Professional Documents
Culture Documents
ACTIONS TO BOOST
INDONESIA AIR
TRANSPORT SECTOR
DURING COVID-19
PANDEMIC
BLEMBA 30
SYNDICATE #1
MID-TERM GROUP ASSIGNMENT
Aisyah Jati Putri - 29321026
Bonny Reinhard Immanuel - 29321045
Deby Hermina Syamria - 29321138
Denish Ariesmendi - 29321001
SYNDICATE #1 Dhea Erwina Laurents - 29321060
MEMBERS I Made Wiranatha K M - 29321102
Novira Elfarisa - 29321161
Raeda Fakriyya Luthfilhadi - 29321083
Rico Milza - 29321119
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CONTENT 01 COVID-19 SITUATION
05 SUGGESTED AIR TRANSPORT
STRATEGY & POLICY
TOPICS
02
BUSINESS ETHIC ISSUES AIR
TRANSPORT SECTOR
06 ACTION PLAN
03
CURRENT AIR TRANSPORT
POLICIES
07 CONCLUSION
04 ETHICAL RATIONAL
3
COVID-19
SITUATION
01
4
COVID-19 CONDITION IN INDONESIA
Key Milestone of COVID-19
The COVID-19 pandemic, also - 9th April 2020, the pandemic had
known as the corona virus 30th Jan 2020, WHO declared spread to all 34 provinces in
pandemic, is an ongoing global a Public Health Emergency of Indonesia 13th Jan 2021, 1st vaccine kicked
pandemic of corona virus disease International Concern - 24th April, Indonesia Close Border off
2019 (COVID-19) caused by severe
acute respiratory syndrome corona
Dec 2019 Jan 2020 Mar 2020 Apr 2020 Jun 2020 Jan 202
virus 2 (SARS-CoV-2). 31st Dec 2019, 1st - 2nd March 2020, 1st case in Indonesia on - 1st PSBB - PPKM Darurat
identified in Wuhan, China - 11th March 2020, WHO declared a - Indonesia Open Border - Indonesia Close Border
Pandemic
Cases Per Region as of Aug 2021 COVID-19 Status in Indonesia as of August 2021
The government applied "large-scale social restrictions" (Indonesian: Pembatasan Sosial Berskala Besar, abbreviated as PSBB), which was later modified into the "community
activities restrictions enforcement" (Indonesian: Pemberlakuan Pembatasan Kegiatan Masyarakat, abbreviated as PPKM).
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Source: https://covid19.go.id/peta-sebaran-covid19; https://en.wikipedia.org/wiki/COVID-19_pandemic_in_Indonesia
THE IMPACT OF COVID-19 PANDEMIC ON INDONESIAN AIR TRANSPORT
Passenger: 1000 Person
Aircraft: Unit During 2019 – 2020:
Cargo: Ton
Baggage: Ton • Decreased in number of domestic flights by -45% and -71%
Parcels: Ton
for international flights
• The number of passengers drop sharply to -81% for
international flights and -55% for domestic flights (73 Mio
passenger in total)
• Drastic reductions also occurred in domestic cargo (-13%),
baggage (-62%) and parcels (82%) and international cargo (-
31%), baggage (-80%) and parcels (-69%)
• The aviation industry's economic growth experienced
a contraction of -80.23% YoY in 2Q2020, bigger
Domestic Aircraft Traffic, 2016–2020
than contraction in 1Q2020 of -13.21% YoY
• Foreign tourists in 2020 decreased by -75% compared to
2019 YoY
02
7
BUSINESS ETHICS ISSUES
During the pandemic, the government faces a dilemma between prioritizing public health or economic growth,
which at the moment, these two things are not mutually beneficial. This condition affected the economic sectors
significantly. On top of that, the aviation industry has run into a critical financial struggle.
In order to control the spread of Covid-19, the government has implemented several policies that are burdensome
for the aviation industry. Due to the policies implementation since the Covid-19 outbreak started in March 2020, the
number of passengers has dropped to more than 70 million people for domestic and international flights. Even
more, some countries decided to close their borders, especially from Indonesia.
This crisis put some difficulties for the airlines, such as:
• Drastically income loss
• Inflated fixed, maintenance and operational costs (OPEX)
• Unable to pay debts
• Unable to pay employees salary
• Layoff the employees
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2020 INDONESIA AIRLINES MARKET SHARE
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Source: AirAsia Anunal Report 2020; https://finance.detik.com; https://investasi.kontan.co.id; https://www.liputan6.com; 2021 Garuda Indonesia Incidental Public Exposure; https://lokadata.id/; https://voi.id;
CURRENT AIR TRANSPORT
POLICIES
03
11
AIR TRANSPORT POLICIES
Decree of Covid-19 Response Acceleration Task Force No. 9 of 2020 on Criteria
and Requirements for Travel in the Adaptation of New Normal.
This regulation established general criteria and requirements regarding individuals
who want to travel using public transportation facilities, whether using land, sea,
or air modes. Common requirements set out in this regulation including the
Public-related identity, PCR test, and symptom-free certificates.
Policies
Decree of Covid-19 Response Acceleration Task Force No. 17 of 2021 on Provision
of Domestic Traveling.
This regulation concerning travelers leaving or entering areas under level 3 and
Government level 4 PPKM using public transport must have a vaccination certificate or a
negative RT-PCR Test Result that is valid for 2x24 hours at the time of departure.
of Indonesia
Regulation of Minister of Transportation No. PM.18 & PM.41 of 2020 on
Transportation Control to Prevent the Spread of Covid-19
Decree of Minister of Transportation No. SE.62 & SE.63 of 2021 on Instruction for
Industry-related Domestic and International Travel with Air Transportation.
Policies These operational policies mandated to control air transport activities, by
reducing the slot time of airport, infrequency among passengers of max amount of
seating capacity with social distancing, and guideline for flight operator by
enforcing strict health protocols.
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AIR TRANSPORT POLICIES (CONT.)
13
AIR TRANSPORT POLICIES (CONT.)
• 7 Broad Archetypes: government-backed commercial loans and government guarantees; recapitalization
through state equity; flight subsidies; nationalization; deferral and/or waiver of taxes and charges; grants;
and private equity. (Source: Journal of Air Transport Management 89 (2020))
Russian Federation’s tax deferral for Airlines. AU$715 million of unconditional Australian airline
(Ostapets et al., 2020) relief (through the Coronavirus Economic
Response Package).
(Commonwealth of Australia, 2020)
Global EURO-CONTROL member states’ agreement to US$32 billion in bailouts (including grants and
release a financial package enabling airlines to loans for US airlines) through the CARES Act).
Policy defer payment up to €1.1 billion of air traffic control (Courtney, 2020)
fees due for payment to Europe’s air traffic
Benchmark management industry.
(EUROCONTROL, 2020)
Source:
• Ostapets et al. https://www.whitecase.com/publications/alert/covid-19-russian-legal-impact.
• EUROCONTROL. https://www.eurocontrol.int/press-release/eurocontrol-states-assist-airlines-11bln-deferral.
• Commonwealth of Australia, 2020. Coronavirus Economic Response Package Omnibus Bill 2020 (Schedule 7, Part 2).
• Courtney. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text?q=product+actualizaci%C3%B3n .
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ETHICAL
RATIONAL
04
15
ETHICAL RATIONAL
Policy Description Existing Policy/Condition Ethical Issues
Domestic Travel Domestic air travel with For Java & Bali, travel with air transport is These requirements will force the traveler to do vaccine and
Restriction specific requirements allowed with 2x24h PCR test and tracing status with the test. This will increase the number of
vaccination certificate 1st dose; or 1x24h vaccinated people but also will reduce the interest of the people
Antigen test and vaccination certificate 2nd to travel especially with air transport.
dose.
For outside Java & Bali, travel with air Lots of districts in Indonesia do not have 2x24h PCR test
transport is allowed with 2x24h PCR test; service or proper 1x24 Antigen test service.
or 1x24h Antigen test.
Air travel are forbidden for passenger PCR test price is different in several cities and even higher than
under 12 years old. the flight ticket.
International Closed border for Foreign nationals who may enter Indonesia Limitation in international flights affect airline companies'
Travel Closure international air travel are those in accordance with the income.
Regulation of the Minister for Law and
Human Rights no. 27/2021, have permit Foreign nationals still can come to Indonesia with some
from related ministry, and from country that requirements and procedures.
have Travel Corridor Arrangement (TCA)
with Indonesia
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ETHICAL RATIONAL
Policy Description Existing Policy/Condition Ethical Issues
Airline Bailout The aviation industry as a Provide Garuda Indonesia Is this policy to save the Industry or specific company?
strategic industry employs 2 • Mandatory Convertible Bond As a government-owned company, giving bailout to Garuda
million and contributes 2,6% to (MCB) that reached to IDR 8.5 Indonesia can save the only airline company owned by the
GDP Trillion state.
• Program Khusus Ekspor (PKE) IDR
1 Trillion In the short term can it save the company, and in the long term
can it save the aviation industry?
• Long Term Debt Re- However, the government must ensure that the use of funds
structurization IDR 826,5 Billion
does not benefit only one party. The use of funds must have a
• Angkasa Pura I and long-term impact in saving the company, not only covering huge
Angkasa Pura II losses due to the company's inefficiency in leasing aircraft from
• Pertamina the lessor.
• Perum LPPNPI
As the owner of SOEs, the government can intervene through
another SOEs to help Garuda Indonesia in handling this
problem. However, the government should ensure this long-term
debt restructuring does not burden other SOEs in running
their business and does not have any future legal impact on
SOE officials who make restructuring decisions.
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ETHICAL RATIONAL
Policy Description Existing Policy/Condition Ethical Issues
Stimulus to PSC Subsidy vs Raise Ticket Subsidy of the passenger service On the one side subsidize PSC can increase the number of
industry Price charge (PJP2U) and ready to waive the passengers but however it is against the travel restrictions
passenger service charge (PSC) or policy.
airport tax in the rate of the ticket flights
Increase the price of airline tickets to Raising ticket prices can affect the airline profit margins and
limit the number of passengers based support the travel restriction policy at the same time.
on based on the Minister of
Transportation Regulation No 18 Increasing ticket price also can be an action from the
year 2020 article 14 during government to suppress price competition in the industry.
Pembatasan Sosial Berskala Besar
(PSBB) condition.
Airline Safety standard vs cost All the grounded aircrafts have to follow Airline companies must comply to the safety standards of the
Operational efficiency the SOP. operations including pilot license and technical aspects of the
All the pilots must maintain the license planes, despite they must remain cost-efficient.
incl. proficiency check, medical, and
experience.
Human resources 1433 new pilots graduated in 2020, Oversupply of pilot compared with low rate of employment.
while more than 180 Garuda's pilots
were laid off.1
Salary deduction Airlines have to cut some of their costs The salary of pilots that have been deducted is
to save the company, one of which is not commensurate with the risk of the job.
reducing employee salaries.
18
Source: Direktorat Kelaikudaraan dan Pengoperasian Pesawat Udara ; https://www.cnnindonesia.com/ekonomi/20200602115002-92-508933/181-pilot-garuda-indonesia-di-phk
1
SUGGESTED
STRATEGIES & POLICIES
FOR AIR TRANSPORT
05
19
STRATEGY & POLICY
No. Strategy Policy
Monetary Strategy • Policy in subsidize commercial interest rates and extending Non-Performing
2 Government monetary strategy that support the health and stability of the Loan target, and further policy in budget allocation to support the local
financial sector. government’s economic recovery.
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STRATEGY & POLICY
NO Strategy Policy
• Launch an aviation industry stimulus package. The government as a majority
Optimising Time Slots & Routes
shareholder of Garuda Indonesia should provide policy especially for Garuda
6 An optimizing strategy in-flight time slots, as well as re-activating domestic
Indonesia by focusing on its main business line of scheduled flights; such as
routes that were not operating.
re-activating domestic routes.
Unemployment Insurance Strategy
Design an unemployment insurance scheme that allows recently • Policy on compensation for salary loss due to compulsory quarantine, work
7
unemployed workers to receive enough money to cover their monthly from home caused by the pandemic conditions.
expenses during their period of unemployment.
• Policy for airline to utilize its passenger aircraft for cargo operation in order to
Air Cargo Strategy
optimize the revenue
8 Urge the airline to have the non-operated aircraft converted into freight
(cargo) aircraft.
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ACTION
PLAN
06
22
POLICY & ETHICAL ANALYSIS
Likely Consequences Ethical Standard
Key
Aspect
Stakeholders Positive Negative Duties of Party Right of Party Best Practices
Compliance May incur Comply with health Have safe business Collaborate with health
with health additional cost & customer conduct while still facilities to provide easy
standard needed to protection standard generating sizeable access to Covid-19 test
Airlines ensure the comply with profit Uphold new on flight health
continuation of health-related standard
business measure
Faster control Budget Provide clear & Right to give Integration of Customer &
on Covid-19 allocation and its effective regulation sanction or penalty Covid Test Data by
Improve Health
case implications for on health & to any stakeholder enhance Peduli Lindungi
Related
Government containment the business customer protection not comply with the app to provide better
Measure &
environment standard standard tracking & access from all
Customer
stakeholder
Protection
Standard
Get May incur Comply with health Have reliable & easy Customer should self-
standardized additional cost & customer access to any needs monitor for the potential
health needed to protection standard for required onset of symptoms for 14
protection rules comply with standard days on arrival and report
Customer to ensure health-related symptoms and travel history
safety flight measure to local health authorities.
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Policy &
POLICY ÐICAL
Ethical Analysis
ANALYSIS(cont.)
(CONT.)
Maintain Healthy Possibility of Utilize aid to sustain Easy access to Create clear scheme for
Business reduce the business needed aid flight delay & refund
Condition benefit for all Invest in more The devise plan procedure
Opportunity for stakeholder efficient technology on restructuring Cut off any underperform
better change in May result or method for organization subsidiaries or personnel
Airlines organization & major change business operation Reduce cost on nonpriority
business as whole in core Encourage for lean needs of operation
business & & mean Optimize the opportunity
existing organization for air cargo business
Business future plan restructuring
Improvement &
Strategic Keeping economic May need to Provide needed aid Have clear Provide bank load aid for
Recovery growth provide all for airlines business report from airlines
Improve possible Provide clear airlines on Grant subsidy or reduce in
[Loan aid, Cost sustainability of support regulation on aid for utilized aid plan tax & maintenance cost for
Efficiency & aviation industry regardless of airlines business Review & airlines
Organization negative Maintain business devise aid plan Maintain good business
Restructuring] outcome in dynamic between for each environment for Investor
Government short term airlines needed airlines Opening for potential route
Enforce operations especially for
regulation to domestic route due to the
maintain uncertainty of closure
healthy border worldwide
business whenever demand justified
dynamic
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ACTION PLAN
Collaborate with health facilities to facilitate rapid antibody test and vaccination services and enhance the
application Peduli Lindungi to alter the requirement to healthcare that airplane passengers have been vaccinated.
Review the self-quarantine procedure for 8 days which is considered is too long, particularly for those whose
PCR result is negative.
Provide remission from the fare on airport services, passenger service charge (PSC), fuel tax, apron rental fee,
and navigating & communication cost.
Restructuring Non-Performing Loan and reduction in interest rates by central banks.
Short-term Opening for potential route operations especially for domestic route due to the uncertainty of closure border
worldwide whenever demand justified.
Collaborate with several airlines that comply with standards to distribute vaccines all over Indonesia.
Make adjustment to configuration of passenger planes into cargo planes in order to optimize the opportunity
for air cargo business since the transport traffic cargo at the airport keep experiencing enhancement.
Provide safety arrangement while the aircraft ready to onboard.
Allow passengers to reschedule their flight with another airline since cash or credit card refund passenger
pertaining to denied boarding and flight cancellation are not mandatory.
Cut off some of its underperforming subsidiaries, for instance Garuda has direct ownership of 6 (six) subsidiary
companies, including travel agent Garuda Indonesia Holiday France S.A.S in Paris and tourism company PT. Aero
Mid-term
Wisata.
Conduct travel bubble policy with several potential countries to start open border.
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CONCLUSION
07
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THEORY OF ETHICS
"... justice denies that the loss of freedom for some is made "It is impossible to think of anything at all in the world, or
right by a greater good shared by others." indeed even beyond it, that could be considered good
without limitation except a good will."
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CONCLUSION
The Ethical issues in the air transport industry post Covid19 is a right vs right dilemma, where government are forced to maintain the
balance between economic/financial situations vs health conditions. Due to this nature, the theory to be picked is 'Ethical Relativism',
where the decision is to choose a balanced outcome for both sides.
Background Policies
1. Evaluate the ticket fare rates, bottom and top market cap
2. Subsidize rates and extending non-performing loan
3. Aviation industry stimulus package
Mitigate the financial loss suffered by the 4. Arrange an alliance between air transport providers, to reduce cost and increase efficiency
air transport industry between stakeholders
5. Collaborate with World Airline Organizations to help with health regulations implementations
6. Improve local routes based on justified demand
7. Cut off underperforming subsidiary
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CONCLUSION (CONT.)
Background Policies
Reduction in scheduled passenger flights Provide incentive to switch to cargo to optimize revenue
Maintain the airline workforce stability Insure the airline workforce with salary loss compensation
STRATEGIES TO BE IMPLEMENTED
Optimizing Improvement
Unemployment
Time Slots & Air Cargo on Health and
Insurance
Routes Safety Protocol
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THANK YOU
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