Fastjet Zimbabwe no longer needs to stock spare parts for every aircraft
type as a result of this rationalization.

1.1.5.3 Other operating costs

Other operational expenses make up the last group of operating costs. These expenses can
range from a variety of things, such as landing fees, gate agents, and luggage handlers, to in-

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flight meal prices. Since they were simple areas for quick cost saving, these areas have
witnessed huge reductions, particularly catering. Most airlines now procure their food and
airport services from other sources. Other operating costs need to rise if airlines start
providing more complex services once more in the future.

1.1.5.4 Indirect operating costs (IOC)

The difference between direct and indirect operating costs (IOCs) stems from the possibility
that some expenses could alter directly with the level of activity, while other expenses would
not. IOCs are expenses incurred by an airline whether the aircraft is in flight. Both small and
large airlines have indirect costs, which can also be categorized as follows and have a wide
range of examples: • distribution costs (sales and marketing); station costs; depreciation and
upkeep; ground costs; passenger services; general overhead and administrative costs. To
manage indirect costs, airlines should use sound financial practices when acquiring money,
keeping it, and channeling it to the most productive use so that it earns more money. Sound
cash flow practices will keep the airline growing and allow it to withstand and absorb shocks
during times of crisis. Comair Limited failed to absorb the pandemic's shocks, forcing the
airline into liquidation. Airlines are able to achieve great goals with limited financial
resources, good financial practices, good business practices, and the incorporation of best
systems of corporate governance.

Pre-pandemic, Africa’s air transport sector faced multiple challenges, including those related
to economic regulation, profitability, safety, security, and sustainable financing of critical
infrastructure.

African carriers have some of the oldest fleets in the world with 80 percent of all aircraft
registering over an age of 10 years or older. This, in turn, triggers higher associated
maintenance costs, increased fuel consumption, poor reliability, and increased downtime.
„ The fleet sizes of most African carriers lack sufficient scale to negotiate favorable rates
with fuel suppliers, while the practice of fuel hedging is not widely common leaving African
airlines exposed to volatile price fluctuations.

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Operating costs are also very high in Africa as the cost of the infrastructure (such as airports
and air navigation service providers) is higher than in the rest of the world.

1.2 Impact of COVID-19 on Zimbabwe’s aviation industry

According to the World Health Organization (2020), the COVID-19 pandemic was caused by
a coronavirus known as SARS-CoV-2. The coronavirus was first discovered in Wuhan,
China, and it caused a pandemic that spread over the entire world. The airlines were believed
to be major contributor to the spread of the disease. In response to the COVID-19 outbreak
around the world, Airlines started suspending all flights and their operation were put on hold.
Governments around the world-imposed lockdown, airports were closed except for returning
citizens, foreign nationals were barred from entering, visiting tourists were forced to return to
their home countries, smaller airports were closed, and arriving citizens were quarantined,
leaving airlines with no choice but to adapt to, deal with, and survive the crisis. The COVID-
19 had a disastrous effect on airline finance all across the world. IATA (2020) estimated that
airlines incurred costs of $51 billion in terms of unavoidable costs, debts and refunds in the
form of vouchers and credit to customers whose itineraries were cancelled due to the
pandemic.

According to IATA (2020), passenger air transport measured as revenue passenger kilometre
was down 90% year-on-year in April 2020 and still down 75% in August. Industry-wide
revenue passenger kilometres (RPKs) fell by a massive 52.9% year-on-year in March, the
largest decline in recent history. Available seat kilometres (ASKs) contracted by 36.2% year-
on-year in March, which resulted in the global load factor declining by 21.4 ppts to 60.6%.
The collapse in economic activity and trade affected freight, which was almost 30% lower
year-on-year in April and still about 12% lower in August. According to Campbell (2022),
Africa’s aviation sector is recovering strongly from the effects of the Covid-19 pandemic, but
Southern Africa is lagging significantly behind the continent’s other three IATA sub-regions
(East Africa, North Africa and West Africa). The recovery of airlines from Covid 19 is
hampered by a lack of funding and excessive operational costs inherent in the business
(Flight Global, 2020).

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The COVID-19 had a disastrous effect on airline finance all across the world. The impact was
considerably larger for Zimbabwean airlines, whose financial position was already poor. The
collapse of Kuva Airline just 3 months into its operations is the evidence of growing cash
flows pressures to the airline as they emerge from Covid 19. Air Zimbabwe had a $300
million debt owed to foreign creditors, had not made a profit in nearly three decades, and was
heavily reliant on government bailouts due to political interference and poor management.
Fastjet Zimbabwe is one of the best-run commercial airlines in the nation, defying the Covid
19 odds as seen by its performance. The airline operated throughout the Covid era in
Zimbabwean airspace. The aviation sector also witnessed the collapse of Comair and its
subsidiary business Kulula, which was operating under the flagship of British Airways due to
Covid 19.

The primary reason for the airlines' present cash flow issues is the COVID-19 pandemic
outbreak, which forced numerous firms to close and caused enormous disruptions in various
industry sectors. Airlines worldwide ceased operations as a result of the global spread of
COVID 19. According to IATA (2020) report, the world's passenger traffic volumes
decreased in April 2020 as a result of travel restrictions that affected all countries. It produced
the sharpest global recession since the Great Depression (Kose &Ohnsorge,2021). The cash
reserves that airlines held before to the announcement of COVID 19 measures were what
they relied on at that time. Airlines that were caught off guard faced financially difficulties
and were unable to cover for the costs of aircraft storage, maintenance, and insurance. Many
airlines cut massive amounts of staff, and some even cut salaries.

Funding is also a key enabler for Africa’s future in aviation (Villaron, 2020). The biggest
problem that has been facing airlines in Zimbabwe is the lack of fleet financing. Unlike in
developed countries such as the United States and most European countries, airlines in
developing countries have received direct cash injections in the form of equity or loans. In
Zimbabwe, there were no direct bailout to airlines by the government during the pandemic
period. The balance sheet of most airlines in Zimbabwe are bad such that no financial

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institution is willing to support the industry. In South African, banks refused to lend directly
to South African Airways because the government could not provide loan guarantees.

The majority of the cash flow issues experienced by airlines in Zimbabwe were inherited
prior to the pandemic and worsened during the pandemic. Local airlines were already facing
difficulties in accessing foreign currency due to the government's numerous foreign currency
reforms implemented between May 2016, when the idea for bond notes was first floated, and
June 2019, when the multi-currency system was terminated. Some currency reforms led to
discrepancies between bond notes or RTGS$ balances and US$, which led to loopholes that
drove the foreign currency parallel market, creating a situation where there was a greater
demand for foreign currency than there was supply. This worsens the liquidity situation of
most domestic airlines, as they are unable to settle their foreign suppliers or institutions due
to foreign currency shortages. Most local banks refused to process telegraphic transfers from
the local nostro account, claiming that RTGS balances did not correspond to real USD values.

Zimbabwe is one of the most challenging aviation markets due to low profit margins, high
operating costs, heavy tariffs, and cut-throat competition. The cost structures of Zimbabwean
airlines are believed to have been greatly inflated by airport taxes, landing fees, and parking
charges, which are supposedly among the highest in Southern Africa. The cost structure of
airlines is extremely unsustainable. The cost structure of a typical airline is divided into fixed
costs (aircraft financing, insurance, etc.), operating costs (labor, fuel, ticket distribution, etc.),
and taxes, fees, and charges. It is characterized by fixed costs in the operation and
maintenance of expensive inputs such as aircraft. They employ a highly skilled and costly
workforce, and the majority of their operating expenses, such as fuel and spare parts, are paid
for in hard currencies, which are frequently in short supply in Africa. The local airlines have
found it difficult to operate profitably as a result of these factors.

The local airlines operate some of the oldest fleets in the world as a result of the country's
ongoing economic difficulties. Most of the aircraft registered in Zimbabwe are at least 20
years old. As a result, related maintenance expenses increase, as does fuel usage, reliability

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declines, and downtime increases. They are exposed to dramatic price swings because the
majority of their fleet sizes are too small to bargain with fuel suppliers for favorable terms.
The airline industry has continued to incur significant losses, which have a direct impact on
cashflows.

The Zimbabwean government banned bank lending in 2022 to halt speculation against the
Zimbabwean currency, as part of a slew of measures to halt its rapid depreciation on the
underground market. The decision was short-lived, as the Central Bank ordered banks to
resume bank lending at a rate of 200%, liberalized the foreign currency market, and created
gold coins as a store of value. The central bank purposefully tightened monetary policy in
order to limit monthly inflation. The central bank's measures did not benefit the already ailing
airline industry. The economy experienced a money supply shortage, which increased
liquidity risk as businesses struggled to settle their accounts.

Embracing the low-cost carrier model (LCC) by flying the right sized aircraft is essential as
airlines prepare to emerge from the COVID 19 pandemic phase. Given high fuel and
maintenance and other operating costs in Africa, aircraft should be right-sized, maintain high
load factors without aggressive fares discounting and protecting yields. These smaller aircraft
should be fuel efficient and offer passengers a superior flying experience which justifies a
rational fare structure. The right-sized aircraft provide airlines the freedom to position the
aircraft on strategically significant routes when demand is currently low. The airline may
scale its capacity as the number of passengers increases by raising flight frequency or moving
to a larger aircraft in its fleet. Smaller aircraft offers reduced- operating costs, which are
critical for local airlines to break even or begin earning profits.

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1.3 Statement of the Problem

The problem to be addressed by this study is the cash flow issues that have negatively
impacted the operations of airline industry in Zimbabwe. During the Covid period the
aviation industry suffered huge losses due to flight cancellations by no-show passengers,
border closures and other restrictions, airlines left many customers stranded when they shut
down operations or cancelled routes (Nhamo, 2022). According to IATA (2020) airline held
about $35 billion in unutilised customer tickets that needed to be refunded. However, most
airlines were reluctant to refund the passengers and had to allow free changes on booking
dates to 6 months to about a year. This posed a great threat to airlines as they recover from
covid, as most seat inventory were occupied by passenger who had paid before the covid
period, and their funds have utilised. According to Ufer (2017), the aftermath of the disasters
is potentially more dangerous, threatening to the survival and sustainability of various
businesses.

Local airlines are finding it difficult to make a profit because of a lack of economic liquidity,
fluctuating oil costs, and declining currency rates. Due to a lack of foreign cash, they are
unable to fulfil their responsibilities on a global basis. As a result, there have been instances
where access to international airports has been restricted to local carriers. Due to concerns
about the airline's incapacity to adhere to international safety standards, Air Zimbabwe has
been refused license to fly to the EU. Due to financial flow concerns, local airlines have been
unable to satisfy international requirements.

Economic growth and development are significantly facilitated by air travel. On a local,
regional, and international level, air travel boosts connectivity and encourages integration
into the global economy. Particularly in emerging nations, it is essential for promoting
economic progress. It is crucial to design cash flow optimization techniques that will aid
airlines in turning around their operations into profitable ventures, generating strategic
financial plans contemporaneous with the maximization of revenue streams and cost-saving
activities, in order to assure sustainability.

1.4 Research Objectives

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These are the objectives that the researcher endeavours to achieve at the end of the research
process

1. Pricing strategies (fare price optimisation)

2. network restructuring and optimization of operating resources,
3. Management of contractual obligations
4. Fleet planning
5. Ecommerce optimisation.

1.5 Research questions

1. What are the current pricing strategies (fare price optimisation)?

2. To what extent are current strategies yielding network restructuring and optimization
of operating resources?

3. How are current airlines managing contractual obligations?

4. What is the state of fleet planning?

5. How are airlines resolving the issue of ecommerce optimisation?

1.6 Rationale for the study

The main aim of conducting the present study is to is to identify cashflow optimization
options for airlines as they prepare to exit the COVID-19 crisis. In order to avoid a potential
liquidation to a local airline, airlines must plan and implement effective cashflow strategies
that can assist in overcoming significant operational challenges. Issues such as increased fuel
prices have hurt airlines' liquidity positions.

1.7 Assumptions

This study was based on the critical assumptions that jet fuel prices will not increase more
than- 5- percentage points faster than inflation rates, aircraft operating efficiencies will
average the same level as those experienced during the pre-covid 19 period, and load factors
will rise to 90 percent by end 2022. The research is going to assume the normal distribution
assumption for the nominal demand

1.8 Delimitations of the study

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According to Pellissier (2018), delimitations refer to the parameters that specify the scope of
a study to focus on only one specific area or entity, as opposed to a broader or holistic
approach. The study is limited to Zimbabwean airline companies, with a focus on the cash-
flow optimization tactics used by these Zimbabwean airlines. Errors and misstatements in
annual financial statements, as well as failure to disclose crucial financial information in
annual financial statements, can lead to biased and inaccurate conclusions about study
findings. The researcher faced a hurdle due to the lack of availability of the most recent
annual financial statements for other airlines, which contain the most up-to-date information
and are relevant to the current state of the operations. The evidence acquired from annual
financial accounts was heavily relied on by the researcher. The researcher's research time was
limited. To some extent, this constrained the scope of the investigation.

Ticket sales follow a normal distribution, with the last seat on the plane being purchased just
before departure.

1.9 Limitations

Some of the limitations of the study included the fact that some of the participants refused to
participate in spite of being informed that it was for purely for academic purposes only. Their
refusal was on the basis of personal reasons. The other limitation of the study was on
obtaining the right sample size due to the downsizing of airlines as a result of the Covid-19.
The other limitations included the restrictive time to complete the project which meant the
researcher had to ensure the scope of the study was manageable within the specific time
frame.

1.10 Definition of key terms

Cash flow optimization is disciplined approach that anticipates liquidity shocks and allocates
windfalls strategically in order to maximize opportunity (Davies et al, 2019).

Coronavirus disease (COVID-19) is an infectious disease caused by the SARS-CoV-2 virus.

The airline industry encompasses a wide range of businesses, called airlines, which offer air
transport services for paying customers or business partners (Stein et al ,2020).

Internal control is a process, effected by an entity's board of directors, management and other
personnel, designed to provide reasonable assurance (Eren et al, 2021). That information is

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reliable, accurate and timely. Of compliance with applicable laws, regulations, contracts,
policies and procedures.

Financial optimization is the process of allocating resources in the most efficient way
possible to maximize desirable objectives, such as net profit or expense reduction (Smith,
2018).

1.11 Organisational structure

Chapter 1: Introduction and background to the study

This chapter provide a background to the area under study and provides the objectives and
hypotheses upon which the study will be hinged upon. It also give a justification of the study
under research and the outline of the study.

Chapter 2: Literature Review

This chapter reviews relevant literature on the concept of leadership qualities. It also looks
into research that has been done by other scholars in the same field and will provide a critique
of the theory research.

Chapter 3: Research Methodology

This section focuses on the methods and tools that were adopted in the research study. It
brings out the research strategy, sampling methods, data credibility, and ethical issues for
consideration.

Chapter 4: Results and Discussion

Data collected is processed and analysed. The results are presented, interpreted, and
discussed in the chapter.

Chapter 5: Conclusions and Recommendations

This is the last chapter of the study and focus on the conclusions of the study the researcher
will bring out recommendations based on the research findings and areas of the future
research study.

1.12 Chapter summary

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This was a discussion of the background behind the study project. Additionally, it defined
important concepts and underlined any restrictions that were found. The following chapter
covered a review of the literature

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CHAPTER 2

LITERATURE REVIEW

2.0 Introduction

This chapter presents the related literature and studies after the thorough and in-depth search
done by the researchers. This will also present the synthesis of the art, theoretical and
conceptual framework to fully understand the research to be done and lastly the definition of
terms for better comprehension of the study.

2.1 Theoretical Framework

This dissertation which examines the cashflow strategies utilised by airlines made use of
three theoretical frameworks which are agency, contingency theory and theory of firm.

2.1.1. Agency Theory

Jensen and Meckling (1976) developed this hypothesis to explain the interaction between the
primary and the agent. All actions made by an agent on behalf of the principal should be
believed to be influenced by the principal. Corporate governance in organizations is based on
this connection between the principal and the agent. There is a link between shareholders,
management, and the board of directors in corporate governance. The senior management is
the agent, while the shareholders are the principals. In this arrangement, the sole goal of
management is to maximize shareholder wealth.

2.1.2. Contingency Theory

In an effort to explain how factors like cashflow strategies influences from both the internal
and external environment affect an organization's functioning and design, this theory
primarily focuses on behavioural problems and features of an organization (Horvat 2017).
Theoretically, no one type of organizational structure is appropriate for all businesses and
organizations (Kim and Matkin 2020); rather, the efficacy is influenced by technology,
relative sizes, environmental changes, and organizational characteristics. In light of shifting
conditions, the concept describes the connection between cashflow strategies and airlines
survival or optimal performance.

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2.1.3 The Theory of a Firm

This concept was developed by Baumol (1959 & 1962), Marris (1964), and Williamson
(1964). (1966). According to this theory, which is based on neoclassical economics,
businesses exist and do actions to raise their profits. In order to maximize profits, businesses
negotiate prices and distribute resources with one another in the market. This point of view
contends that a company's behaviour is determined by its capacity to increase profits. Making
decisions concerning resource allocation, production methods, and output volume is
supported by this theory. On the other hand, the firm theory has come under fire for
emphasizing broad industries. As a result, it is unable to explain why airlines produce
services they do, as well as what motivates firms' resource allocation decisions during the
service process.

2.2 Conceptual Framework

The conceptual framework includes cashflow optimisation as the independent variable and
optimal performance as the dependent variable. In this study, cashflow optimisation is
classified as including price optimisation, resource optimisation and also finance
optimisation. On the other hand, optimal performance of the airline industry is denoted by the
sub-variables of profit, efficiency performance and financial performance . The relatedness
among these variables is as shown in Figure 1.1 below.

Cashflow Optimisation Optimal Performance

(Independent Variable) (Dependent Variable)

HO1
Price Optimization Profit

HO2
Resource Optimization Efficiency Performance

HO3
Finance Optimization Financial Performance

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Figure 1.1 Conceptual Framework.

Source: Adapted from Eisen (2020).

2.3 The Airline Industry in Perspective

An airline is a business that provides air transportation for both passengers and cargo.
According to Gönenç and Nicoletti (2007), the airline industry transports passengers and
cargo on a scheduled and non-scheduled basis within and across national borders. There are
three main types of airline business models, which are distinguished by their operational
characteristics and the services they provide to passengers (Cento, 2014). They include full-
service and low-cost carriers that operate scheduled flights, as well as charter carriers that
operate flights outside of normal schedules through a hiring arrangement with a specific
customer. According to Conte (2014), full-service carriers' core business is passenger, cargo,
and maintenance, whereas low-cost carriers' core business is passenger air-services and
ancillary offerings. Airlines use a variety of resources to transport their passengers and cargo.
One of the most crucial resources used by airlines is cash. According to Conte (2014), the
core business of full-service carriers is passenger, cargo, and maintenance, whereas the core
business of low-cost carriers is passenger air-services and ancillary offerings. Airlines
transport passengers and cargo using a variety of resources. Cash is one of the most important
resources used by airlines. The success or failure of an airline is determined by its cash
management and planning.

2.4 The concept of cash

IAS 7 defines cash as "cash on hand and demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value." The term "cash" in the context of this study refers to
the virtual funds that are quickly and directly available to a company for their expenses, such
as paying "cash" for new equipment or paying dividends to shareholders, while the majority
of these transactions are really made through bank transfers. Cash is the most important

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resource in running a successful business, and cash flow is critical for sustaining business
operations. Tenant (2012) defined cash flow is the ability to generate a sufficient supply of
cash so that a business is able to meet its demand for cash. It is one of the most important
aspects of a company's survival. Cash flow has become a critical element of many firms’
operational strategies (Quinn, 2017). According to Pino (2012) many businesses become
insolvent because they do not have enough cash to meet their short-term obligations. There is
a continuous cycle of events in a business that can increase or decrease the cash balance.

2.5 The concept of Cash flow

The movement of money into and out of your organization is referred to as cash flow, and the
cycle of cash inflows and outflows determines the viability of your company. Cash flow
analysis is the study of the cycle of your company's cash inflows and outflows with the aim
of ensuring a sufficient cash flow for your company and to serve as the foundation for cash
flow management (Noor et al, 2014). Cash flow analysis entails investigating the aspects of
your business that affect cash flow, such as accounts receivable, inventory, accounts payable,
and credit terms. Perform a cash flow analysis on each of these individual components,
airlines are able to identify cash flow issues and find solutions. Cash In, according to Cooke
and Jepson (1986), is the positive cash flow in which money is received, whereas Cash Out is
the negative cash flow in which money is disbursed. The Net Cash Flow is defined as the
difference between Cash In and Cash Out (Odeyinka et al., 2003). Managing cash flow
therefore is vitally important in the soft running, survival and success of airline business
(Atrill P. 2004).

2.6 Fundamentals of optimization

In the context of cash flows, it is also vital to define what "optimizing" entails. It is important
to distinguish between the optimization of "cash flows" and the optimization of profit since in
corporate finance, "cash flows" and "profit" are two different concepts. Optimization is the
process of allocating resources in the most efficient way possible in order to maximize
desired goals such as net profit or expense reduction. Optimization can be defined as the
process of achieving an optimum. A typical optimization model is concerned with allocating
scarce resources among potential alternative uses in order to maximize an objective function

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such as total profit. Optimization is a process of finding a balance between the company’s
cash requirements versus the company’s cash generation capacity.

2.7 Cash flow optimization

According to Parente (2022) cash flow optimization calls for a methodical approach that
foresees liquidity shocks and intelligently distributes windfalls to take advantage of
opportunities. He asserted that a business can be profitable on paper and yet can be at risk of
bankruptcy if they fail to pay their obligations on time. To optimize cash in any business, all
of the underlying cash "levers" that drive the cash flows of the business must be identified
and understood, in addition to the more obvious levers in working capital(Conte,2014). This
demonstrates the significance of cashflow optimization strategy.

2.8 Cash flow optimization strategies

The following paragraphs discusses in detail some of the identified cashflow optimization
strategies.

2.8.1 Revenue optimization

Any business's natural goal is to increase its profit. Profit maximization and revenue
maximization are closely related in the context of the airline sector since, when considering
the airline market, expenses that are charged for the ticket, particularly short-term costs, are
initially set (Malighetti, Paleari et al. 2009). In other words, a situation where revenue
maximization is almost the same as profit maximization results from low variable costs and
high fixed expenses. After the US airline market was deregulated in the 1970s, the discipline
of revenue management was born in the aviation sector (Strauss, Klein et al. 2018). Effective
revenue management is extremely important to the airline industry.

Vinod (2021) stated that revenue management in airline industry is the understanding of
various demand conditions, various passenger classes, levels of price sensitivity (elasticity of
demand) among various passenger groups, and the importance of the stochastic nature of
demand by the traveling public (for instance, the number of reservations and actual trips may
differ) will affect the airlines' ultimate performance. Revenue management as defined by
Kummer et al (2022) is a quantitative technique which allows an airline manager to handle

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the supply of aircraft seats and passenger demand to maximize revenues. It is a game of
probabilities in which the goal is to extract as much revenue as a passenger is willing to pay
(Cramer & Thams, 2021). As a result, it is not surprising that airlines, who are aware of all of
these dynamic aspects, levy various fees in order to respond appropriately to changing
elasticities, varying passenger incomes, competitors' pricing policies, and market conditions.

2.8.2 Pricing and seat inventory

Pricing and seat inventory management are the two key topics on which revenue management
typically focuses. Overbooking, fare class mix, and origin-destination control are the three
key areas of focus for scientists and specialists working on seat inventory management for
ARM (Belobaba, 2015). According to Embark RM, the airline sector is extremely
competitive and dynamic, necessitating the need for a dynamic approach for controlling
revenue across the lengthy booking window of a journey. According to Talluri and van
Ryzin, the term "revenue management" refers to a group of methods and tactics used by
airlines (and other transportation companies) to control demand for their services (Ryzin and
Talluri).

Vinod (2021) states that it is important to measure and monitor revenue management key
performance indicators (KPIs) such as yield, revenue/ask, spoilage, market share, oversales,
forecast error, and spill rates across organizational silos. He argued that strong collaboration
and business process alignment should exist across organizational silos (Vinod, 2021a). The
most effective use of revenue management data is necessary for effective decision-making in
all important functional areas, including network planning and flight scheduling, airline
pricing, reservations and inventory control, product distribution, ancillary products and
retailing, interactive marketing, loyalty, sales, and operations that directly affect an airline's
cash flows.

2.8.3 Price discrimination

"Almost every corporation with market power tries to engage in some kind of pricing
discrimination" (Varian 1989). Price discrimination is the practice of charging various
consumer groups for the same commodity at different rates. It is closely related to revenue
management. Companies may set pricing based on a set of parameters. For instance, a flight's

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price may vary depending on the time of departure, the number ordered, the customer's age,
and the time of purchase. It is standard practice to charge more for departures at busy times
and to provide discounts for early booking. Price discrimination should not be confused with
price dispersion since the latter presumes that there are several sellers on the market who set
various prices for the same kind of item, whereas price discrimination presumes that there is
only one seller.

"Almost all businesses with market dominance try to set prices in some way. Utilizing
various price elasticity of demand is the main tenet of price discrimination. For instance, if
we look at the airline industry, some categories of passengers have considerably more
inelastic demand than others, which implies they are prepared to spend more for a given
commodity than other consumers. Due to this, the business raises pricing for clients who are
prepared to pay more, boosting earnings. Customers that react more strongly to price changes
and hence have substantially more elastic demand are frequently drawn to discounts and
special offers.

Numerous research examined the effects of various factors on airline ticket costs. For
instance, Malighetti, Paleari, and Redondi examined the pricing policies of budget airline
Ryanair in their article (Malighetti, Paleari et al. 2009). They discovered, among other things,
that the length of the route, the frequency of flights there, and the proportion of completely
booked flights all boost the average price on the route. The fact that they discovered a
negative link between price and the number of seats available by Ryanair at the airports of
origin and destination is equally intriguing.

In their work, Pels and Rietveld examined whether pricing practices of airline businesses are
connected with those of their rivals based their research analysis on data from the London-
Paris market (Pels and Rietveld 2004). Both network and low-cost carrier tactics were
investigated, and the overall conclusion is that network airlines do not follow low-cost carrier
price changes; instead, some airlines decrease costs in response to price increases by potential
competitors. In addition, they discovered proof in this research that all airlines follow the
same pricing trend, raising costs as departure day approaches.

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2.8.4 Revenue optimization fences
The revenue optimization walls prevent people who would otherwise be ready to pay a
considerably higher fee from using the discounted seats, limiting their use to those who are
price sensitive (Vasigh et al., 2018). The airlines do not want a business traveller who is
prepared to pay the full fee to get a ticket at a significantly reduced price. They identified the
following six primary "fences" to help improve cash flows in airlines which are airline
schedule, frequent flyer miles, ticket refundability, advance purchase requirements
(restrictions), and Saturday night stay.

2.8.4.1 Advance purchase requirements (restrictions)

Advance purchase restrictions basically limit the number of days before the day of departure
that a ticket can be purchased. This is essentially a situation where there is daily depreciation
of the value of money due to hyperinflation. This restriction is critical for domestic airlines in
order to avoid losing value in volatile local currencies.

2.8.4.2 Frequent flier mileage

This is the number of miles awarded for a particular fare class which can be an important
consideration for travellers. According to Vasign et al.(2018) the frequent flier programs have
proven to be effective at attracting and retaining loyal customers. For example, if the
following fare class provides more frequent flier miles, a passenger may be willing to forego
one. For this fence to function properly, all fare classes and options must be fully disclosed.
A matrix approach with various fare types available to the passenger is the most effective
marketing use of frequent flier mileage as a yield management "fence." Another associated
frequent flier benefit is free first-class upgrades. Depending on the fare class chosen, a
customer may be eligible for a free first-class upgrade or must use miles to pay for the
upgrade.

2.8.4.3 Refundability

The ability to refund tickets is another significant "fence" used by airlines all over the world
to help segment the market. Higher-priced classes typically include full ticket refundability,
allowing customers to cancel their reservation and receive a full refund. As a result, the
refundable ticket provides more flexibility to the traveller, which is obviously preferred by

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those who need to get somewhere quickly. Classes with lower prices frequently do not
provide refunds unless there are exceptional circumstances.

2.8.4.4 Change fees

Vasigh et al. (2018) state that change fees, like ticket refundability, are an important revenue
management "fence" that can be used to separate travellers based on their time-sensitive
needs. People who require a lot of schedule flexibility value the ability to change their flights
whenever they want or for a small fee. The highest fare class typically provides complete
flexibility and is preferred by business travellers with unpredictable schedules. Fastjet’ s Flex
Flyer pricing option allows for unlimited flight changes at no extra cost. When you book Flex
Flyer, you will gain travel flexibility, a large baggage allowance, access to airport lounges,
specialized check-in, priority boarding, and other benefits. Fastjet’s "Flexi-Go" options give
you the flexibility and confidence to make changes if you arrive early.

2.8.4.5 Airline schedule

According to Garrow (2015), airlines can be more profitable by allocating high- and low-fare
seating if they are aware of the expected customer composition on a flight because different
passenger groups have different travel habits. Time-conscious travelers, for example, may
choose an early departure and an evening arrival to complete a full day's worth of work. As a
result, the airline will limit the number of low-cost, one-day roundtrip flights.

2.8.4.6 Revenue optimization Control Types

In order to maximize revenue for each flight, Vasigh (2017) believed that booking restrictions
and protection levels are essential strategies. The protection level is the number of seats that
are still available for purchase by higher-fare classes but have not yet been sold, whereas the
booking limit is the maximum number of seats that can be booked for each ticket class.

2.8.4.7 Management of spoilage and spillage

An airplane with empty seats is a visual representation of spoilage. Airlines should strive to
minimize spoilage because an empty seat will not generate any additional revenue for the

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airline and is likely to have been sold at a reasonable price. Pricing that is not in line with the
market for the specific fare class causes spoilage. Airlines must strike a balance between
spillage and spoilage in order to maximize their cash flow.

2.8.4.8 Overbooking
Overbooking is used by airlines to avoid spoilage because, more often than not, some
customers fail to show up for a flight or miss a connection, particularly for flights departing
from hubs. While overbooking may cause inconvenience for a few passengers, the benefits of
airline overbooking include increased seat availability, easier access to first-choice flights,
and lower overall travel costs due to more efficient use of airline seats (Dunleavy, 1995).
Though overbooking may be a good way to increase revenue, it can also result in expenses
such as meal and lodging credits, flight credits for future flights, departure delays, customers
being transferred to other flights, staffing issues, and a loss of reputation. By accurately
forecasting any overbooking that is desired, the airline can avoid an overbooking situation.

2..84.9 Fare Pricing Optimization

In the airline industry, pricing policies and practices refer to how an airline determines the
price of a ticket based on supply, costs, and market competition. Palmer et al. (2011) state
that airline’s pricing policies are frequently dynamic; prices change on a daily basis and vary
from airline to airline. A passenger who purchases a ticket at the appropriate time may end up
paying significantly less than other passengers on the same flight. Depending on the business
model and market, a different pricing strategy may be used. Spillage, on the other hand, is a
problem because airlines typically reserve a few seats for last-minute passengers who are
willing to pay the full fare for the flight. The airline could cancel the flight because it is
already fully booked, thereby losing money on the trip.

Considering that leisure travelers are more price sensitive than business travelers (Wen &
Chen, 2017), one of the goals of revenue management systems and pricing has been to
provide lower prices to those who are willing to purchase sooner (Morlotti et al., 2017). The
revenue management system then adjusts the ticket price as the departure date approaches,
using a pricing elasticity that takes into account the market's reaction and features (Alderighi
et al., 2016; Williams, 2020).

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2.8.4.10 Cost-based pricing
According to (Philips, 2015), it alludes to the method in which prices are established based
on costs plus an additional profit represented as a percentage of the cost. Demand elasticity or
the level of competition are not factors considered in this pricing strategy. This approach is
best suited to the local market, where there is little fierce rivalry.

2.8.4.11 Bundling

Bundling is the practice of combining services that are included in the cost of a ticket,
according to Vasigh et al. (2018). Bundling typically increases airlines' overall revenue which
will result in improved cash flows.  Virgin Atlantic bundles door-to-door limousine service,
in-flight massage, and drive-through check-in with its transatlantic flights (Ovans,
1997). Airlines frequently combine air travel, life insurance, vehicle rentals, and hotel into
vacation packages.

2.8.4.12 Unbundling and airline ancillary revenue

Ancillary revenue is any revenue generated beyond the direct sale of airline tickets. A lot of
airlines have been engaged in separating the services that were formerly included with a seat,
including bag check fees, seat selection fees, fees for carry-on bags, prices for pillows, fuel
surcharges, overhead bin fees, meal surcharges, and even the opportunity to pay by credit
card.

2.9 Management of contractual obligations

Contracting is an essential component of doing business in any industry, including the airline
industry. According to Odebiyi et al. (2020) a fundamental principle of law is that parties
who have engaged into a contract or agreement are obligated to abide by its terms. This is due
to the fact that, with certain exceptions such as contract frustration or the doctrine of force
majeure, among others, a party cannot typically withdraw from a contract or agreement
simply because the other party later discovered that the terms of the contract or some events
relating to its execution are not favorable.

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2.9.1 Obligations under financing contracts
Most airlines finance their aircraft acquisitions through operating or financing leases. In the
case of finance leases, the airline borrows a portion of the money and/or uses equity financing
to cover any outstanding amount required to pay for the aircraft (Gayle, 2015). According to
Vasigh et al. (2018) airlines acquire ownership of the aircraft subject to a mortgage in the
lenders' favor by paying interest on the financing and principal repayments when the loan is
repaid. The aircraft are an asset and the associated liabilities constitute debt, according to the
airline's financial statement.

In operational leases, the airline leases the aircraft for the specified time in return for making
payments for the security deposit, rent, and aircraft maintenance organization payments
(Delgrande,2022). Additionally, there are still other expenses and a number of other set fees
associated with maintaining the airworthiness of the aircraft for the carriers. During covid the
airlines were still obligated to pay for these expenses, adding a significant revenue burden.
The airlines were supposed to continue paying aircraft engineers, airline crew, and airport
parking charges in order to satisfy the requirements of the Aircraft Maintenance
Organization. This had a disastrous effect on the already cash-strapped airlines.

According to DelGrande (2022), operating leases may include a "hell or high water" clause
stating that the lessee's responsibility to pay rent is absolute and unconditional regardless of
other circumstances, with the exception of the aircraft being fully lost (which is covered by
insurance). As a result, by accepting the lease, the lessee basically accepts the risk of being
unable to utilize the aircraft for an extended length of time. Subsequently, airlines that
purchase their aircrafts through leases that do not exclude payment based on absolute
commitments under the "Hell or High-water" provision are required to fulfill their obligations
by both paying for and taking possession of the agreed-upon planes. Despite these losses,
airlines still have additional costs and various other unavoidable fixed charges related to
maintaining the aircraft’s airworthiness. 

2.9.2 Invoking force majeure in obligations under financing contracts

According to Jost and Sascha (2014) the idea of force majeure, no party is responsible for any
obligations outlined in an agreement or transaction as a result of the happening of certain

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circumstances. The term "force majeure" refers to a phrase that is typically inserted in
contracts to reduce the chance or potential of unavoidable natural catastrophes that might
disrupt the planned sequence of events and prevent the parties (to the contract) from
completing their commitments (Heuermann; 2013). A Force Majeure event is often an
occurrence over which the contracting party has no control, and which prevents performance
of the contract's duties.

As explained by DelGrande (2022) following event can be regarded as Force Majeure:

1. if the contractual provision for force majeure expressly or impliedly mentions the

event as an event of force majeure.

2. if the contractual obligations are rendered incapable of being performed after the
occurrence of the event, and

3. if parties have no control over the occurrence and continuance of the event.

Basing on the findings of DelGrande (2022) airlines must emphasize the opportunity for
relief in order to survive and escape responsibility for breaching their leases as a result of the
financial losses they sustained during the epidemic. One such reprieve is the potential for
employing Force Majeure to avoid lease payments and, as a result, reduce the financial strain
until pandemic-related limitations end.

2.9.3 Legally Invoking Hardship in financing service agreements

Based on the study by DelGrande (2022) the Hardship Principle In lieu of completely
waiving all payment obligations, doctrine is an alternative legal remedy that enables the
lessee to renegotiate the terms of the agreement and postpone payments. The objective of this
principle is to correct the imbalance between the parties by implementing actions that
preserve the concept of good faith while maintaining the contract's enforceability under new
conditions. Kikoyo (2020) added that Hardship may be applicable in the case of a pandemic
to resolve conflicts between parties.

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In contrast to force majeure, applying the Hardship concept to aircraft leasing contracts is a
more practical legal approach for the airline sector. The theory of hardship, which is founded
on the idea of securing payment through re-negotiation, can also aid in getting over the "Hell
or High Water" provision since it upholds the absolute nature of contractual duties and
provides financial certainty for the lessor. This theory may be used in accordance with a
contractual clause or the current interpretation of international commercial law.

2.9.4 Continuing airworthiness of the aircraft

Airlines are obligated to keep their aircraft airworthy, as certified by the relevant aviation
authority (Weerasekera; 2020). Furthermore, Hinsch (2018) pointed out that under the
operating or financing lease agreements, the lessee or owner of the aircraft may be subject to
additional obligations relating to the supervision of ongoing maintenance requirements in
accordance with the approved Continuing Airworthiness Management Organisation
(CAMO), maintenance monitoring, and recordkeeping. This means that in order for an
aircraft to continue to be airworthy, certain maintenance procedures must still be completed
on a regular basis even is the aircraft is grounded.

However, according to (Weerasekera; 2020), airlines may request permission from the lessor
to keep the aircraft in a specific location (subject to any current travel restrictions), which
requires less frequent maintenance. In any scenario, airlines would be obligated to cover the
cost of maintenance, and additional aviation engineers would be required to fill unfilled
posts. Given operational leasing agreements, airlines are frequently expected to make
contributions to maintenance reserves; nevertheless, in the aforementioned circumstance, it is
unlikely that they would be helpful. Frequently, maintenance reserves are only usable for a
specific number of scheduled maintenance events (referred to as "qualifying works").

2.10 Fleet planning optimization

Clark (2007) defines fleet planning optimization as the process by which an airline acquires
and manages appropriate aircraft capacity in order to serve anticipated markets over a variety
of defined periods of time with a view to maximizing corporate wealth”. Belobaba et al.
(2015) state that the fleet planning process seeks to provide answers to the following queries:

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"What type of aircraft to purchase, when and how many of each?" In terms of both planning
and operations, it is one of the most important long-term strategic decisions for an airline. A
airline’s fleet is defined by the overall number of aircraft it runs at any given moment as well
as the exact types of aircraft that make up its whole fleet. The airline fleet have a significant
impact on the airline's overall financial situation, as well as on operational expenses, the
airline's capacity to operate profitably, and the airline's potential to raise revenues. This
means that the fleet planning optimization tries to find the optimal set of aircraft and flight
routes to maximize profits while minimizing expenses.

According to Kilpi (2008), an airline may find it difficult to decide whether to operate a
consistent fleet or a diverse one. Maintenance, training, and labor costs will be reduced with a
homogeneous fleet. On the other hand, a fleet made up of many types of aircraft offers the
opportunity to select a plane that can more effectively adapt to changes in the market and in
demand for travel. The minimizing of costs is undoubtedly one of an airline's top priorities
when choosing the make-up of its fleet. The clear determination of which types of
expenditures should be taken into account and what value do they have in reality is thus one
of the primary challenges in determining an airline's ideal fleet composition when coming out
of the pandemic.

Throughout the pandemic, several airlines came to see how important fleet planning was. The
epidemic presented challenges for airlines who accidentally flew the wrong aircraft. Airlines
using small body aircraft struggled since they couldn't switch to an entirely different aircraft
to begin delivering cargo. New(1975) first looked at the optimization models for the problem
of airline fleet planning. He looked at airline fleet planning while taking a changing
environment into consideration as newer, more advanced aircraft types become available and
older, less efficient aircraft become obsolete. The author developed an efficient model for
planning the acquisition and disposal of aircraft as well as determining the fleet composition
for a commercial airline after analyzing existing models. This means that the model seeks the
best possible combination of planes and routes to maximize revenue while minimizing costs.

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2.10.1 Fleet standardization
Fleet standardization is critical in determining performance and quality standards. Atay
(2019) state that the formation of a fleet from a similar family or the discovery of fleet
similarity is directly related to the route structure and business culture adopted by the
company. A largely standardized aircraft fleet tends to consist of a single aircraft model.
(Brüggen and Klose, 2010). In a standardized fleet, maintenance and training expenses are
low, and capacity utilization is frequently high (Berrittella et al., 2009 Kilpi, 2007).
According to Seristö and Vepsäläinen (1997), there is a link between fleet uniformity and
higher flying and maintenance expenses. Therefore, by lowering flight expenses, financial
efficiency may be increased. On the other hand, Zuidberg (2014) discovered a negative
association between fleet standardization and operational costs, but the findings lacked
sufficient statistical support. Thus, the author made the implication that fleet standardization
might have a negligible effect on operating expenses.

The COVID-19 epidemic, one of history's worst, has brought about an unprecedented disaster
for airlines around the globe (Albers and Rundshagen, 2020). In order to deal with this
pandemic condition, every airline in the world has implemented policies in the aviation sector
as well as many other industries. The travel and hospitality sector in general, and airlines in
particular, are in terrible straits as a result of such precautions: More than 60% of the world's
commercial airplanes have been grounded (Hollinger, 2020). In 2020, airline industry
revenues are predicted to drop by half, according to an IATA prediction (IATA, 2020).

2.10. 2 Fleet size

Regional jets have given airlines the ability to connect cities with smaller populations that
would be unprofitable with larger aircraft while also increasing travel frequency, thus
strengthening their hub networks. Airlines strive to optimize their load factors at all times
since they are thought of as a necessary condition for a profitable operation; they do
reasonably well, with an industry average of about 75%. Consequently, it follows that when
demand rises, airlines only have two options: increase service frequency or decrease aircraft
size. Single-aisle and twin-aisle aircraft, often known as narrow-body and wide-body aircraft,

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respectively, are the two categories into which airplanes can be split (measured in seats per
service).

2.10.3 Pooling the aircraft components

A pooling arrangement is one in which two or more aircraft operators contribute spare parts
and/or engines to a shared pool for use by the parties. By utilizing economies of scale,
pooling can help to lower the carrying costs for spare parts and spare engines. The agreed-
upon stock (pool) that is owned by each participant in a pooling arrangement may be
withdrawn by that member. Financial institutions are reluctant to permit the pooling of their
aircraft asset collateral because once the asset leaves the control of the operator who will
receive the financing, tracking and traceability are severely hampered. Pooling agreements
may have an effect on the rights to ownership and security interests in the collateral. Even the
existing income opportunities in the airline industry have been compared to the potential for
savings through strict management of spares in the supply chain (McDonald, 2002).

2.11 Relationship between Ecommerce and Cash flow in the airline industry

In light of technological advancement, e-commerce is a developing phenomenon. The impact

of technology on the market today has grown steadily since the 1990s, and since the internet
bubble episode in 2006, it has altered how society views technology. The e-
commerce is a public and global com-munication network that provides direct connectivity to
anyone over a local area net- work(LAN)or Internet Service Provider(ISP) (Turban et al.,
2000). To the continuing changes and the way, they interacted, both people and organizations
had to adjust. As a result, the extensively used and constantly evolving technology has had an
impact on their daily lives. The GDS now allows airlines to turn consumer surplus into
production surplus (Jarach, 2001, Journal of Air Transport Management). This is
accomplished through flexible pricing, in which extra seating capacity is utilized by
providing last-minute offers on websites like lastminute.com.

On the cost side, greater use of e-commerce can bring two further advantages. All internet
buyers pay by credit card, though large customers may have credit facilities. This
significantly improves airlines’ cash flow, since payments are received within two or three

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days, whereas when sales are made via agents, revenues generated will normally take one to
two months to reach the airline. But they may take much longer. Since air travel is highly
seasonal with very marked peak periods, receiving cash up-front helps reduce the level of
working capital required and may well generate additional bank interest. Greater internet use,
especially for business-to-business dealings, also reduces costs in other areas. For instance,
online monitoring and ordering of supplies such as aircraft spare parts, stationery, in-flight
catering or products for in-flight sales can save labour costs, reduce stockholding and
improve efficiency. Costs can also be reduced by switching from traditional
telecommunication links to web.

According to Garrow (2022) as the world recover from the COVID-19, airline passengers
represent a different mix of customers with varying travel requirements, especially in terms
of when they wish to schedule their tickets. In a study by Hayakawa et al.(2021) on the role
of E-commerce in mitigating the negative impact of Covid-19 on international trade they
discovered EC is getting increasingly popular as people are now managing to book their
flight tickets in the comfort of their homes. EC business is expected to mitigate the negative
effects of COVID-19 and future pandemics and thereby helps to improve ticket sales which
impact positively on the cashflows.

2.11. 1 Electronic ticketing

Several definitions exist for electronic commerce, often known as E-commerce. E-commerce
is broadly defined by Kalakota and Whinston (1997:7) as "A new business model that
satisfies the needs of companies, merchants, and customers to reduce costs while enhancing
the quality of goods and services and speeding up service delivery." They see e-commerce as
a production process that uses a network of middlemen to transform digital inputs into
outputs with added value. Over the course of the last two decades, the influence of the
internet and websites has almost transformed every aspect of business. In both the developed
and developing worlds, electronic booking and payment methods are rapidly expanding.
According to Pandit (2017) e-ticketing comprises creating an electronic record of the ticket's
information, updating the status of the ticket at each stage when the passenger uses each
flight coupon, and processing payments after the flight to handle refunds, reissues, or provide

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management reports. Since its beginnings in 1997, e-ticketing has expanded quickly, largely
because of its ability to save airlines money.

Purchasing a ticket is more convenient when done online because it can be done from any
location, including your home (or even remotely using a laptop and mobile phone), at any
time of day, every day of the year. Online ticket providers often offer pertinent information
alongside the service, which is a benefit. This could influence future purchasing choices and
promote usage (Buford,1998). As a result, today's ticket buyers only need to use their home
computer and the internet to travel to the ticket offices rather conveniently. It is superior to
taking public transportation and waiting in lines at ticket booths. Additionally, there are
advantages for the service providers. Sales of tickets are rising as new markets are developed.
Once the service is launched, no additional labor is needed beyond routine maintenance and
data updates. There is less overhead and more automation in the transaction recording
process. A crucial element is that ticket sellers also offer easy services to customers, which
enhances their public image and promotes repeat business (Burford;2000).

2.11.2 Internet based payment (Wire transfers)

Effective payment methods are required as we exit the COVID 19 period in order to maintain
the industry's long-term viability. According to IATA (2021) The development of payment
technology varies greatly globally. Chinese consumers have embraced mobile payments, with
26% of them using their smartphones to book flights28. India's percentage is 11%, while the
average for other nations is merely 1% to 2%. Airline electronic ticketing often offers two
different payment options so that customers can complete the entire purchasing procedure.
Cash and credit card payments, for instance (debit card). The general public typically selects
a payment method that is simple to use but also has a sophisticated security mechanism.
Customers demand websites that protect personal information, offer secure payment methods,
and uphold the confidentiality of online communications (Franzak et al, 2001). Any airline
provider of an E-ticketing service is constantly working to improve and preserve their
payment mechanism.

"Travellers will assess a certain website's utility and usability, including information search,
internet subscription, and payment options" (Grace&Chia, 2009). This statement

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demonstrates how different factors affect the use of online electronic ticketing for the airline
company. Nowadays, individuals are constantly looking for the easiest and most comfortable
approach to do a work. Some clients will get frustrated with a long process to do something.
"The specific holdup cost paid on associated intangible goods will increase when a customer
spends a long time to grasp and become comfortable with the purchasing and payment
procedures at a particular shopping website" (Grace&Chia, 2009). If airlines fail to give
travellers the payment options convenient to them, whether it is through PayPal, credit cards,
NFC smartphone payments, or frequent flyer miles, on airline website, at the check-in desk,
or on the plane, they risk jeopardizing their sales.

To keep up with competitors and expand during crisis periods, airlines must examine their
payment procedures, identify flaws, and identify and seize potential. The primary goal is to
keep customers satisfied while increasing convenience when paying for their air ticket,
capitalizing on opportunities, and ensuring security for their payments. These goals can be
met by automating payment operations, improving reporting, and implementing sophisticated
fraud management systems. This ensures that, in the event of another pandemic, airlines will
have a secure payment platform to ensure a continuous flow of cash in the company.

2.12 Network Management (relationship between network management and Liquidity)

A group of nodes and edges constitutes a network (Wojahn, 2008). Most airline networks are
made up of the links (edges) connecting airports for air traffic (nodes). Three essential
characteristics that characterize air traffic networks are size, frequency, and connectivity.
Sallan and Lordan (2019) asserted that there are significant links between airline network
management and customer service attributes including timeliness and geographic coverage.
The two primary possibilities for network configuration are a hub-and-spoke system (single-
hub or multi-hub) and a point-to-point network.

2.12.1 Hub and spoke

Peitz and Spiegel (2014) define a hub and spoke network as a route system in which several
"spoke" sites are connected to one or a few "hubs" that are responsible for generating revenue
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and processing outbound transactions. According to Vasigh (2018), a hub and spoke network
is a planned structure that improves company cost effectiveness. By avoiding point-to-point
networking, they are able to provide products and services to the client on time, which also
helps to strengthen the brand in the market. In a hub-and-spoke network, aircraft are more
likely to fly at full capacity and can frequently fly routes more than once per day, according
to Abdelghany & Abdelghany (2016). They suggested that employing a hub would allow all
airports to be connected to one another with a minimum of four trips, as opposed to the ten
flights needed for a point-to-point service. The airline can serve all the cities with fewer
resources thanks to the difference in the number of necessary flights.

Figure 4 Hub and spoke

Expansion encourages travel, increases connectivity, and improves asset utilization (Gillen &
Morrison, 2005)

The benefits of the H&S system come from the consolidation of travel demand from each
spoke city to the largest or all of the network's destinations. Goedeking (2017) suggested that
growth in the network and passenger density have beneficial effects on supply and demand
from an economic standpoint. There is competitive edge resulting from the capacity to
service several cities of various sizes since travellers prefer to book their whole trip with a
single airline. Closely scheduled flights, a single check-in, more convenient gate and facility
locations, and a lower chance of lost luggage help passengers making hub connections
(Wittmer et al.;2013). The search and transaction expenses are reduced for the passenger

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when they are aware that an airline likely flies to their preferred location. When loyalty
programs are involved, familiarity with the airline's product reduces uncertainty and fosters
loyalty. Due to the consolidation of different origin-destination combinations on a limited
number of routes, the hub airline may benefit from higher load factors, higher frequencies
and the use of larger aircraft with lower unit costs (Dennis, 1994)

Flight frequency can be raised when additional locations in the network are added and as
more travellers pass through the hub. According to Gillen and Morrison (2014), large
network airlines run ten or more connecting complexes daily, allowing passengers to match
flights with chosen itinerary timings thanks to high frequency. A larger base across which to
distribute advertising and marketing costs is provided by increases in the number of
destinations serviced as well as in frequency. Instead of only promoting a few places, one
advertising promotes 50. Frequent flyer programs become more useful and effective.

As the airline recover from the pandemic, a hub and spoke network may significantly expand
the number of city-pair markets that an airline can service for a given level of output. This is
the immediate value of hub and spoke networks. In order to link supply and demand, it can be
quite effective to combine many traffic flows through a hub.

2.12.2 Point to Point

According to Zgodavová (2014) the point-to-point airline system, also known as the direct
network or line network, is a model where flights are operated directly between two cities,
regardless of their distance from one another. Goedeking (2015) suggested that a point-to-
point network is a route where an airline exclusively concentrates on origin and destination
traffic. It indicates that the airline solely cares about carrying travellers from a city of origin
(X) to a city of destination (Y) and back again. It is not interested in establishing connections
between travellers from (Z) and (Y) via other methods of transportation (X). Low-cost
airlines, like Fastjet Zimbabwe, are relevant in this category. The airline makes multiple stops
to pick up the short-distance customers during its flights.

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Figure 5 Point to point

2.12.3 Frequent-Flyer Program

O’Connell and Williams (2005) suggest that frequent-flyer program or FFP is one of the
four groups of dimensions involved in assisting passengers in deciding which airline
they will travel on (the other three dimensions are brand – reliability, quality, and
comfort; networks – flight schedules and connections; and fare).Likewise, Gilbert and Wong
(2003) also found that the networks and FFP are expected from, especially, business
travelers. Similarly, the Brazilian business travelers would rather fly FSC because of the
FFP reason as well (Huse & Evangelho, 2007). Meanwhile, from the airlines’ perspectives,
such a program can increase passenger loyalty and improve load factors (Chang & Hung,
2013; Flores-Fillol, 2009). Mak and Go (1995) also found that although FFP can increase
passenger loyalty, the program came third in mind when their respondents were considering a
flight (after schedule and brand image). The FFP is commonly applicable among alliance
members as well. The integration among alliance members is benefited by long-haul FFP
members (with flight connections at a hub), particularly if a passenger is travelling to a
destination where his/her FSC does not serve (Niranjana et al.,2014). For instance, although
Lufthansa does not have a direct flight to Bali from Germany, their passengers can still
accrue FFP points and other benefits when travelling to Bali from Frankfurt (they can connect
to another Star Alliance member either in Bangkok or Singapore). According to Chin (2002),
the airline’s FFP has generated a significant positive impact on passengers’ decisions in
choosing Singapore Airlines. Additionally, Chin also suggests that the airline’s FFP
members, who participated in his survey, showed a willingness to pay higher airfare.

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2.12.4 Open Skies and Global Alliances
Stoll (2004) asserts that "the creation of alliances fundamentally reflects the airline industry's
efforts to expand its global network-based structure within the bounds set by legislative
regulations. With origins in the earliest international accords controlling air transport, the
concept of "open skies" comprises the legal framework that surrounds the benefits granted to
airlines. According to Vedder (2008) airlines join global alliances in order to expand their
worldwide reach. In accordance with the bilateral and multilateral air services agreements,
airlines from participating nations are permitted to operate legally on international
commercial flights for the transportation of people and products. Bilateral air service
agreements between nations have been more significant since the Chicago Convention and
are currently the main means of governing international air travel.

The three major alliances – Star Alliance, oneworld, and SkyTeam – account for nearly three-
quarters of all scheduled air traffic worldwide (73.1 per cent as of December 2008). Many
alliances include shared use of airport lounges, pooled frequent flyer programs, and
cooperative marketing to split costs in addition to revenue-generating activities like code-
sharing and selling seats on each other's flights (Chan, 2000). A sort of alliance that may
involve risk sharing, coordinated operational processes, and collaborative financial operations
is an airline-airport alliance (Trautmann, 2007)

2.13 Empirical evidence

A research by Dube et al. (2022) investigated the COVID-19 pandemic's effects on the
worldwide aviation sector and its recovery paths, with a primary focus on North America,
Europe, and Pacific Asia. Their research revealed that the pandemic's effects had severely
harmed the world's aviation sector, which had suffered significant revenue losses ever since
travel restrictions were implemented. Their research also revealed that the need for domestic
and regional aviation was expected to accelerate the sector's revival. The relationship
between fleet structure and market concentration was investigated by West and Bradley in
2008. They suggested a more varied fleet structure, which would be more suited if the airline
considered reaching out to different markets. The study's results showed that, in contrast to
the authors' hypothesis, a rise in the fleet standardization index improved profitability.
Regarding the connection between fleet homogeneity and airline profit margin, they reach the

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same results as Kilpi (2007). Merkert and Hensher (2011) also found some evidence of fleet
uniformity and operational efficacy in parallel to Brüggen and Klose (2010).

A review of the literature indicates that many studies on airline and fleet management that
concentrate on the economic consequences of crises reach a recommendation for policy or a
conclusion for an empirical investigation. So it appears that such study does not further our
understanding of fleet management. In light of this, research on fleet management and
standards must be integrated. The COVID-19 pandemic situation has underlined the necessity
for this. Every nation views forced confinement as an issue for the aviation sector. Forced
confinement conditions that restrict persons from traveling both locally and internationally
are subject to an air travel ban. During the restriction, air traffic has decreased by up to 94%
of the typical pace for worldwide passenger transit (Suau-Sanchez et al., 2020).

2.13.1 Cost containment measures

Cost containment provides a unique opportunity to re-baseline costs including clean sheet
budgeting which is the process of rebuilding the operating budget from the ground up to
transform the airline to operate efficiently in a post-COVID-19 world. Restructuring charges,
asset write-downs and renegotiating existing contracts for more favorable terms with
intermediaries and third-party vendors should be on the table. For the business model, this is
an opportunity to reinvent the airline network, pricing, revenue management and airline
operations.

2.14 Chapter summary

This Chapter discussed the literature that has examined the insectionality between cash flow
strategies and airlines survival and finance optimisation. Appropriate gaps where found in
some occasions hence this study will close those gaps.

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 CHAPTER 3

RESEARCH METHODOLOGY

3.0 Introduction

The preceding chapter explored the literature related to cashflow optimisation strategies and
how they influence profitability in airline business. The researcher is expected to explain,
justify and align the research philosophy to the research strategy being applied in any given
research endeavour (Knox, 2004). Therefore, the thrust of this chapter is to explain the
research design and to justify the research philosophy, research strategy, population and
sampling sizes involved, sampling method, data sources, data collection, data analysis and the
preservation of the ethical principles that are involved throughout the research process.

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3.1 Research Philosophy

Saunders et al. (2009) define scientific theory as the process or approach through which
knowledge is created depending on the researcher's worldview. Cooper and Schindler's
(2008) theory for correlational research is based on the researcher's expectations, aspirations,
and hypotheses about the situation. Positivism, realism, interpretivism, and pragmatism are
considered to be the four primary sub-categories of research philosophy (Wilson, 2016). This
study was built on a positivist approach since it looks to see how cash flow optimization and
airline business profitability relate to one another. The preconceived notions have to be
consistent with the study's broad viewpoint. Since positivism is a logical philosophy that
seeks to elucidate causal relationships between variables, as Kanhukamwe (2015) points out,
it was judged relevant for this study.

3.1.1 Positivism Research Philosophy

Positivism is a philosophy founded on the idea that only data received via experience (the
senses), especially measurement, may be taken into account. The researcher's involvement in
positivist-related studies mostly focuses on data collection and objective evaluation. These
studies often yield clear-cut, quantitative results. According to Crowther and Lancaster
(2008), deductive research is linked to positivist studies, whereas inductive research is linked
to phenomenology. Since it does not assert the existence of things or what it means for items
to exist (ontology), positivism is an interdisciplinary field of study that focuses on how we
interpret them (epistemology). The positivist research philosophy was chosen for this study
because it examines the research problem from various angles, combining approaches to
reach conclusions, and its epistemology is unbiased-value free (Wilson, 2010), resulting in a
more realistic ultimate conclusion.

3.2 Research Paradigms

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A research paradigm is the philosophical framework around which the study is built. It
provides a framework of ideas and perceptions upon which the research project's theories and
methods might be based. Ontology, epistemology, and research methods together constitute a
research paradigm.

3.2.1 Ontological Assumption

The researcher’s ontological assumption, a personal assumption which is impossible to refute
empirically, is their assumed answer to the research question by concept-definitions. That is
to say, what the researcher decides they are studying or what should be studied, may that be
an entity, agent, behaviour etcetera and the way in which they perceive the reality of what is
being measured. In this study, the researcher assumes there is a two-way causal link between
cash flow optimisation strategies and profitability in airline businesses.

3.2.2 Epistemological Assumption

The epistemology is the procedure of the theory of knowledge. “This issue is concerning the
major question that is regarding as obtainable discipline in the field of knowledge.” (Bryman,
2001). The Epistemological Assumptions Epistemology is ‘a way of understanding and
explaining how we know what we know’, (Crotty, 2003). In this study, the researcher
assumed there is a nexus between cash flow optimisation strategies and profitability in airline
business.

3.2.3 Methodological Assumption

Consist of the assumptions made by the researcher regarding the methods used in the process
of either quantitative or/and qualitative research (Creswell, 2003).

3.2.3.1 Research Approach

Study approaches are a collection of research plans and methodologies that sometimes
include broad assumptions to precise data collecting, analysis, and interpretation methods
(Collins, 2010). The two most popular methodologies are qualitative and quantitative ones. In
this study, the deductive research method was used. The deductive methodology, as defined
by Daymon et al (2011), is a strategy in which researchers start with a hypothesis or theory,
which is subsequently proven beyond possible doubt by empirical evidence that either affirms
or rejects it. The deductive technique is inextricably linked to the quantitative analysis
method. Quantitative analysis is an analytical process in which proof gets tested and
hypotheses and concepts are refined and tested beyond a reasonable doubt (White, 2000). To
determine the outcomes, a positivist investigator makes use of a mathematical and statistical

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method (Kanhukamwe, 2015). The quantitative analysis methodology was therefore used in
this study since the research cantered on establishing the cause-and-effect relationships
between central bank interventions and the exchange rate allocation mechanisms. Thus,
quantitative methodology was used in the study.

3.2.3.2 Research Strategy

A Research Strategy is a step-by-step plan of action that gives direction to the researcher’s
thoughts and efforts, enabling the researcher to conduct research systematically and on
schedule to produce quality results and detailed reporting. This enables one to stay focused,
reduce frustration, enhance quality and most importantly, save time and resources. According
to Saunders et al (2000) various research strategies are Survey, experimental, case study,
ethnography, grounded theory, cross-sectional and longitudinal studies and action research.
Jankowicz (2000) suggests that a case study is appropriate when the thesis focuses on a set of
challenges in a specific company or companies, such as the Ethopian Airways, Qatar
Airways, or Air Zimbabwe. A single or numerous scenarios might be used to demonstrate
methodology. Making use of the case study was significantly expected to give room for a
detailed and reasonably in-depth comprehension of the impact of cash flow optimisation
strategies on airline business profitability. It can also be concluded in the Sanders et al (2009)
submission that a descriptive case study strategy is more compatible with the collection of
quantitative data, such as the profitability ratios, efficiency ratios, solvency ratios among
others issued during macroeconomic uncertainty, and can be further analysed using
descriptive and inferential statistics in quantitative terms. This study adopted the case study
research strategy since it aims at analysing cash flow optimisation strategies on airline
business in Zimbabwe.

3.2.3.3 Research Design

A research design is the broad framework, blueprint, or structure of a research effort, whereas
a study strategy contains multiple instruments, techniques, procedures, or processes used to
obtain or assess data or information (Scholarship, 2021). A research design outlines the
structure of the research topic as well as the process for gathering empirical data, which is
primarily on the problem of linkages. The three categories of research are exploratory,
descriptive, and explanatory. According to Saunders et al., (2003), the way questions are
asked leads to descriptive, explanatory, or exploratory replies, with the three-fold study goal
of exploratory, descriptive, and explanatory being the most widely utilized in the research
technique literature. Thus, this study adopted the exploratory research design.

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3.2.3.4 Exploratory research
The investigation was carried out by the researcher. "A wide ranging, clearly intentional,
methodical, pre-planned action aimed at maximizing the finding of sweeping statements
resulting to description and cognition of an area of life," Stebbins defines a broad-ranging,
premeditated, methodical, pre-planned activity (2001). "Exploration is positivistic," writes
Stebbins (2011), "because its primary aim is to promote true blanket statements about a
specific group, procedures, activity, or circumstance." Exploratory research is particularly
useful when a subject of study has gotten little emphasis, as this subject has, as seen by the
research gap described in the previous chapter. This type of research aimed to investigate and
truly comprehend a confounded event. The researcher looked into the efficacy of cash flow
optimisation on profitability of airline businesses in Zimbabwe. As a result, this study
considered an exploratory research method since this area has not received much attention in
the Zimbabwean context.

3.3 Model Specification

The study used the Ordinary Least Squares (OLS) estimation technique to analyze the
efficacy of cash flow optimisation strategies on airline business profitability in Zimbabwe. It
has been chosen because it is a popular method which is easy to use and produces decent
results. The justification for the use of (OLS) in this study was its ability to give estimators
that are Best Linear and Unbiased (BLUE) (Gujarati, 2009). For (OLS) to give estimators that
are BLUE, some assumptions of the classical linear regression model (CLRM) must not be
violated. There should be no multicollinearity, normality in the distribution of the
disturbances as well as non-autocorrelation. In order to achieve the following diagnostic tests
were carried out. The Arbitrage Pricing Theory (APT) states that stock prices or expected
returns are influenced by a number of macroeconomic factors (Alshogeathri 2011). This can
be stated as follows:

R¿ = r i f + β i X i + ε t
Where:
R¿ = is the airline revenue 𝑖 at time 𝑡,
f
ri = is the risk-free interest rate or the expected return at time 𝑡,
β i X i = 𝑋𝑡 is a vector of cash flow optimisation strategies or responses to liquidity risks that
have been predefined and 𝛽𝑖 is a metric that measures how sensitive airline revenue is to each
of these cash optimisation factors,

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εt = is the error term representing unsystematic risk

3.3.1 The Cash Flow Optimisation Strategies Equation

CFOS = f(verbal intervention, operational intervention, concerted intervention, sterilized
intervention)

In line with theoretical literature, with some modifications (addition of variables), the
functional form of the model that was used in this study in relation to trade liberalization and
capital flows is specified as follows:

CFOSt = β 0 + β 1 Pt + β 2 RF t + β 3 ℑt + β 4 TLR t + ε t.
Where: εt is an error term with zero mean and a constant variance,

β 0 = Constant Term, β 1, β 2, β 3 & β 4 = Regression coefficients to be estimated.

i. Dependent Variable = CFOS : Cash flow optimisation strategies(USD$);

ii. Independent Variables = Pricing, Revenue Forecasting, Liquidity management, Tracking

Liquidity risk

Pt : Pricing,

RF t : Revenue Forecasting,

LM t : Liquidity Management,

TLR t : Tracking Liquidity Risk.

The hypothesis of the study:

H 0: Cash flow optimisation strategies do not affect the profitability in airline businesses.

H 1: Cash flow optimisation strategies affect the profitability in airline businesses

The research confirms 95% confidence level and 5% significant level. For any significance
number found to be outside the constructed interval, the null hypothesis was rejected.

3.3.2 The Pearson product-moment correlation coefficient (PPMCC) (r) Model

The Pearson product-moment correlation coefficient (PPMCC) (r) Model also known as the
bivariate correlation, is a statistic that measures linear correlation between two variables X
and Y and was employed to examine the relationship between the cash flow optimisation

47 | P a g e
strategies and profitability in airlines. It has a value between +1 and −1. A value of +1 is total
positive linear correlation, 0 is no linear correlation, and −1 is total negative linear
correlation. As follows:

S xy
r=
Sx SY

Where:

 X is the independent variable (cash flow optimisation strategies)

 Y is the dependent variable (profitability in airlines)
 S xy is the covariance of variable X and variable Y

 S x is the standard deviation of X

 S y is the standard deviation of Y

 r is a measure of the strengthof a linear association between two variables

3.3.3 Model Diagnostic Tests

3.3.3.1 Normality Test
An Assumption of the (CLRM) is that the error term must be normally distributed about the
mean. This means that there exists a better chance of obtaining minute disturbances. As
explained by Gujarati (2009), the Jarque Bera statistic which requires the computation of
skewness and kurtosis statistical measures which will be used to verify the existence of the
assumption.

3.3.3.2 Correlation Test

A correlation test (usually) tests the null hypothesis that the population correlation is zero.
Autocorrelation is when the error term in one time period is correlated with the error term in
the previous time period. With the presence of autocorrelation, OLS results and standard
errors are likely to be incorrect thereby giving incorrect confidence intervals and hypothesis
testing. The problem of autocorrelation can be detected by tests such as Breusch-Godfrey
(BG) and Durbin-Watson statistic (DW). The Breusch-Godfrey Serial (LM) test was used for
the in the study.

3.3.3.3 Unit Root Test

In statistics, a unit root test tests whether a time series variable is non-stationary and
possesses a unit root. The null hypothesis is generally defined as the presence of a unit root
and the alternative hypothesis is either stationarity, trend stationarity or explosive root

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depending on the test used. Autoregressive unit root tests are based on testing the null
hypothesis that =1(dierence stationary) against the alternative hypothesis that <1 (trend
stationary). They are called unit root tests because under the null hypothesis the
autoregressive polynomial of zt, (z)=(1z) =0, has a root equal to unity. Autoregressive unit
root tests were adopted to in this study.

3.3.3.4 Cointegration Test

Cointegration is a statistical method used to test the correlation between two or more non-
stationary time series in the long-run or for a specified time period. The method helps in
identifying long-run parameters or equilibrium for two or more sets of variables. The
Cointegration test is based on the logic that more than two-time series variables have some
similar deterministic trends that can be combined over a period of time.

3.3.4 Stability Test

3.3.4.1 Normality Test
An Assumption of the (CLRM) is that the error term must be normally distributed about the
mean. This means that there exists a better chance of obtaining minute disturbances. As
explained by Gujarati (2009), the Jarque Bera statistic which requires the computation of
skewness and kurtosis statistical measures which will be used to verify the existence of the
assumption.

3.3.4.2 Multicollinearity Test

Multicollinearity refers to the case in which, in the regression model, there are two or more
explanatory variables that are highly correlated which makes it difficult to isolate their
individual effects on the dependent variable (Salvatore and Reagle, 2002). In the presence of
perfect multicollinearity, the OLS estimates are indeterminate and their standard errors are
infinite. As such, statistical inferences will be inaccurate and precise estimation will thus be
difficult. An excess of 0.8 in the value of the correlation coefficient implies a serious problem
of multicollinearity (Gujarati, 2004). The study makes use of pair wise correlation matrix to
detect multicollinearity.

3.3.4.3 Heteroscedasticity Test

In regression analysis, heteroscedasticity (sometimes spelled heteroskedasticity) refers to the
unequal scatter of residuals or error terms. Specifically, it refers to the case where there is a
systematic change in the spread of the residuals over the range of measured values.
Heteroscedasticity is a problem because ordinary least squares (OLS) regression assumes that

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the residuals come from a population that has homoscedasticity, which means constant
variance.

3.4 Time Horizon

The most typical time horizons in research investigations are cross sectional and longitudinal
studies. For this study, a cross-sectional research horizon was used. A cross-sectional analysis
requires an evaluation of a specific problem statement at a certain point in time (Saunders et
al, 2009). This study timeframe gives you a perspective of the variables one would be looking
at, at a certain point in time. As a result, the financial year 2009-2019 was chosen as the
study's time range.

3.5 Data Sources

In every research, the investigator makes use of either primary data or secondary data or both.
For the purposes of this study, both primary and secondary data was used.

3.5.1 Primary Data

Primary data is a type of data that is collected by researchers directly from main sources
through interviews, surveys, experiments, etc. Primary data are usually collected from the
source where the data originally originates from and are regarded as the best kind of data in
research. In this study, a questionnaire was distributed to glean primary data from sampled
stakeholders from Air Zimbabwe, Civil Aviation Authority of Zimbabwe, fastjet Zimbabwe
Limited, Kuva Air, Kenya Airways, Airport Company of Zimbabwe.

3.5.2 Secondary Data

Secondary data refers to data that is collected from those records holding primary data aside.
These included published reports, journals etcetera. The main sources of secondary data for
this research were reports published by CAAZ, Air Zimbabwe and the RBZ (ZSE)
considering a period of 3 years from 2019 to 2022.

3.6 Population, Sample Size and Sampling

3.6.1 Target Population

A population can be defined as a group of people, events, or objects that have similar
features. (Mugenda, 2003). Any analysis that defines the target population should be
conducted. According to Saunders et al. 2009, a target population is an individualized
population from which the investigator attempts to acquire and generalize data that is typical

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of the entire community. 436 stakeholders in Airline industry (Airline companies and
regulators) were the target population. The purpose of this target population is to provide data
that is useful and relevant in addressing the research questions posed in the study of the effect
of cash flow optimisation strategies intervention on profitability of airline businesses.

3.6.2 Sample Size

Sample size refers to the number of observations or participants included in a study. This
number is usually represented by n (Bryman, 2015). To determine the overall sample size, the
researcher used a sample calculation formula known as the Andrew Fisher’s Formula. It
considers the following conditions: Determine the population size (if known), Determine the
confidence interval, Determine the confidence level, and Determine the standard deviation (a
standard deviation of 0.5 is a safe choice where the figure is unknown) and finally Convert
the confidence level into a Z-Score. Put these figures into the sample size formula to get your
sample size:

Table 3. 1 Confidence level with Z-scores

Confidence level z-score

80% 1.28

85% 1.44

90% 1.65

95% 1.96

99% 2.58

Table 1 Confidence level with Z scores

Source: Research Data (2022)
2
ZScore x StdDev x (1−StdDev )
Sample Size = 2
Confidence Interval
Thus, a total sample size of two hundred and eighty-five (285) respondents. Table 3.2 shows
the overall sample size for the study.

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 Sample frame/ Structure Target Population Sample Size
Air Zimbabwe 50 40
Fastjet Zimbabwe Limited 35 20
Ethopian Airways 75 60
Qatar Airways 95 85
Kenyan Airways 66 30
South African Airways 90 40
Civil Aviation Authority Zim 25 10
Grand Totals 436 285
Table 2 Sample of determination
Source: Research Data (2022)
3.6.3 Sampling
The procedure of selecting a representative sample of the total population with the purpose of
discovering characteristics that apply to the entire population is referred to as sampling
(Bryman, 2015). It was critical to ensure that the sample chosen for this study was
representative of the entire population. The study used non-probability sampling
methodology for the sake of this particular research topic. The study used a purposive
sampling method in which the sample size was chosen on the fly, i.e. based on a judgement
basis.

3.6.3.1 Purposive sampling

Purposive sampling, according to Black (2010), is a non-probability sampling method in
which elements for the sample are picked based on the researcher's judgment. Researchers
frequently feel that by applying sound judgment, they can produce a representative sample
and save time and money. Purposive sampling is one of the most cost-effective and time-
efficient sample techniques available and in this case financial reports of Air Zimbabwe,
Civil Aviation Authority of Zimbabwe and Reserve Bank of Zimbabwe were purposively
selected along with the financial years ranging from 2009 to 2019.

3.7 Data Analysis

The researcher employed E-views, Matlab and Excel to portray the information that has been
gathered. The results of the study were presented on 3D graphical illustrations and tables to
enhance thorough investigation and consistent comparison. The researcher further utilised
multiple regression analysis and hypothetical models to examine the relationship between

52 | P a g e
cash flow optimisation strategies and profitability in airline businesses. Regression method
was employed as it is expounding a greater degree of the nature of influence of independent
factors. Correlation Analysis was also employed to ascertain the degree of connection
between central bank intervention and exchange rate allocation mechanisms.

3.8 Validity and Reliability of results

In order to make suitable conclusions based on the study findings, good research is built on
the concepts of reliability and validity. When data is said to be dependable, it means that the
same research results would be obtained if the study was repeated under similar conditions.
To maintain reliability, methods must be consistent and the research process must be
transparent (Ramanathan, 2008). Valid data may be easily verified and is trustworthy. That is
why the researcher had to use audited published financial statements of the target population
of Air Zimbabwe, RBZ auction reports, and Civil Aviation Authority of Zimbabwe published
results in order to be valid (Gray, 2013). The phrase "reliability coefficient" encompasses a
number of different factors. Since this study has dependent and independent variables, it
adopted the correlation model to check the validity and reliability of the study

3.9 Chapter summary

The main focus of this chapter was to go through the research methodologies applied in this
study and how they were justified. The chapter provided a thorough explanation of the data
collection and analysis procedures used to test the hypothesis. Also discussed were the
sample size and the target population. Therefore, the preceding chapter focuses on the data
analysis, findings and discussions.

CHAPTER 4

DATA ANALYSIS, PRESENTATION AND DISCUSSION

53 | P a g e
4.0 Introduction

This study is on the analysis of cashflow optimization strategies for airlines as they plan to
emerge from the covid-19 crisis, hence the chapter offers an analysis of the data from the
assessed research participants. The data analysis was done using SPSS version 24, in that
manner data was presented using table chats and special output figures.

4.1 Demographic information

The study looked at the demographic characteristics of the respondents in trying to determine
the factors that are contributing to the assessment and the researcher focused on gender, age,
position of the participants. The results are shown by the following sections

4.1.1 Position
It was observed that there were 79 research participants that took part in the study figure 4.1
shows that 46.1% were from the RBZ, 15.8% were from Civil Aviation Authority, 15.8%
were in the managerial position while 22.4% were non managerial stuff.

Figure 4.1 Position

Figure 6 Position

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4.1.2 Gender distribution
In gender distribution it was observed that the study was taken by more males than females.
The findings shows that the pie chart below had 61.3% males.

Figure 7 Gender distribution

4.1.3 Age distribution
It was observed that the study had more participants that were between the ages 50 years and
above with 39%, 40to 50 years 28.6%, 25-30 with 16.6%, 30-40 with13% and lastly below
23 with2.6% as shown in figure 4.3. These age trends would be explained by the fact that the
participants were taken from departments that occupied such a diverse age distribution and
that is backed by stipulations by on to Creswell (2016), that all age groups should be availed
for a comprehensive research study and this has a direct impact on the value of respondents’
contributions towards a study.

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Figure 8 Age distribution

4.2 Cash flow issues facing Zimbabwean airline companies

The findings of the assessment found that the Zimbabwean airline companies are facing
cashflow issues since Zimbabwean Airline Companies does not have sufficient liquid cash to
meet its liabilities, cash flow issues arise. Businesses may find it difficult to cover debt
payments and other obligations when cash outflows outpace cash inflows. Net income
outflows do not always mean that a company is experiencing cash flow issues. It is
challenging for business owners to pay people on their payroll and settle debts because of a
shortage of easily accessible finances. Availability, efficiency, effectiveness, risk, and
compliance (Villaron, 2020; Campbell, 2022; Nhamo, 2022). In the table 4.1 below it has
been shown that 26.8% strongly agreed, 33.8% agreed, 12.7% were neutral while the rest
disagreed that Airline companies are making losses on a yearly basis. Findings support that
airline companies are struggling to pay up bills (31.9% strongly agree, 31.1% agree). It has
also been established that Airline companies are struggling to keep up operating costs as
supported by research evidence (39.2% strongly agree, 31.1% agree). In cashflow challenges

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it has been understood that 40.5% strongly agreed, 31.1% agreed 6.4% were neutral to
Airline companies are failing to pay suppliers on time and regularly default payments.

1 2 3 4 5

Airline companies are making losses on a yearly basis 26.8 33.8 12.7 15.5 11.3

Airline companies are struggling to pay up bills 31.9 26.4 6.9 27.8 6.9

Airline companies are struggling to keep up operating 39.2 31.1 6.8 10.8 12.2
costs
Airline companies are failing to pay suppliers on time 40.5 31.1 6.4 10.8 10.8
and regularly default payments

Table 3 Cashflows issues facing Zimbabwean airlines

4.3 The present liquidity situation impact on business performance

The current liquidity situation in the country has an impact on business performance. A
company needs liquidity because it demonstrates its capacity to fulfill its immediate
obligations. The common metrics for a company's liquidity condition are believed to be the
profitability ratios and current ratio. The relationship between short-term assets and short-
term liabilities is established by the current ratio. According to the survey, regulatory and
policy-related issues, problems with debt instruments, and issues with the foreign exchange
market are the primary red flags that limit the liquidity of airline firms (Garrow, 2022). In the
current assessment it has been seen that 39.8% strongly agreed, 31.9% agreed, 6.9% were
neutral to the fact that business conduct of market players is unethical hence impacted the
performance, in transparency it was seen there are questionable conduct (36.2%, strongly
agree, 34.7% agree, 5.6% neutral and the rest disagreed. It has been validated that reform
regulation measures of markets are problematic hence make it difficult for a business to
operate. And lastly 32.9% strongly agreed, 39.5% agreed and 7.9% were not sure as the rest
disagreed that the investment strategies and styles of market players have an impact on
liquidity hence makes it difficult for business to find investors as shown in table 4.2

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 1 2 3 4 5

The business conduct of market players is unethical hence 39.8 31.9 6.9 11.1 11.1
impacted the performance

There is no transparency in trading information hence lack of 36.1 34.7 5.6 11.1 12.5
trust in business

The reform regulation measures of markets are problematic 38.5 43.4 1.3 9.2 6.6
hence make it difficult for a business to operate

The investment strategies and styles of market players have an 32.9 39.5 7.9 6.6 13.2
impact on liquidity hence makes it difficult for business to find
investors

Table 4 Liquidity situation on performance

4.4 Benefits of foreign exchange auction trading system during the covid 19 epidemic

Muparadzi & Rodze (2021) and Banga et al 2020 it has been concluded that the National
Bank uses the foreign exchange (FX) auction as a tool for monetary policy to buy or sell
foreign currency in the interbank FX market. Exchange and over the counter (OTC) are the
two main organizational models for the financial markets, while certain modern technological
facilities muddy the traditional lines. In the participants responses 39.5% strongly agreed,
42.1% agreed, 1.3% were neutral, 10.5% disagreed and 6.6% strongly disagreed that foreign
exchange auction trading system increase the cashflow of airline companies. The findings
strongly suggested that foreign exchange auction trading system helped airline companies to
gain investors (37.7% strongly agree, 40% agree, 1.3 neutral and the rest disagreed). Hence
the study also noted similar findings that Airline companies benefited from the Foreign
Exchange Auction Trading System during the COVID 19 epidemic 32.5% strongly agreed,
41.6% agreed, 2.6% were not sure while the rest disagreed that foreign exchange auction
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 trading system helped airline companies to manage their cashflow. It has been seen that
foreign exchange auction trading system helped airline companies to settle debts with the
advantageous transactions offered by the foreign auction trading system (26.4% strongly
agree and 44.2% agree)

1 2 3 4 5

The foreign exchange auction trading system increase the cashflow of 39.5 42.1 1.3 10.5 6.6
airline companies
The foreign exchange auction trading system helped airline 37.7 40.0 1.3 9.2 10.5
companies to gain investors
The foreign exchange auction trading system helped airline 32.5 41.6 2.6 7.8 15.6
companies to manage their cashflow
The foreign exchange auction trading system helped airline 36.4 44.2 1.3 10.4 7.8
companies to settle debts with the advantageous transactions offered
by the foreign auction trading system

Table 5 Benefits of foreign exchange auction system

4.5 Inferential statistics

4.5.1 Regression Analysis

A positive coefficient indicates that as the value of the independent variable increases, the
mean of the dependent variable also tends to increase. There is a significant impact of
cashflows on profitability, the hypothesis tests if cashflows carries a significant impact on
profitability. Cashflows significantly predicted profitability, F (14.711) = 81.806, p < 0.000,
which indicates that the cashflows can play a significant role in shaping profitability (b
= .491, p < .000). These results clearly direct the positive effect of the cashflows. Moreover,
the R2 = .1800 depicts that the model explains 18% of the variance in profitability. The tables
shows the summary of the findings.

Model Summaryb

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Model R R Square Adjusted R Square Std. Error of the Estimate

1 .424a .180 .168 1.10498

a. Predictors: (Constant), CASHFLOWS

b. Dependent Variable: profitability

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 17.962 1 17.962 14.711 .000b

Residual 81.806 67 1.221

Total 99.768 68

a. Dependent Variable: profitability

b. Predictors: (Constant), CASHFLOWS

Coefficientsa

Unstandardized Coefficients Standardized Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) .899 .330 2.724 .008

CASHFLOWS .491 .128 .424 3.836 .000

a. profitability

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4.5.2 Correlations
A preasorn correlation was computed using SPSS to test the hypothesis of the study. The
study had hypothesized that

H 0: Cash flow optimisation strategies do not affect the profitability in airline businesses.

H 1: Cash flow optimisation strategies affect the profitability in airline businesses

Findings in this manner points that cashflow optimization had a moderate effect on
profitability of the business. The result shown in table 4 shows that r=.289, p=.017, n=68.

Correlations

CASHFLOWS profitability

CASHFLOWS Pearson Correlation 1 .289*

Sig. (2-tailed) .017

N 71 68

Profitability Pearson Correlation .289* 1

Sig. (2-tailed) .017

N 68 75

*. Correlation is significant at the 0.05 level (2-tailed).

In determining the extent to which airline companies have benefited from the Foreign
Exchange Auction Trading System during the COVID 19 epidemic a regression analysis was
computed. The findings were in support of the view that there is a significant impact of
Foreign Exchange Auction Trading System during the COVID 19 epidemic on profitability

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 as well as performance of airline firms. Foreign Exchange Auction Trading System
significantly predicted profitability, F (79.328) = 65.302, p < 0.000, which indicates that the
Foreign Exchange Auction Trading System and cashflows can play a significant role in
shaping profitability (b = .919, p < .000). These results clearly direct the positive effect of the
Foreign Exchange Auction Trading System and cashflows. Moreover, the R2 = .700
depicts that the model explains 70% of the variance in profitability. The table shows the
summary of the findings.

Model Summaryb

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .842a .709 .700 .64156

a. Predictors: (Constant), Foreign Exchange Auction Trading System, CASHFLOWS

b. Dependent Variable: profitability

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 65.302 2 32.651 79.328 .000b

Residual 26.754 65 .412

Total 92.055 67

a. Dependent Variable: profitability

b. Predictors: (Constant), Foreign Exchange Auction Trading System, CASHFLOWS

Coefficientsa

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 Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) .919 .201 4.565 .000

CASHFLOWS -.703 .118 -.601 -5.971 .000 .441 2.266

Liquidity status 1.326 .112 1.191 11.831.000 .441 2.266

a. Dependent Variable: profitability

4.5.3 Collinearity Statistics

The variance inflation factor (VIF), which measures the correlation and strength of
correlation between the predictor variables in a regression A value of 1 indicates there is no
correlation between a given predictor variable and any other predictor variables in the model.
A value between 1 and 5 indicates moderate correlation between a given predictor variable
and other predictor variables in the model, model. In this study Foreign Exchange Auction
Trading System and cashflows were found to be held at 2.266 thus indicating to be moderate
predictor variable I other factors that predict profitability were held constant as shown in the
table below

Coefficientsa

Collinearity Statistics

Model Tolerance VIF

1 CASHFLOWS .441 2.266

Foreign Exchange Auction Trading System.441 2.266

a. Dependent Variable: profitability

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In order to determine normality graphically, we can use the output of a normal Q-Q Plot. The
data was normally distributed, as the data points close to the diagonal line. As visible from
the normal Q-Q plot below, the data is normally distributed.

Model Summaryb

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .893a .798 .795 .43859

a. Predictors: (Constant), liquidity management

b. Dependent Variable: PERFORMANCE

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The researcher used a regression analysis to determine the relationship between performance
and the present liquidity situation. The findings support that the view that there is a
significant impact of liquidity status and the actual performance of airline firms. Liquidity
situation significantly predicted performance, F (264.506) = 12.888, p < 0.000, which
indicates that the improvement or a problem in the liquidity status would mean a problem in
performance or improvement. These results clearly direct the positive effect of the of
liquidity status on performance Moreover, the R2 = .795 depicts that the model explains
79.5% of the variance in performance. The table shows the summary of the findings.

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 50.880 1 50.880 264.506 .000b

Residual 12.888 67 .192

Total 63.768 68

a. Dependent Variable: PERFORMANCE

b. Predictors: (Constant), liquidityISSUES

Coefficientsa

Model Unstandardized Coefficients Standardized Coefficients t Sig.

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 B Std. Error Beta

1(Constant) .600 .119 5.023 .000

Liquidity
.787 .048 .893 16.264 .000
management

a. Dependent Variable: PERFORMANCE

The assessment between fare and liquidity management was tested using Pearson Correlation
Coefficient, which established that between to two variable there existed a positive
relationship. Findings show that the positive change in fare would encourage a change in
liquidity management without explaining for causality. Findings as shown in table r=554,
p=.000, n=71.

Correlations

Liquidity
Fares management

fares Pearson Correlation 1 .554**

Sig. (2-tailed) .000

N 77 71

Liquidity management Pearson Correlation .554** 1

Sig. (2-tailed) .000

N 71 72

**. Correlation is significant at the 0.01 level (2-tailed).

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A positive coefficient indicates that as the value of the independent variable increases, the
mean of the dependent variable also tends to increase. There is a significant impact of
contractual obligations on cashflows, the hypothesis tests if cashflows carries a significant
impact on profitability. Cashflows were significantly predicted by contractual obligations, F
(9.600) = 9.329, p < 0.000, which indicates that the cashflows can play a significant role in
shaping profitability (b = .491, p < .003). These results clearly direct the positive effect of the
meeting contractual obligation. Moreover, the R2 = .125 depicts that the model explains
12.5% of the variance in cash flows. Moreover, an airline in crisis times they need to make
sure that whenever there is a contractual obligation there is room to enforce invoke force
majeure. The tables show the summary of the findings.

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .354a .125 .112 .98577

a. Predictors: (Constant), contractual obligations

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

1 Regression 9.329 1 9.329 9.600 .003b

Residual 65.106 67 .972

Total 74.435 68

a. Dependent Variable: CASHFLOWS

b. Predictors: (Constant), contractual obligations

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A positive coefficient indicates that as the value of the independent variable increases, the
mean of the dependent variable also tends to increase. There is a significant impact of e-
commerce on liquidity management, the hypothesis tests if e-commerce carries a significant
impact on liquidity management. The status of liquidity management was significantly
predicted by ecommerce, F (39.482) = 29.250, p < 0.000, which indicates that the cashflows
can play a significant role in shaping profitability (b = .442, p < .000). These results clearly
direct the positive effect of the meeting contractual obligation. Moreover, the R 2 = .354
depicts that the model explains 35.4% of the variance in liquidity management. The tables
show the summary of the findings.

Model Summary

Std. Error of the

Model R R Square Adjusted R Square Estimate

1 .603a .364 .355 .86072

a. Predictors: (Constant), e-commerce

ANOVAa

Sum of
Model Squares df Mean Square F Sig.

1 Regression 29.250 1 29.250 39.482 .000b

Residual 51.118 69 .741

Total 80.368 70

a. Dependent Variable: liquidity management

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 b. Predictors: (Constant), e-commerce

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients

Std.
Model B Error Beta t Sig.

1 (Constant 5.44
1.088 .200 .000
) 7

e- 6.28
.442 .070 .603 .000
commerce 3

a. Dependent Variable: liquidity management

A positive coefficient indicates that as the value of the independent variable increases, the
mean of the dependent variable also tends to increase. There is a significant impact of fleet
planning on cashflows, the hypothesis tests if fleet planning carries a significant impact on
cashflow management. Cashflows were significantly predicted by fleet planning, F (16.843)
= 14.663, p < 0.000, which indicates that the cashflows can play a significant role in shaping
profitability (b = .341, p < .003). These results clearly direct the positive effect of the meeting
fleet planning obligation. Moreover, the R2 = .196 depicts that the model explains 19.6% of
the variance in cash flows. The tables show the summary of the findings.

Model Summary

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 Std. Error of the
Model R R Square Adjusted R Square Estimate

1 .443a .196 .185 .93304

a. Predictors: (Constant), fleet planning

ANOVAa

Sum of
Model Squares df Mean Square F Sig.

1 Regression 14.663 1 14.663 16.843 .000b

Residual 60.069 69 .871

Total 74.732 70

a. Dependent Variable: CASHFLOWS

b. Predictors: (Constant), fleet planning

Coefficientsa

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

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 B Std. Error Beta

1 (Constant) 6.4
1.514 .236 .000
09

fleet planning 4.1

.341 .083 .443 .000
04

a. Dependent Variable: CASHFLOWS

4.5.4 Reliability statistics

The study observed higher Cronbach’s alpha score which was held at .935 for 19 statistical
items. The score shows a higher internal consistency score of the research.

Reliability Statistics

Cronbach's
Alpha N of Items

.935 19

4.6 Chapter Summary

This study is on the analysis of cashflow optimization strategies for airlines as they plan to
emerge from the covid-19 crisis, hence the chapter offers an analysis of the data from the
assessed research participants. The data analysis was done using SPSS version 24, in that
manner data was presented using table chats and special output figures. The chapter provided
a detailed analysis of the research findings. The chapter ends on the validation that
Zimbabwean airline companies are facing cashflow issues since Zimbabwean Airline
Companies does not have sufficient liquid cash to meet its liabilities a universal situation in
the country has an impact on business performance

CHAPTER 5

SUMMARY CONCLUSION AND RECOMMENDATIONS

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5.0 Introduction

The study's conclusions and recommendations are presented in Chapter 5. This chapter will
provide the results' initial presentation. The key findings were highlighted in the finding’s
summary. In this chapter, suggestions will also be made in light of the study's findings. This
dissertation concludes with a chapter summary and suggestions for additional research.

5.1 Summary of the study

The study found that that the Central Bank uses the foreign exchange (FX) auction as a tool
for monetary policy to buy or sell foreign currency in the interbank FX market. Exchange and
over the counter (OTC) are the two main organizational models for the financial markets,
while certain modern technological facilities muddy the traditional lines. In the participants
agreed that foreign exchange auction trading system increase the cashflow of airline
companies. The findings strongly suggested that foreign exchange auction trading system
helped airline companies to gain investors. Hence the study also noted similar findings that
the local airline companies benefited from the Foreign Exchange Auction Trading System
during the COVID 19 epidemic agreed that foreign exchange auction trading system helped
airline companies to manage their cashflow. It has been seen that foreign exchange auction
trading system helped airline companies to settle debts with the advantageous transactions
offered by the foreign auction trading system.

In determining the extent to which airline companies have benefited from the Foreign
Exchange Auction Trading System during the COVID 19 epidemic a regression analysis was
computed. The findings were in support of the view that there is a significant impact of
Foreign Exchange Auction Trading System during the COVID 19 epidemic on profitability
as well as performance of airline firms. Foreign Exchange Auction Trading System
significantly predicted profitability which indicates that the Foreign Exchange Auction
Trading System and cashflows can play a significant role in shaping profitability. These
results clearly direct the positive effect of the Foreign Exchange Auction Trading System and
cashflows. Moreover, depicts that the model explains 70% of the variance in profitability.

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The study found a positive coefficient which indicates that as the value of the independent
variable increases, the mean of the dependent variable also tends to increase. There is a
significant impact of fleet planning on cashflows, the hypothesis tests if fleet planning carries
a significant impact on cashflow management. Cashflows were significantly predicted by
fleet planning which indicates that the cashflows can play a significant role in shaping
profitability. These results clearly direct the positive effect of the meeting fleet planning
obligation.

The study found that the current liquidity situation in the country has an impact on business
performance. Local airlines need to effectively manage their cashflow because it
demonstrates their capacity to fulfil immediate obligations. The common metrics for a
company's liquidity condition are believed to be the profitability ratios and current ratio. The
relationship between short-term assets and short-term liabilities is established by the current
ratio. According to study findings, regulatory and policy-related issues, problems with debt
instruments, and issues with the foreign exchange market are the primary red flags that limit
the liquidity of airline firms. The study validated that reform regulation measures of markets
are problematic hence make it difficult for a business to operate. The investment strategies
and styles of market players have an impact on liquidity hence makes it difficult for business
to find investors.

The study found that the aviation industry endured severe disruption in 2020, as a result of
the coronavirus pandemic, which exposes the long-term viability of airlines. Perhaps the most
severely impacted industry is the aviation sector. Passenger traffic across the globe fell by
80% as a result of restricted movements, decreased tourism, reduced revenue and compressed
business activity which had a negative impact on the airline operations' ability to maintain a
healthy financial position. Due to their vulnerability to the cyclic momentary shocks of
fluctuating oil prices, shifting demand, and depreciating currencies, airlines have been forced
to make significant structural changes to their operating strategies, business models, revenue,
and pricing strategies in order to improve their cash flow position as they emerge from the
long-term effects of COVID-19.

The study found that the Airlines started suspending all flights and their operation were put
on hold. Governments around the world-imposed lockdown, airports were closed except for

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returning citizens, foreign nationals were barred from entering, visiting tourists were forced
to return to their home countries, smaller airports were closed, and arriving citizens were
quarantined, leaving airlines with no choice but to adapt to, deal with, and survive the crisis.
The COVID-19 had a disastrous effect on airline finance all across the world. IATA (2020)
estimated that airlines incurred costs of $51 billion in terms of unavoidable costs, debts and
refunds in the form of vouchers and credit to customers whose itineraries were cancelled due
to the pandemic.

The study noted that the COVID-19 had a disastrous effect on airline finance all across the
world. The impact was considerably larger for Zimbabwean airlines, whose financial position
was already poor. The collapse of Kuva Airline just 3 months into its operations is the
evidence of growing cash flows pressures to the airline as they emerge from Covid 19. Air
Zimbabwe had a $300 million debt owed to foreign creditors, had not made a profit in nearly
three decades, and was heavily reliant on government bailouts due to political interference
and poor management. Fastjet Zimbabwe is one of the best-run commercial airlines in the
nation, defying the Covid 19 odds as seen by its performance. The airline operated
throughout the Covid era in Zimbabwean airspace. The aviation sector also witnessed the
collapse of Comair and its subsidiary business Kulula, which was operating under the
flagship of British Airways due to Covid 19.

The primary reason for the airlines' present cash flow issues is the COVID-19 pandemic
outbreak, which forced numerous firms to close and caused enormous disruptions in various
industry sectors. Airlines worldwide ceased operations as a result of the global spread of
COVID 19. According to IATA (2020) report, the world's passenger traffic volumes
decreased in April 2020 as a result of travel restrictions that affected all countries. It produced
the sharpest global recession since the Great Depression. The cash reserves that airlines held
before to the announcement of COVID 19 measures were what they relied on at that time.
Airlines that were caught off guard faced financially difficulties and were unable to cover for
the costs of aircraft storage, maintenance, and insurance. Many airlines cut massive amounts
of staff, and some even cut salaries.

The study found that funding is also a key enabler for Africa’s future in aviation (Villaron,
2020). The biggest problem that has been facing airlines in Zimbabwe is the lack of fleet

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financing. Unlike in developed countries such as the United States and most European
countries, airlines in developing countries have received direct cash injections in the form of
equity or loans. In Zimbabwe, there were no direct bailout to airlines by the government
during the pandemic period. The balance sheet of most airlines in Zimbabwe are bad such
that no financial institution is willing to support the industry. In South African, banks refused
to lend directly to South African Airways because the government could not provide loan
guarantees.

The study found that the majority of the cash flow issues experienced by airlines in
Zimbabwe were inherited prior to the pandemic and worsened during the pandemic. Local
airlines were already facing difficulties in accessing foreign currency due to the government's
numerous foreign currency reforms implemented between May 2016, when the idea for bond
notes was first floated, and June 2019, when the multi-currency system was terminated. Some
currency reforms led to discrepancies between bond notes or RTGS$ balances and US$,
which led to loopholes that drove the foreign currency parallel market, creating a situation
where there was a greater demand for foreign currency than there was supply. This worsens
the liquidity situation of most domestic airlines, as they are unable to settle their foreign
suppliers or institutions due to foreign currency shortages. Most local banks refused to
process telegraphic transfers from the local nostro account, claiming that RTGS balances did
not correspond to real USD values.

The study established that Zimbabwe is one of the most challenging aviation markets due to
low profit margins, high operating costs, heavy tariffs, and cut-throat competition. The cost
structures of Zimbabwean airlines are believed to have been greatly inflated by airport taxes,
landing fees, and parking charges, which are supposedly among the highest in Southern
Africa. The cost structure of airlines is extremely unsustainable. The cost structure of a
typical airline is divided into fixed costs (aircraft financing, insurance, etc.), operating costs
(labor, fuel, ticket distribution, etc.), and taxes, fees, and charges. It is characterized by fixed
costs in the operation and maintenance of expensive inputs such as aircraft. They employ a
highly skilled and costly workforce, and the majority of their operating expenses, such as fuel
and spare parts, are paid for in hard currencies, which are frequently in short supply in Africa.
The local airlines have found it difficult to operate profitably as a result of these factors.

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The study found that the local airlines operate some of the oldest fleets in the world as a
result of the country's ongoing economic difficulties. Most of the aircraft registered in
Zimbabwe are at least 20 years old. As a result, related maintenance expenses increase, as
does fuel usage, reliability declines, and downtime increases. They are exposed to dramatic
price swings because the majority of their fleet sizes are too small to bargain with fuel
suppliers for favorable terms. The airline industry has continued to incur significant losses,
which have a direct impact on cashflows.

From the findings, the Zimbabwean government banned bank lending in 2022 to halt
speculation against the Zimbabwean currency, as part of a slew of measures to halt its rapid
depreciation on the underground market. The decision was short-lived, as the Central Bank
ordered banks to resume bank lending at a rate of 200%, liberalized the foreign currency
market, and created gold coins as a store of value. The central bank purposefully tightened
monetary policy in order to limit monthly inflation. The central bank's measures did not
benefit the already ailing airline industry. The economy experienced a money supply
shortage, which increased liquidity risk as businesses struggled to settle their accounts.

The study found that embracing the low-cost carrier model (LCC) by flying the right sized
aircraft is essential as airlines prepare to emerge from the COVID 19 pandemic phase. Given
high fuel and maintenance and other operating costs in Africa, aircraft should be right-sized,
maintain high load factors without aggressive fares discounting and protecting yields. These
smaller aircraft should be fuel efficient and offer passengers a superior flying experience
which justifies a rational fare structure. The right-sized aircraft provide airlines the freedom
to position the aircraft on strategically significant routes when demand is currently low. The
airline may scale its capacity as the number of passengers increases by raising flight
frequency or moving to a larger aircraft in its fleet. Smaller aircraft offers reduced- operating
costs, which are critical for local airlines to break even or begin earning profits.

5.2 Conclusions

In conclusion, assessment found that the Zimbabwean airline companies are facing cashflow
issues since Zimbabwean Airline Companies does not have sufficient liquid cash to meet its
liabilities, cash flow issues arise. Businesses may find it difficult to cover debt payments and
other obligations when cash outflows outpace cash inflows. Net income outflows do not

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always mean that a company is experiencing cash flow issues. It is challenging for business
owners to pay people on their payroll and settle debts because of a shortage of easily
accessible finances. Availability, efficiency, effectiveness, risk, and compliance. Findings
support that airline companies are struggling to pay up bills. It has also been established that
Airline companies are struggling to keep up operating costs as supported by research
evidence. In cashflow challenges it has been understood that 40.5% strongly agreed, were
neutral to Airline companies are failing to pay suppliers on time and regularly default
payments.

The current liquidity situation in the country has an impact on business performance. A
company needs liquidity because it demonstrates its capacity to fulfill its immediate
obligations. The common metrics for a company's liquidity condition are believed to be the
profitability ratios and current ratio. The relationship between short-term assets and short-
term liabilities is established by the current ratio. According to the survey, regulatory and
policy-related issues, problems with debt instruments, and issues with the foreign exchange
market are the primary red flags that limit the liquidity of airline firms. In the current
assessment it has been seen that 39.8% strongly agreed to the fact that business conduct of
market players is unethical hence impacted the performance, in transparency it was seen there
are questionable conduct neutral and the rest disagreed. It has been validated that reform
regulation measures of markets are problematic hence make it difficult for a business to
operate. And lastly the investment strategies and styles of market players have an impact on
liquidity hence makes it difficult for business to find investors.

The study also noted that there is significant of the IMT tax on airline cashflows. This also
greatly impacts on the ticketing system, cash cycle etc within the airline as those deductions
have an implication on profitability of airlines especially when dealing with foreign
currencies. The taxation system then impacts the pricing system as international airlines are
charging less because of the non-existent of the exorbitant taxes upon local airlines.

Maladministration especially from the executives in which they impose on lower levels of
administrative employees. The dubious act of selfishness may lead to compromise to the
whole of the airline and may lead to negative implications on cashflows.

5.3 Recommendations

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5.3.1 Maximises on the Foreign Exchange Auction
The study discovered that the foreign exchange auction system, which airline firms can
employ to maintain their financial liquidity, was beneficial to them. The duration of the
foreign exchange auction system is uncertain, as is the system's long-term viability.
Therefore, airline firms should try to make the most of it and ensure they gain from it over
the long term in order to have strong cash liquidity in the near future and to be able to use it
effectively even after the foreign exchange auction has ended.

5.3.2 Give customers incentives and penalties

One tactic to encourage clients to make a payment early is by offering a discount, for
example a two percent discount on the value of the invoice if payment is made within seven
days. Other early payment incentives could include a discount on future orders, gift
certificates or merchandise. Mention these incentives in the invoice so the client is
immediately motivated to react to the offer. Airline companies can also reduce the risk of
unpaid invoices by adding late payment fees. Airline companies should be sure to clearly
highlight the late payment penalty in the initial customer contract and again when you first
invoice, explaining what the fee is and when it applies.

5.3.3 Cut unnecessary spending

Business expenses can sneak up on airline companies: extra office space they do not use , an
unsold inventory build-up, costly employee phone plans, to name a few. Each individual
purchase might be a small amount but combined they can turn into a serious drain on your
cash flow. By dedicating time to airline expense management and cutting out unnecessary
spending, airline can help plug cash leaks at their source. Airlines can also think of expenses
with a year-round approach, and reduce certain costly expenses in times of the year they are
not required to keep the business running.

5.3.4 Study cash flow patterns

These negative and positive cash flow swings do not have to catch airlines off-guard because
chances are there’s a pattern. If airline companies perform a cash flow analysis, where they
study their business history to identify trends, they can spot cash flow swings ahead of time
and start preparing earlier.

A cash flow forecast is a document showing the airline’s business’s income and outgoings for
a set period of time, broken down by weeks or month, or even quarter. It allows airline
companies to see at a glance when you will have a surplus or a deficit of cash in their
account, helping them to plan when to pay expenses.

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5.3.5 Robust Internal Controls
Airlines should ensure that their internal controls need oversight as without oversight it is not
good enough. The manager, or a trusted resource, should diligently review bank statements,
check or payment registers, and bank reconciliations regularly. The management should
review payroll statements for phantom employees and unapproved raises, hours, or even
expenses. The management should press upon the employee the need to keep supporting
documents and should periodically review some transactions and supporting documents for
validity and accuracy. By having robust understanding of internal controls, banks can use the
information to enhance their internal controls so as to reap the financial performance benefits.
Furthermore, the research is useful in the sense that scholars can utilise the findings to
formulate their future studies.

5.3.6 Revenue Optimisation

Effective revenue management is extremely important to the airline industry. Revenue
management in airline industry is the understanding of various demand conditions, various
passenger classes, levels of price sensitivity (elasticity of demand) among various passenger
groups, and the importance of the stochastic nature of demand by the traveling public (for
instance, the number of reservations and actual trips may differ) will affect the airlines'
ultimate performance. As a result, it is not surprising that airlines, who are aware of all of
these dynamic aspects, levy various fees in order to respond appropriately to changing
elasticities, varying passenger incomes, competitors' pricing policies, and market conditions.

It is obvious that giving up all control and letting people run wild is not ideal. However, there
must be a balance between complete centralization and unrestricted decentralization.
Methods and equipment can be centralized to give staff members a single language and
strategy for fostering innovation. However, the concepts and products that employees create
using these technologies should belong to them, and any accompanying money and assistance
should likewise be distributed hence it is difficult. And it's particularly challenging to
accomplish in well-established, hierarchical organizations where employees are sometimes
required to ask for permission before acting rather than being encouraged to take initiative
and own outcomes. Therefore, there may be need to construct flexible organisation structure
that deal away with red tape.

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5.3.7 Compassionate transformative airline Leadership

Leaders must listen carefully and take measured risks in order to practice compassionate
transformative airline leadership. They must encourage experimentation among their teams,
accept failure when it occurs, and strive to understand why something did not work so they
may learn from it as opposed to looking for the culprit. The creation of such an environment
will enable individuals to come up with ideas, question accepted wisdom in airline
Leadership, persistently advocate for their ideas to win support across boundaries and silos,
collaborate across silos to develop initial ideas and realize tested ideas, and accept failure as a
necessary component of the innovation process.

5.3.8 Balance to be found between total centralisation and unconstrained

decentralisation
It is obvious that giving up all control and letting people run wild is not ideal. However, there
must be a balance between complete centralization and unrestricted decentralization.
Methods and equipment can be centralized to give staff members a single language and
strategy for fostering innovation. However, the concepts and products that employees create
using these technologies should belong to them, and any accompanying money and assistance
should likewise be distributed. That is difficult. And it's particularly challenging to
accomplish in well-established, hierarchical organizations where employees are sometimes
required to ask for permission before acting rather than being encouraged to take initiative
and own outcomes. Therefore, there may be need to construct flexible organisation structure
that deal away with red tape.

5.3.9 Due Diligence

The investigation found that Airlines occasionally had problems with suppliers who broke
their commitments. The study advises suppliers to use caution while selecting their providers.
Airlines can reduce supply-chain risk by thoroughly researching potential suppliers before
signing a contract with them. By doing so, they can improve their working relationships and
lessen their exposure to dangers. Airlines should investigate each supplier's financial
sustainability and stability before finalizing the contract. By doing this, Airlines is shielded
from the external business risks associated with the supplier's bankruptcy. Instead of solely
relying on the financial reports its suppliers provide to it.

Airlines can get information about the financial viability of its suppliers from credit-rating
organizations. Airlines should consider aspects like product quality, regulatory compliance,

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and how its suppliers treat its partners and employees in addition to financial viability. By
doing this up front, supplier quality is confirmed, and associated supply-chain risks are
decreased. Dependence on a single supplier exposes Airlines to dangers brought on by a bad
political or economic climate affecting that vendor. It's a good idea for Airlines to diversify
its suppliers by purchasing its supplies from different companies. In this manner, the supply
chain's damage from the failure of one provider will be less severe.

5.3.10 Optimise Supplier Relationship Management

Even while Airlines 's present supplier relationship seems to be working properly, it may yet
be made even better. This can be achieved by improving supplier relationship visibility,
speeding up the procurement processing time, and centralizing all supplier data, including
contracts, certificates, notes, chats, and more. As with shifting conversations, emails, and
other correspondence from individual inboxes to a single, central account, monitoring
supplier spending, choosing volume allocations, and assisting supplier negotiations are all
examples of similar goals.

5.3.11 Implement Internet of Things Devices

Almost often, more data is better. That is why it's time to think about more advanced
techniques for gathering inter-operational data once the Airlines integration goals have been
specified and they have the various data streams to measure them. IoT (internet of things)
devices, for instance, can assist Airlines in gathering better information on the activities
taking place on the floor, in the warehouse, and during delivery workflows. Airlines can even
construct ‘digital twins’ of the production processes and its supply chain by connecting the
logistics network in this way. This would offer Airlines the ability to monitor activities from
all touchpoints on the value chain, digitally, in real time.

5.4 Areas of further research

The study evaluated airlines' plans for cash flow optimization as they prepare to recover from
the COVID-19 issue. This study serves as a foundation on which subsequent studies can
build to further their own investigations. Since there have been few research on this
developing topic, this study can be regarded as a pioneer in the area under consideration.
Future research can evaluate the efficacy of the suggested cashflow optimization strategies
and be based on a thorough analysis of the arguments for and against the strategies' efficacy.
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References

List of appendices

Appendix 1 Questionnaire

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