CASE STUDY: Strategic Planning In the Airline Industry Management

The 2019 coronavirus (COVID-19) pandemic as the newest global risk has disrupted business

operations in all industries. The airline industry is one of the first industries that was affected from the event because the disease is easily passed among people. To date, there is no official medical treatment for the disease, causing a tremendous panic for world citizens. Thus, governments around the world have prohibited cross-country transportation. The market value of the airline business has shrunk since then. Ultimately, this incident motivates us to study the impact of COVID-19 on the performance of the airline industry around the world.

Similar events can be seen in the catastrophic shocks from airline disasters, the September 11, 2001 attacks, and the impact of Severe Acute Respiratory Syndrome (SARS) on airline stocks. A recent study documents the impact of COVID-19 on employment in the airline industry, but the impact of the COVID-19 on airline stock prices has not yet been investigated. In order to fill this gap, we aim to examine the airline stock returns during the spread of the COVID-19 pandemic.

Although the World Health Organization (WHO) announced the first COVID-19 infected case in China on December 31, 2019,we consider three major dates related to COVID-19: (1) the first infected case outside China reported in Thailand (January 13, 2020); (2) the outbreak in Italy (February 21, 2020); and (3) the declaration by WHO on the global pandemic outbreak and the announcement of the U.S. ban on travelers from 26 European countries (March 11, 2020). We

select these three dates because they demonstrate important steps regarding the uncontrolled

COVID-19 infection.

The COVID-19 pandemic has caused disruptions in all parts of the world. We investigate the impact on the global airline business. Three crucial announcements are selected to be studied, which are (1) the first case reported outside China (Event 1: January 13, 2020), (2) Italy outbreak (Event 2: February 21, 2020), and (3) the declaration by WHO on the global pandemic outbreak and the announcement of President Trump to ban travelers from 26 European countries

(Event 3: March 11, 2020). We find the under reaction and overreaction to the announcements in

Event 1 and Event 3, respectively. Airlines stocks in Australia, Canada, the U.K., and the U.S., are the worst performers in the post-event period in Event 3. We offer several potential explanations for the findings in this paper. As the COVID-19 pandemic has been ongoing, our results call for the policy implications below.

We understand that the government in each country is at an intersectionwhether to provide financial support or guarantee existing debt, or to believe in market mechanisms and let the airline firms file for bankruptcy. In order to back up the airline industry, several alleviation policies may deal with mergers and acquisitions, tax policy, and government subsidies. These

policies, of course, will increase the national debt. Otherwise, firm liquidation in the airlines is,

perhaps, inevitable and subsequently will disrupt the global supply chain and related businesses. (Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7451055/)

QUESTION 1

Assess the extent of immediate policy designs in order to alleviate the impact of the pandemic in the airline industry around the globe.

QUESTION 2

Demonstrate whether this crisis an opportunity for airlines to increase their direct ecommerce channel share? Assess how can airlines afford not to invest in digital anymore?