• International Journal of Technology (IJTech)
  • Vol 11, No 6 (2020)

Post COVID-19 Recovery Models and Strategies for Aviation in Indonesia

Post COVID-19 Recovery Models and Strategies for Aviation in Indonesia

Title: Post COVID-19 Recovery Models and Strategies for Aviation in Indonesia
Heri Fathurahman, Mohammed Ali Berawi, Imbuh Sulistyarini, Andyka Kusuma, Yasmine Nasution, Komarudin

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Cite this article as:
Fathurahman, H., Berawi, M.A., Sulistyarini, I., Kusuma, A., Nasution, Y., Komarudin, 2020. Post COVID-19 Recovery Models and Strategies for Aviation in Indonesia. International Journal of Technology. Volume 11(6), pp. 1265-1274

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Heri Fathurahman Department of Business Administration, Faculty of Administrative Sciences, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
Mohammed Ali Berawi Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
Imbuh Sulistyarini Department of Management, Faculty of Economics and Business, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
Andyka Kusuma Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
Yasmine Nasution Department of Management, Faculty of Economics and Business, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
Komarudin Department of Industrial Engineering, Faculty of Engineering, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia
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Abstract
Post COVID-19 Recovery Models and Strategies for Aviation in Indonesia

Global aviation has experienced many crises in the past, each of which has had a significant impact on air traffic. After each fall, the industry recovers and returns stronger, exceeding the previous volume of traffic; however, the COVID-19 pandemic presents a new level of concern, with unknown detrimental effects. The airlines, airports and all other partners involved have greatly suffered. The airport system has been hit by flight closures in many markets, including Indonesia. Airport management and operating companies, concessionaires, terminal tenants, ground handling and catering companies, and the various partners involved are under stress and financial constraints due to the pandemic. In response to this, the flight plan for the “new normal” takes into account the new flight demand and airline market structure scenarios. By using the qualitative approach, this research tries to construct recovery models and strategies for the Indonesian aviation industry post-pandemic. Results show several scenarios, classified as optimistic, moderate, and conservative for the recovery of the industry. This requires the construction of a business model through the V-shape, U-shape, Prolonged U-shape, L-shape and W-shape. In striving for the recovery of the aviation industry, three strategies are needed: survival, growth and sustainability.

L shape model; Prolonged U shape model; U shape model; V shape model; W shape

Introduction

Many governments quickly responded to pandemic covid-19 by strategizing their policies to support healthcare facilities, economic sectors, and social safety nets during the pandemic (Berawi, 2020). Mitigating pandemic negative impact is necessary for synergizing policies and strategic programs to be developed and implemented, including appropriate preparedness and effective responses (Berawi, et al, 2020).

The Indonesian Ministry of Finance noted that the 2020 State Budget deficit has reached IDR 500.5 trillion or 48.2% of the benchmark worth IDR 1,039.2 trillion. The value of the budget deficit is equivalent to 3.05% of the gross domestic product (GDP). This deficit was aggravated by the state revenue valued at only IDR 1,034.1 trillion, with a negative growth rate of 13.1% from last year's realization until August 2019. Meanwhile, state expenditure was recorded to be valued at IDR 1,534.7 trillion. The Indonesian Ministry of Finance has estimated the economic growth rate for 2020 between -1.7% to -0.6% (Anggraeni, 2020).

Moody's Investors Service estimates that the number of global airline passengers will not return to pre-COVID level until at least 2023. The low demand for global airlines will affect the recovery of the industry. In this analysis, aircraft manufacturers, such as Boeing and Airbus, will be the last parties to recover when the travel industry stabilizes. Demand has dropped by more than 90%, which significantly affects the global economy. The airline industry contributed 3% to global GDP in 2019. The key to the aviation industry's recovery lies in finding a vaccine for COVID-19; however, such is unlikely to be available before 2021, and may take longer for one that can address a potential mutation of the virus. Meanwhile, the government is expected to continue providing stimulus support for this industry to survive (Moody’s, 2020).

Fifty-eight percent of traveler respondents surveyed by airlines in eleven countries expressed their avoidance of air travel. Thirty-three percent have no plans to travel in the near future to avoid getting infected. Forty-five percent indicated that they would return to tourism trips in the coming months. However, most of the respondents were still willing to travel to visit family and friends or simply go on a vacation. Meanwhile, 66% expressed that they would make fewer trips for leisure and business after the lifting of restrictions. Furthermore, 64% said they would postpone travel until economic factors improve; referring to personal and global financial conditions (IATA, 2020).

        This research aims to develop a model and strategy for the aviation business to overcome the disruption due to the pandemic. In addition, this study aims to highlight various steps taken by the government and industry to revive the aviation sector. Such business models and strategies, which take into account the strengths and opportunities of the aviation industry (ICAO, 2015), will assist decision makers, governments and airlines in developing policies and interventions to restore the aviation sector during and after COVID-19.

Conclusion

The recovery of the Indonesian aviation industry can be done using three scenarios, namely optimistic, moderate and conservative. For the optimistic scenario, the aviation industry can use the V-shape model. For the moderate scenario, the industry can apply the U-shape and Prolonged U-shape models. Lastly, for the conservative scenario, the industry can apply the L-shape and W-shape models.

With the current conditions, the V-shape model is challenging to follow. The practical and feasible model would be the U-Shape where recovery takes place gradually. Prolonged U-shape, L-shape, and W-shape models have a slower pace for recovery. Such models involve double dip recovery, such that the aviation demand curve does not immediately return to normal, but shifts to the right.

Acknowledgement

This research was in collaboration with and financed by the Research & Development Agency of the Ministry of Transportation of the Republic of Indonesia. The University of Indonesia likewise collaborated with the researchers.

Supplementary Material
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