EFFECT OF COVID-19 TO

PROCUREMENT MANAGEMENT :

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

AirAsia Took Loan From 3 Banks to

increase it capital

AirAsia Looking For New

Shareholder to sustain its
operations

Fundraising means that

Airasia is diluting its equity
ARTICLE 2: AIRLINE TRAVEL GROUPS WARN OF MORE JOB CUTS AS COVID AID
TALK STALL
WRITER: DAVID SCHAPER
LINK : https://www.scribd.com/article/479294088/Airlines-Travel-Groups-Warn-Of-More-Job-Cuts-As-Covid-Aid-Talks-Stall
  Airlines and their employee unions are appealing with
Congress and the White House to enact a bill extending
government payroll support for the sector after nearly
40,000 workers were recently furloughed.
AIRCRAFT GROUNDED = ZERO
JOB  One of the sectors most severely affected by the Covid-
19 outbreak is the airline and travel-related business
sectors. Since the epidemic started, there has been a 70%
decrease in air travel, and hotel occupancy rates have
also dropped significantly.

 Because of the mounting uncertainty about whether

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

 The president also urged Congress to authorize direct

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

• Since the price-conscious leisure traveler is

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

• Particularly mainline carriers will need to control

their expenses and alter their business plans.

• Airasia must prioritize their domestic travel first

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

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

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

• Giant Company like Apple, Space Tesla can start an OEM

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

• All this giant company can also invest in the smaller

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

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

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

The dramatic drop in air traffic has

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

COVID-19 has caused 250% increase in

worldwide freight rates. Particularly those
between Asia and Europe, are being
affected by the conflict in Ukraine and
persistent pandemic, which putting pressure
on air freight prices. The Shanghai
lockdown resulted in flight cancellations
and a loss in capacity. It was a sharp decline
in demand for air cargo, which offset the
increase in air freight prices.
CHALLENGE:
DIFFICULT TO GET FUNDING

Each and every aviation stakeholder,

including but not limited to airlines,
airports, air navigation service
providers, aerospace manufacturers,
and everyone else along the value
chain, has been dealing with issues
that might threaten their survival.
Therefore, it’s quite hard to convince
investor for funding the business due
to the higher risk during COVID-19.
CHALLENGE:
LABOUR SHORTAGE

The aviation and travel-related

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

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

Additionally, because of their large fixed expenses and

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

Companies that rely more on air travel for their income

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

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

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

 Airlines will have to work more closely with the authorities

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

 Airlines and regulators can collaborate to establish standards

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

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

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

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