Malaysia Airlines had its humble beginning in the golden age of travel. A joint initiative of the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore and Imperial Airways led to a proposal to the government of the Colonial Straits Settlement to run an air service between Penang and Singapore. The result was the incorporation of Malayan Airways Limited (MAL) on 12 October 1937. On 2 April 1947, MAL took to the skies with its first commercial flight as the national airline. Fuelled by a young and dynamic team of visionaries, the domestic carrier turned into an international airline in less than a decade.
With the formation of Malaysia in 1963, the airline changed its name to Malaysian Airlines Limited and soon after, Borneo Airways was incorporated into MAL. Within 20 years, MAL grew from a single aircraft operator into a company with 2,400 employees and a fleet operator using the then latest Comet IV jet aircraft, 6 F27s, 8 DCs and 2 Pioneers. In 1965, with the separation of Singapore from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines (MSA). A new logo was introduced and the airline grew exponentially with new services to Perth, Taipei, Rome and London. However, in 1973, the partners went separate ways; Malaysia introduced Malaysian Airline Limited, which was subsequently renamed Malaysian Airline System, or simply known as Malaysia Airlines. Today, Malaysia Airlines flies nearly 50,000 passengers daily to some 100 destinations worldwide.
The airline holds a lengthy record of service and best practices excellence, having received more than 100 awards in the last 10 years. The most notable ones include being the first airline with the "World's Best Cabin Crew" by Skytrax UK consecutively from 2001 until 2004, "5-star Airline" in 2005 and 2006, as well as No.1 for "Economy Class Onboard Excellence 2006" - also by Skytrax UK. (http://www.malaysiaairlines.com/hq/en/corp/corp/info/history/our-history.aspx).
Background of the Case
The global airline industry is in a state of turmoil and it is increasingly clear that the survivors and most certainly the winners-will have to make radical changes to adapt to the new environment. For the February 2005, Malaysia Airline System (MAS) reported a loss of over RM1.3 billion. This announcement came at the same time as some of MAS' regional competitors reported strong profits. MAS have much strength to build on. But without a full business transformation, they will not be enough to weather the tough airline industry environment. Indeed, left to its current course and speed, MAS will fail (BusinessTurnaroundPlan, 2006).
With hard work, radical changes and some tough decisions, MAS can certainly be a survivor and a winner. Since early December 2005, the management team of MAS has dedicated itself to the development of a plan that builds off the actions taken by the Board in 2005 to begin the turnaround. MAS likely failed, running out of cash in April 2006, and reporting a RM1.7 billion loss for 2006 (BusinessTurnaroundPlan, 2006).
The ability to transform the business to profitable business and, to go beyond expectations. How to improve efficiency and capabilities, and new growth opportunities to serve company's vision and mission?
There are several points to choose case of Malaysia Airline System (MAS). First, it's a success story of Malaysian company in global competitive. Second, Malaysia Airline System has got their objectives done. Third, the global airline industry is a knowledge intensive sector, which put you in middle of huge business.
Based on reading, some issues have listed in table (I) as points of opinions about case of Malaysia Airline System (MAS).
- Return MAS to profitability
- Tackling new opportunities, new customers & new markets
- Competitive cost structure in the region
- Cash Surplus
- Customer growth achievement
- Customer satisfaction
- Upholding five-star product
- Transform the company into a strong and vibrant institution
- Improving operational reliability
- Safety Record
- On Time Performance
- Realize a net income of RM500 million in 2008
- Grow network, build capacity
- Competitive fares
- 1.0 billion RM or above
- Connect customers around the world to and from Asia and beyond
- Lower costs
- First in regional airline industry
- Higher productivity
- Core competitive strengths
- Number of incidents not more than 3 cases per month
- On time performance of 80% for flight schedules
- To be able to invest in growing MAS' network and building capacity
- To be able to make more profit
- More passengers will choose to fly on MAS
- Support MAS' turnaround and its recovery
- To get more revenue and enlarge the market share
- To offer low and competitive fares to the customers
- Maintain the high quality products and services
- To be able to open up more routes and acquire more planes
- To be able to compete in the globalization
- To improve its quality services & reduce the mistakes
- To get customers satisfaction
There are several points of MAS strategy that can be analyzed and useful to the improvement in the future. Based on the discussion:
- A turnaround is not just a series of quick actions, it is also a multi-year program designed to create an organization that can adapt to whatever the market will throw MAS' way. And it is important to note that lasting airline turnarounds take years of concerted action.
- Transform the company into a strong and vibrant institutionone that is capable of withstanding external shocks and aggressively tackling new opportunities.
- Airlines are radically restructuring their operations to survive, and clear winners will emerge. Asian carriers have been protected to date, but not for much longer.
- Between mid 2002 and late 2005, fuel prices increased by over 168%. The increase in fuel prices alone has added nearly USD64 billion to the industry cost structure.
- The events of September 11, the SARS outbreak and the Gulf War have had devastating effects on the industry.
Suggestion and Recommendation
- Increase training of employee and information system guide employee to give more suggestions for improvements. More suggestions for improvements, number of implementation will increase.
- Decrease the size of premium cabins, and increase the density in economy cabins. This will allow MAS to provide regular services to those destinations that they choose to serve. If the percentage of faulty components has reduced, the services quality will be increased. When services quality increased, that will make the service image and reputation increase also.
- Reduce the average aircraft size and change the aircrafts to be smaller and more fuel efficient and moved MAS head office to Subang. To generate cash and achieve greater efficiencies in terms of reduced travelling between offices to attend meetings and reduced building maintenance and other support costs.
- Intensify flight frequencies on MAS' chosen trunk routes and increase connecting traffic flows into these foreign hubs from other airlines as feeders into MAS' trunk routes. To be MAS able to reduce the variable and station costs.
In today's information environment, a company can no longer be measured solely on past performance. Although past performance is usually a good indicator of future results, it cannot be the sole base for measurement. The financial perspective is critical to the success of the Business Turnaround Plan.
There is still a long way to go and there is no room for complacency. The management of MAS wants to transform MAS to achieve their vision of becoming the World's Five Star Value Carrier (FSVC), providing 5-Star products and services at affordable prices.
MAS needs the resolute support of the partners, government, its employees, managers, customers, suppliers, agents and investors. This thrust of MAS's strategy is focused on fundamentally transforming of national and community needs are met while still providing MAS with the room required to operate profitably.