Control what you can. Quickly. Start preparing for the “New World”
COVID-19
A New World for Airports
Updated on April 8th
2Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
COVID-19: Control what you can. Quickly. Start preparing for the “New World”
• COVID-19 is unlike any previous crisis, a “blink” on the long term growth of the Aviation industry– This time traffic recovery will be hard and long-term, there will be permanent impacts, non aviation will be very different (different
categories/ brands client preferences, …)
• After crisis competitive scenario will be radically different: less Airlines, most of which state-subsidized, less Travel
Retailers, many privately-managed Airports state-subsidized, less secondary Airports?
• To face this, you need to proactively govern the situation, act fast to protect cash as much as you can, proactively
manage 10s of different stakeholders, start putting the basis for the transformation to be ready for the “New World”
• To try and help Airports on this impossible task, we have put together 10 pages to collect experience we are getting from
talking to many players in the industry (Airlines, Airports, Travel Retailers, Brands, Governments) and our Point of View– At the end of the document you can find, as a reference, similar “game plans” we are discussing with Airlines and Travel Retailers/ Brands
• You most likely have already activated most of the measures and reflections contained here, but we hope you will find these
elements and game plan useful to complement your and your team own actions. We are at your disposal to discuss
and provide further depth
• This is a “living” document, we will issue new versions as new relevant elements come in
3Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
COVID-19 crisis is different form all other epidemics
2003 2009 2010 2014 2017 2020
SARS H1N1 H7N9 COVID-19
Confirmed
cases
Mortality
~8.000 ~60.000.000 ~1.600 >1.350.000(2002-2003) (2009-2010) (2014-2017) (# as of April 8th,
still ramping up)
~800
~9,6%
~18.000
~0.03%
~600
~40%>80.000
~4%(# as of April 8th,
still ramping up)
Source: National Health Commission of the PRC; WHO; Lit research
Epidemics
Rate close to
common “influenza”
4Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
COVID-19 will not be a “blink” as 9/11, SARS or Financial Crisis
Source: World Bank
Global Air Traffic – Billions of Passengers Carried
1970 1980 1990 2000 2010 2019
1
2
3
4
9/11
SARS
COVID-19?
Financial
Crisis
Traffic recovery will be not be a
simple “V shaped” bounce
back
A number of factors will
conjure to prevent it
• Travel restrictions going on
in different part of the worlds
• Travel health risk (real and/or
perceived)
• “Doom” attitude linked to
high death toll from COVID
• Deep Global recession
5Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Air Traffic recovery will likely be only in the mid-long term
Demand suppressed during
outbreak, to recover to pre-COVID-
19 level
• Transportation & tourism
• Restaurant & food service
• Entertainment & education (offline)
• Real Estate
• Auto
• Household appliance
• Grocery
• Telecommunication
• Apparel
• Insurance
• Entertainment & education (online)
• E-commerce (demand spiked,
fulfillment partially constrains in
short-term)
• Healthcare
Demand suppressed during
outbreak, to bounce back to even
higher consumption level because of
“revenge buying” or mindset
change
Demand stimulated because of
panic stockpile and staying at
home, to return to normal level
and stabilize after outbreak
Demand stimulated because of
treatment need and staying at
home, may keep growth momentum
because of mindset and behavior
change
Hit in short-term,
recover in long-term
Hit in short-term,
bounce back or grow
faster in long-term
Spiked in short-term,
stabilize in long-term
Spiked in short-term,
keep growth
momentum in long-term
Definition
Industry
examples
1 2 3 4
Source: Lit research, Bain analysis
Actual behaviour will strongly differ by Airport (Region/ Country, type of traffic, major Airlines, …)
We have tools to help you forecast scenarios specific for your Airport(s)
plus a Macro-surveillance website constantly updated with our latest intelligence
6Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Scenario for key Travel Retail categories more positive…Key Travel Retail categories – all channels
The next 18-24 months
Key Travel Retail categories – all channels
Mid-term growth
• Based on the available data and foreseeable evolution 2020 will report a
strong contraction in global luxury goods purchases, with a likely
reverberation over 2021, which could take different patterns by region/country
• Mid terms growth driver remain confirmed
Younger customers
Digital channel
@
YZ
• Chinese middle class to increasingly
become luxury shoppers (more locally) and
driving overall growth of the market
• New generations (Y and Z) recovering
their dynamism and willingness to buy
luxury, delivering all market growth and
compensate for the slow down of older
generations
• Online to continue represent the largest
growth pool and influence 100% of luxury
purchases
Rising Chinese middle class
2020 2021 and beyond…
Rapid stabilization
Dip and rebound
China
RoAsia
Japan
Americas
Europe
Luxury market next
18-24 months
evolution by region
7Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
…but with very different categories/ brands mix
…rise in health concern(in general, not just about luxury)
…acceleration of share
of digital shopping (driven by brands)
…confirmed advocacy
for environment (possibly
boosted by “champion” brands)
…higher expectations
of brand activism
…strengthened local
pride
• The amplification of the current facts and the impact on people lives and lifestyle is likely to
reinforce consumers mindfulness (in general, not just about luxury) and sensibility to health concern
• Consumers will restart shopping at physical stores (once they are open and safe again), but if brands
“elevate their digital game” (better assortment, user experience, optimized marketing, …), the appeal
of the digital channel increases, accelerating its growth
• Sustainability will remain a key topic (esp. for Gen Z and alike-minded consumers)
• Some brands may take the chance to rethink their end-to-end product lifecycle and supply chain
for higher sustainability (also for the challenge of excess of unsold stock)
• Current brands activism (brands advocating for people safety, donating to hospitals and medical
centers) reinforces consumer conviction that brands should complement the action of governments
and institutions on social matters
• As some impacted nationalities suffer “social stigma” by international public opinion, they show a
reinforced national/cultural pride and are becoming more vocal against those brands who are
not on their side (e.g. Western brands making donation to their home country institutions, but not
supporting the people in their core market – e.g. China)
Also on Non Aviation, Actual behaviour will strongly differ by Airport
We have tools to help you forecast scenarios specific for your Airport(s)
8Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
A New World for Airports, after COVID-19
• Likely fewer, larger Airlines, as the crisis will trigger an involuntary sector consolidation
– Airports relying heavily on an Airline, especially if for connecting traffic, need to assess their position
– Management of Airlines bad debts today will also influence competitive outcome for Airlines
• All Airlines will be much more “aggressively focused” on costs, including Airport-related ones
– Depending on till system, Airports might see “aggressive” renegotiations of their fees (both non-regulated and, at a certain extent, regulated)
• Traffic recovery will not be a “V shaped” bounce back: it will be long and painful, and differ by Airport
– Airports will need to have a continuously updated view on the likely scenarios for their specific situation
– Airports will also have a key role in influencing pax behavior (i.e. addressing health concerns, …) and helping traffic recovery
• Pax choice parameters will likely include, on top of the “traditional” ones (price, schedule, frequent flyer, …) also health protection
– Airports will need to differentiate on pax health protection initiatives (above and beyond country regulations), especially for connecting traffic
• Different pax Retail behavior: omni-channel increase after “forced trial”, reinforced sustainability focus, categories/ brands mix shift
– Airports will need to “double down” on omni-channel (CRM, Tracking, Web, …), on “sustainability” positioning (not only in non-aviation) and re-think
Retail strategy, space allocation and contracts
• Likely fewer, larger travel retailers, as the crisis will trigger sector consolidation, much more focused on costs control
– Airports with a diminished negotiation power vs. retailers, some rents levels challenged as retailers will limit investments also on Tier1 locations
– This will be fundamental in the upcoming full contracts renegotiation in non-aviation (both short term and mid-term)
• Governments will (have to) move to ensure strategic Airports (state-run and private) will continue to operate during and after crisis
– Tier1 Airports might benefit from Government support but their profitability/ ROI might be challenged by public opinion
– Tier2 Airports might face different priorities from Governments, within limited funds
Fundamental to act fast both to “Preserve Cash” AND “Prepare for the New World”
Short term
Medium / Long term
9Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Airports “crisis game plan” - 1: ACT NOW - Govern -proactively- the situation
• Set-up an intelligence task force and dashboard
– Set up a constantly updated Dashboard(s) and News Room with critical KPIs/ Information to monitor: context evolution, people safety, cash, business perf.
– Establish a process for developing and constantly updating short and mid-term market scenarios. Key input for short-term decision-making
– Invest >1FTE to systematically track what is going on in the industry at large (Airports, Airlines, Travel Retailers, Industry Associations, Gov’t entities, …).
Another key input for short-term decision-making
• Establish a high-velocity decision making Emergency Response Center
– Nominate and empower an ERC with crisis leaders, functional experts and external advisors
– Make sure legal is over-represented in ERC: contractual issues, potential health-related claims from employees and pax, …
– Make sure ERC has full visibility of situation (full access to all information, governance of the intelligence task force and dashboard) and has centralized control
of all levers (ability to direct action with any company employee/ asset)
– Make sure your people balance “fire fighting” with “thinking and planning”
• Proactively manage all stakeholders: the number and complexity of interactions has grown 100x
– Reinforce the team with senior people from other dept’s
– Prepare and continuously update a Plan: what you need, how to get it, from each stakeholder
– Be proactive in setting and managing interactions
• Over-communicate internally and externally
– Make sure your Top and Middle Management is fully constantly updated on the evolving context, business, priorities, action plan
– Have a clear plan on who communicates what internally. All of your people should have constant updates and feel “over-communication”
– Drive a clear and constant external communication: your are a fundamental part of the community you serve, you need to be present and active
– drive a clear and objective communication internally and externally with few honest and fact based messages
10Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
• Protect People
– Go above and beyond government regulations to ensure your people, your partners and your pax feel safe. Over-communicate on health protection
internally and externally. Use this as a differentiating lever for you and your partner Airlines
– Evaluate to close non-essential areas of the Airport to reduce infection risks
– Ensure maximum support to critical operations that go trough your Airport, both pax and cargo
• Re-modulate operations capacity aggressively
– Adjust operations capacity on a weekly basis based on updated short term and mid-term plan
– Re-think operations forgiving “traditional” constraints: Airlines separation, Retail flows, …
– Cancel any ops job you can (unless subsidized by Gov’t). Accurately select jobs to cut/ reduce/ suspend in HQ (most people you will need more than ever)
– Cancel any outsourcing contract you have, if you can quickly fill that in with internal resources (training/ certification needs)
• Control Cash
– Re-think Capex based on your best-estimate mid-term scenario, define plan to cancel/ re-modulate balancing need vs penalties/ stakeholders impacts
– Aggressively re-negotiate short, mid and long term debt / credit lines even if think to be able to honor them
– Aggressively ask for Government “moral suasion” to support you on Capex and Debt re-negotiation. You are a strategic infrastructure
– Launch an aggressive procurement re-thinking/ re-negotiation campaign. Most likely there is significant value hidden there, considering the crisis
– Postpone any payment you can, leverage Supply Chain Finance (with Gov’t support/ guarantee) to ensure suppliers get liquidity anyway
– Cancel dividend payment if you have not already materially paid them
• Manage key Partners
– Assess realistic future of partners Airlines, identify those that will be crucial for your future (not necessarily the same as before crisis). Examples
> Unpaid Airport fees: support only the crucial ones
> Health concerns: prioritize the crucial ones on co-preparing operational plans to address pax health concerns (beyond regulatory)
– Evaluate Non-Aviation MAG re-negotiation based on necessity to ensure your current partners do not go bankrupt. Difficult to substitute in the short term
– Assess realistic future of Non-Aviation partners and act accordingly also on short-term decisions
Airports “crisis game plan” - 2: ACT NOW to address immediate risks/ opportunities
11Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
• Support your community and the global travelers to maximize speed of air traffic recovery– Once the pick of the crisis will be over, ensure you have a leading role in re-assuring passengers that air traffic is safe (addressing air travel health
concerns and over-communicate them)
• Identify the key decisions that you are taking now and will affect your business mid-term– Which airlines to prioritize (see previous page), and how to partner with them
– How to address Non Aviation partners in this situation: enforce current contract-MAGs?, re-negotiate an “emergency” bridge?, …
– Capex cancellation/ re-thinking
– Debt re-negotiation
– …
• Make sure those decision are based both on immediate necessity and mid-term scenarios– Generate (and constantly update) mid-term traffic, aviation and non-aviation scenarios and leverage them support short-term decision making
– Elaborate a “zero based” view of your business (revenues and costs) in the new mid-term scenarios, and identify the initiatives to get there
> To be launched immediately: e.g. procurement re-thinking
> To be launched after crisis: e.g. automation/ digitalization, travel retail “new” full potential, …
– Elaborate explicitly which initiatives you can launch “leveraging” the crisis, that you would never had been able to do in a less critical situation
• Explicitly dedicate “10%” of your and your team time now to think at how you get out of the crisis stronger than before– Better position with Airlines and Non Aviation partners
– Well prepared for the “New World” both on Aviation and Non Aviation (re-think retail)
– With a higher market share in your catchment area/ on connecting traffic
– With a differentiating position on health control and sustainability
– Maybe with an investment in another Airport
– …
Airports “crisis game plan” - 3: PLAN NOW - Transform to prepare for the future
12Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Final thoughts: act now to “Preserve Cash” AND “Prepare for the New World”
• The greatest challenge is governance and engaging
senior management
– A dramatic move away from traditional “long term planning”
• The shift to cash conservation will be fundamental
– But will need enormous effort
• The level of senior management bandwidth to manage
partners aggressively is unprecedented
– Labour, different Government stakeholders, Regulators,
Airports, Banks, Travel Retailers, etc.
• This event will likely change our world, the “New
World”, even after Crisis has ended, will be different
– Need to start preparing now for it, it will require significant
change, cancelling/ acceleration of projects, …
The sum of a fast short term action and
dramatic mid-term business re-thinking
A N N E X
COVID-19 Airlines game plan
COVID-19 Travel Retailers/ Brands game plan
14Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Airlines “crisis game plan” - summary
Separate 2020
from beyond
Prioritise
cash
Engage with
customers
& partners
S2020 & W20/21 realism
– Leveraging real world
experience
– Collaborate with labour
Rapidly adjust coming
months
– With JV partners
– With eye on competitive
actions
– Clear triggers to thin or
pause flying
Considered 2021-22
scenarios:
– Manage slot portfolio
– Aligned with partners
Assess need to change
strategy
– Relative cost position
– On-board product
Ensure executive mind-
shift to cash– Daily position shared
with execs
– Goal shift in AP/AR
Reinforce balance sheet
Immediately engage in
renegotiations – Hub / Lessors / OEM
/MRO
– Distribution channels
– Grind out procurement
savings everywhere
Rethink overheads– Freeze all hiring & non
essential training
– Seek break clauses
Adjust key commercial
levers:– Credit cards
– Loyalty
– Interline
Understand changing
needs and expectations
Create drumbeat of
communication:
especially with
commercial partners
Rapidly engage with
hub operator as a
partner
Appeal to authorities for
support and clear
guidance
Closely monitor supply
chain:
– Prepare sufficient buffer
especially in
Maintenance.
Protect the
people first
Protect your staff:
invest to ensure the
safest working
environment
Protect the
passengers: working
with authorities and
learning from partners
Focus on the hub: as
a network airline,
particular care around
connecting facilities and
lounges is critical
Be focused
on main
levers
Establish a Dedicated
Unit: close to key
decision-makers and
empowered to make
recommendations and
track all COVID-19
related activities
internally
Over-communicate:
relevantly and
consistently to all
stakeholders
Scan the market and
listen: absorb best
practice and respond
quickly to regulatory
changes
Airlines
15Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Airlines “crisis game plan” – details (1/2)
Centralise
visibility of levers
Protect the
people first
Establish a control
tower
Over -
communicate
Scan the market
and listen
Protect your Staff
Protect the
passengers
Focus on Hub
• Cancel non operationally critical gatherings > 20 people and consider closing canteens
• Review crew centre /airside gatherings pre/post duty and halt (almost) all staff travel
• Consider reducing IMO in-bound travel for IT contractors
• Clear hygiene and health advice to all staff (head office, flying crew, station staff)
• Review cleaning/hygiene facilities, in the light of regulatory input, for all staff and adapt
• Take advice on possible deep cleaning of most used areas/facilities, sites and in the hub
• Set up a small but trusted Dedicated Unit attached to CEO/CFO/CRO Office
• Hold together multiple ongoing communication initiatives
• Track internal progress of COVID-19 related activities and be ready to adjust up and down
• Report internal KPIs deemed relevant for major commercial decisions
• Ensure staff hears it from you first and create extra bandwidth across all channels internally and externally
• Activate extra handling resources at hub and key transfer points
• Dedicate >1 FTE to scanning other airlines’ actions
• Support Network/ commercial/ ground teams with timely information of COVID-19 spread into markets
• Clear information provision in coordination with Hub and outstation operators, Alliance/JV partners
• Review inventory and availability of hygiene products (soap, water, wipes) on board/lounge/check-in/ gate
• Changes in refund/change conditions and review of cleaning protocol following regulatory/expert input
• Consider stopping/changing catering service and alterations to lines of flying for geographic focus
• Review all connecting procedures along with key partners (airport, security and immigration)
• Identify infrastructure opportunities to manage passenger flows from affected regions separately
Separate 2020
from beyond
S2020 & W20/21
realism
Rapidly adjust
coming months
• Design a core set of graduated scenarios preferably based on currently observable realities.
• Ensure Revenue Mgmt systems are manually adjusted
• Plan with labour to address short term options such as furlough, reduced duty flexibility or other forms of leave
• Evaluate competitor actions and announcements:
• Immediately agree with JV/antitrust partners
• Agree guidelines and clarify network/schedule teams decision rights for route thinning / suspension
• Evaluate Fleet size adjustment
Airlines
16Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Airlines “crisis game plan” – details (2/2)
Separate 2020
from beyond
(cont.)
Considered 2021-22
scenarios
• Design a set of 2-3 year scenarios: market sizes, yields, competition, fuel prices, environmental costs
• Aggressively reshape fleet planning options
• Rethink completely balance of capacity across various group entities
• Map out the combinations of market, capacity (MAX return?) and competitor actions
• Ensure balance sheet can create a safety net and resilience to hostile approaches
• In case of persistent low yields lay out path to retaining/building relative cost advantage
Assess need to
change strategy
Engage with
customers and
Partners
Understand
changing needs
Communication
Hub operator
Appeal to
authorities
Closely monitor
supply chain
• Ensure feedback from front desks and call centers is consolidated and fed back
• Engage in ethnographic studies along physical journey and launch a program of evidence-based say/go testing
• Leverage Control Tower to ensure direct channels and ensure PR teams are working together
• Ensure codependency is clear at highest levels and enhance focus on staff and passenger safety
• Locate key counterparts and ensure your executives engage fully and be aware that Health guidance is critical
• Identify potential areas of government support and consultation for all travel restriction changes
• Initiate conversations on broader industry support and explore IATA support & guidance
• Ensure access to engineering spares
• Explore opportunities for earlier/later refurbishments, heavy checks and shop visits
Prioritise cashEnsure executive
mind shift to cash
Reinforce balance
sheet
Immediately engage
in renegotiations
• Daily position shared with all execs with weekly reforecast and stay away from P&L budgets
• Ensure Finance tightens /loosens and defer executive fixed compensation and adjust variable
• Draw down on all existing credit lines and then extend lines and support from FFP credit card bank partners
• Suspend non-critical payments where possible and review hedging policies on fuel and currency
• Renegotiate Fleet both with OEMs and Lessors and with other strategic suppliers
• Procurement to immediately renegotiate with all suppliers and renegotiate with FFP partners
• Freeze all hiring and cancel all non-essential (operations) training and seek break clauses in contracts
• Reduce & rethink marketing/ advertising and consider flexible staffing/ shift models
• Review interline agreements, immediately adjust marketing spend/type and moderate capacity
• Reduce regulatory delay fines and review loyalty earn/burn (status retention) and Cargo opportunities
Rethink overheads
Adjust key
commercial levers
Airlines
A N N E X
COVID-19 Airlines game plan
COVID-19 Travel Retailers/ Brands game plan
18Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Travel retailers – brands game plan: summary
Governdon’t be carried away
Actto address immediate opportunities & risks
Transformto prepare for the future
Intelligence task-force
and dashboard
High-velocity decision making
committee(assess, plan, re-assess, adjust)
Internal and external
communication plan
Top line protection and
mitigation initiatives execution
OpEx and CapEx
re-phasing and shifting execution
Short-term operations
contingencies actions
“Smart & agile”
decision making & way of working
Supply Chain Reinvention
Digital Boost
TravelRetailers/
Brands
19Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Travel retailers – Brands game plan: define and fine-tune plans
informed by robust and fresh intelligence, and drive teams actions
Intelligence task
force and
dashboard
High-velocity
decision making
committee
Internal and
external
communication
plan
• Set up an periodically updated dashboard(s) and news room with critical KPIs and information to monitor
– Context evolution
– People safety
– Business performance (i.e. Retail turnover, production lead-time, inventory stock)
• Develop external market scenarios (on consumption) based on evolution of epidemiology and socioeconomic
responses
• Assess impact to P&L, balance sheet, cash-flow for each scenario, considering contingency plans
• Nominate and empower a (restricted) committee of crisis leaders, and extends invite to functional experts
and external advisors (based on topic)
• Establish a lean but dedicated project management office (PMO) to coordinate and support the committee
• Periodically re-assess the situation and adjust priorities and plans based on the evolving scenario and
emerging results
• Delegate to operative task-forces by objectives
• Constantly update top management on the evolving context, business and priorities and action plan
• Drive a clear and objective communication to teams to enable their action and contribution
• Define few, honest & fact-based messages to be conveyed externally to inform on business continuity (don’t lie
/ don’t panic)
G O V E R N
TravelRetailers/
Brands
20Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Travel retailers – Brands game plan: execute contingency plan
through pragmatic initiatives across top-line, costs and operations
Topline
protection and
mitigation
initiatives
execution
OpEx and CapEx
re-phasing
• Redirect sales to the more resilient channels / geographies (safe for people / not impacted): e.g. – Double down on online (including digital messaging) in response to retail traffic decline in interested epidemic areas
– Update CRM playbook and initiatives; activate top customers while growing customer experience across touchpoints
– Perform quick evaluation of expected upside potentials and related costs for the various initiatives
– Perform preparatory activities for when the outbreak will be over (e.g. China), with clear “go/no-go” deadlines
• Test new models to next sales campaign for buyers (e.g. virtual showroom, trunk shows)
• Postpone/cancel non-converting mktg. activities (incl. fashion shows) and re-negotiate agency fees (if any)
• Postpone all non strategic CAPEX investments (e.g. stores openings in affected countries)
• Manage retail and other costs (e.g. hiring, training, VM rotations & Props, rents renegotiations, travelling)
Short-term
operations
contingencies
actions
• Optimize current season working capital (stock reallocations, temporary stores/outlets activation, production
phasing/postponement – e.g. permanent items with sufficient stock levels, …)
• Put your Supply Chain in crisis mode to ensure end-to-end product dev., production & delivery (“red and
blue” teams in prototyping/manufacturing/warehouses, 3D product dev., reshoring, expedite of late deliveries,… )
• Develop buying approach and guidelines for next season (how to split the OTB, how to cluster stores based
on expected impacts on consumption of Covid-19, what and how much to buy for identified store clusters)
• Review OTB for next season, accounting for evolution of Chinese and other nationalities consumption –
develop scenarios (be ready to trigger actions - e.g. to unlock budget if situation rapidly improves)
• Review next season collection structure to account for potential production issues (both façon but also
raw material – e.g. cashmere, silk, leather,…); potentially focus on key raw materials (especially fabrics) to order
in advance to ensure availability when production will start (considering current disruptions in sourcing)
A C T
TravelRetailers/
Brands
21Airports Covid POV1_vsentSAOThis information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation and may therefore not be relied on
Travel retailers – Brands game plan: take the opportunity to fully
transform those areas that this outbreak has made more critical
“Smart & agile”
decision making
& way of
working
Supply Chain
Reinvention
Digital Boost
• Enable faster and more robust decision making
– Design and set up advanced-analytic dashboards, easily available, updated and insightful
– Streamline governance and accountabilities (removing old legacy process / silos)
• Make the way of working more in line with the mindset of the new generations
– Design and roll out a model for flexible working hours / locations (to better fit individual lifestyles, and optimize costs)
– Enable virtual meetings and collaboration (saving on travel costs, allowing flexibility, reducing carbon footprint)
• Unlock the full potential of omnichannel
– Define your omnichannel full potential vision and unlock current constraints (functional silos among channels, lack of shared
MBOs / incentives across channels and geos, lack of integrated customer view, B2B logistics mode and processes, …)
– Design, launch and execute enabling initiatives (including enabling IT systems enhancement /re-platforming)
– Revise the role of the store in the omnichannel eco-system and take opportunity to optimize the sub-optimal DOS & doors
• Optimize marketing spending and take more control on digital marketing
– Identify digital capabilities (systems, talent, …) to be internalized (vs. agency black-box)
– Adopt a marketing model based on test and learn to optimize costs and results
• Transform your Supply Chain becoming more reactive and flexible to enable a “seasons-less” and “drops-
oriented” collection structure
– Upgrade suppliers/vendors base, carefully judging their ability to quickly react at scale (without deteriorating product quality)
– Redesign all internal processes, from product dev. to delivery – also cross-functional (e.g. S&OP), to reduce lead-times and
gain speed without increasing risks (e.g. blind orders)
• Increase your bar on sustainability and innovation
– Enhance your sustainability initiatives and control across value chain and introduce innovations (3D product dev., …)
T R A N S F O R M
TravelRetailers/
Brands
Mauro Anastasi [email protected]
Lorenzo Ferroni [email protected]
Derek Gerow, Bain Global Aviation Sector Head [email protected]