The Full Story
A major APAC airline coming out of administration sought significant cost reductions through procurement savings and by building best-in-class procurement capabilities. We provided support in three ways: by assessing the entire spending base to estimate potential savings; by identifying urgent priorities given market conditions and “nonnegotiable” contract deadlines; and by mapping out existing capability gaps in the sourcing life cycle.
AirlineCo had experienced substantial disruptions in the industry and supplier landscape due to the Covid-19 pandemic, prompting the administration team to reset all contracts. This reset necessitated renegotiating multiple high-value, long-term contracts with a relatively new procurement team. The pandemic also changed travel usage patterns due to reduced business travel amid safety concerns and organizational downsizing, decreased international flights, and other impacts, which further complicated procurement decisions.
We performed an in-depth diagnostic to assess historic spending across major procurement categories to identify cost levers, key contract terms, service-level agreements (SLAs), and key performance indicators (KPIs). We then benchmarked cost drivers and prioritized high-value categories that needed immediate action. Multiple categories—such as in-flight catering, ground handling, fuel, maintenance, repair and operations (MRO) components, engine maintenance, and base maintenance—were flagged for deep analysis followed by the creation of a detailed roadmap and list of initiatives to meet the identified savings target.
After completing the diagnostic, we provided full procurement process assistance for high-value categories through the development of sourcing and negotiation strategies, request for proposal (RFP) preparation and execution, evaluation of offers, and supplier selection.
We also helped AirlineCo establish planning, supplier relationship management, and contract management capabilities including:
- integrating an annual procurement plan that encompasses refined cost categorization, spending baseline, and savings ambition;
- defining decision rights for the end-to-end procurement process;
- developing supplier selection methodology and shortlisting; and
- supporting a contract tracking tool and management plans for long-term vendors.
As a result, we identified and implemented 14–16% savings across categories, which was 50% higher than the outside-in targets. Our holistic assessment of AirlineCo unlocked critical savings across categories, reorganized its sourcing strategy, streamlined its vendor base, and enabled it to chart a path to becoming a world-class procurement organization.