The COVID-19 pandemic has adversely impacted the economy, leaving most sectors reeling. Aviation is one among them. After phenomenal growth in air travel over the last decade, the crisis has left aviation’s two primary constituents – Airlines and Airports – bleeding. Passenger traffic and airline operations have crashed by as much as 90%-95% in India, and the recovery to pre-COVID levels is estimated to take at least three to four years.
The response amongst most have been of quick assessment of the damage, and strategising the way forward with an ‘adapt, adopt and advance’ approach. The need for agile forecasting, business re-strategising and adoption of robust resource and performance management is critical. We expect that the post-pandemic business challenges will be different, requiring an approach of agility and nimbleness across operations, people and finance.
Steering Through Turbulence
The Chief Financial Officer must regain control and reimagine the financial plan and strategy. Planning has never been a particularly easy task, but the spread of COVID-19 has made it an uphill challenge. Forecasting, as a technique, uses historical data to make informed estimates that are predictive in determining the direction of future trends. However, with the pandemic in our midst, there is little preparedness to deal with this situation. This is where agility and the ability to respond to a crisis becomes critical.
Organisations have adopted the principle of progressive calibration for annual forecasts, with annual budgeting being realigned to a quarterly exercise.
Shift Your Focus
In response to the crisis, we must focus on new KPIs – EBIDTA margins get replaced with cashflow management; receivables/ payables monitoring become a key measure. Building dynamic dashboards help track the liquidity position.
Saving costs, both operational and capital, is an important measure with reassessment of capacity enhancement and capital spend. Airports are largely infrastructure assets and the capital spends are lumpy. The focus has shifted to ‘need to have’ rather than ‘nice to have’.
The ‘new normal’ has required the aviation sector to quickly adapt to the changing needs of passengers to reassure them that their health and safety remains priority. Indian airports have made a conscious effort to make the airport journey contactless.
New Flight Plan for Airports
Revisiting earlier performance plans is also key as the erstwhile targets will no longer be relevant in the existing situation. KRAs have to be changed – conserving cash should be the target. As a prudent CFO, I have taken cash conservation as my priority and ensured that it remains the number one priority for other heads in my function, as well.
Optimisation requires that airports bring in optionality in the master planning process to make smaller capacity additions. Similarly, most costs are largely fixed, with limited variability to passenger or cargo traffic. In such a scenario, where the revenues are variable to market forces and costs largely fixed, resource management will need to be flexible and dynamic.
Upskilling and reskilling of the workforce to maximise utilisation across the organisation is extremely important. An Airside firefighting resource should have the skills required to handle airport security and manage customers. Similarly, a Landside executive should be skilled in traffic management, security operations and revenue enhancement.
Finally, employees will also have to be proficient with technology/ FPA tools to be more efficient and increase productivity. Organisations have to train employees to use forecasting tools to manage data that will help in decision making during calibrated budgeting, have blue-sky thinking to identify new revenue streams, enforce hiring freezes and optimise workforce cost, support vendors, key partners, and above all have a motivated workforce.