Malaysia Airlines Strategic Management - case study now MAB analyses the beginning of the airline, its history (golden days) and how economic crisis affected the company. The pack also uncovers macro and micro environment of airline industry. The pack also identifies MAS (now MAB), Porter's framework, SWOT analysis for the company and the new beginning of the MAB. The pack detailed out the strategic management for the company and their moving forward plan.

1. THE
MALAYSIA
AIRLINES
STORY
Strategic
Management
(MBC712)
Prepared
for
Dr
Azni
Zarina
Taha
Valerie
Hew
Yook
Ping
BGA140008
Sharifah
Khairin
Syed
Mohd
Ali
BGA140013
Zakiah
Hanim
Mohd
Hamdan
BGA140014
Ahmad
Syamil
Mohamad
BGA140004

2. HISTORY
OF
MALAYSIA
AIRLINES
1937
–
Malayan
Airways
Limited
(MAL)
–
a
joint
iniJaJve
of
Ocean
Steamship
of
Singapore
&
Imperial
Aireways
&
Colonial
Straits
SeRlement
1947
–
1st
chatered
flight
from
Singapore
to
Kuala
Lumpur,
using
an
twin-­‐engined
Airspeed
Consul
1960
–
84-­‐seat
Bristol
Bitannia,
lauched
the
1st
long-­‐haul
internaJonal
flight
to
HK.
1963
–
Change
of
name
from
'Malayan
Airways'
to
'Malaysian
Airways',
(sJll
known
as
MAL)
1963
–
MAL
took
Borneo
Airways
Limited
1966
–
Change
of
name
to
Malaysia-­‐Singapore
Airlines
(MSA)
due
to
separaJon
of
Singapore
from
federaJon
1971
–
MSA
ceased
operaJon
1972
–
Malaysian
Airline
Systems
(MAS)
as
incorporated
1980
–
ImplementaJon
of
InformaJon
Systems
into
operaJon
management
1985
–
MAS
was
privaJsed.
MAS
entered
into
coporate
sector,
listed
on
KL
stock
exchange.
1987
–
Change
of
name
to
Malaysia
Airlines
1991
–
Awards
received
–
Asian
InsJtute
of
Management
/
World
ExecuJve's
Digest
Management
Award
in
the
General
Management
category,
TDC
1990
Tourism
Gold
Award
1990s
–
diversifica/on
of
opera/ons
i.e.
HR,
training,
catering,
property
consultancy,
technical
ground
support
for
the
aircra>s
(need
to
check)
1992
–
Awarded
its
4th
Boeing
award
to
B737
fleet
for
its
reliability
1993
–
MAS
was
first
in
SEA
which
served
South
America
with
its
Boeing
747
aircrad
1994
to
1998
–
MAS
flew
to
Mexico
City
&
had
5-­‐freedom
right
to
carry
passengers
between
Mexico
City
and
LA.
1997
–
MAS
suffered
losses
prior
to
Asian
financial
crisis
2001
–
Awarded
by
Skytrax
UK
–
World's
Best
Cabin
Crew
2002
to
2004
–
profit,
peak
of
the
business
2005
–
Awarded
a
5-­‐star
airline
2005
–
Downturn
of
MAS
2006
–
CEO
introduced
a
3-­‐year
Business
Turnaround
Plan
2007
–
Profit
of
RM
853
million
2009
–
15
new
Airbus
A330
purchased
–
10
opJons
2011
–
Loss
of
RM2.52
billion
due
to
fuel
costs
and
mismanagement
2014
–
Missing
of
Boeing
777
aircrad
–
MH370
&
MH17
2015
–
New
CEO
restructuring
the
firm
–
in
progress

3. BACKGROUND

4. BACKGROUND
OF
MALAYSIA
AIRLINES
The
airline
began
as
Malayan
Airways
Limited
and
flew
its
first
commercial
flight
in
1947.
A
few
years
ader
Singapore's
independence,
the
airline's
assets
were
divided
in
1972
to
form
Singaporean
flag
carrier
Singapore
Airlines
and
Malaysian
flag
carrier
Malaysian
Airline
System.
Despite
numerous
awards
from
aviaJon
industry
and
recogniJon
from
the
World
Travel
Awards
as
the
leading
airline
in
and
to
Asia
(2010–11,
2013,2015)
the
airline
struggled
to
cut
costs
to
compete
with
new,
low-­‐cost
carriers
in
the
region
since
the
early
2000s.
In
2013,
the
airline
iniJated
a
turnaround
plan
ader
large
losses
beginning
in
2011
and
cut
routes
to
prominent,
but
unprofitable,
long-­‐haul
desJnaJons,
such
as
the
Americas
(Los
Angeles
and
Buenos
Aires)
and
South
Africa.
Malaysia
Airlines
also
began
an
internal
restructuring
and
intended
to
sell
units
such
as
engineering
and
pilot
training.
In
2014,
Malaysia
Airlines
lost
two
aircrad—Flight
370
and
Flight
17—less
than
five
months
apart
with
a
combined
537
people
killed,
exacerbaJng
the
airline's
financial
troubles
and
leading
to
the
renaJonalizaJon
of
the
airline.
Prior
to
2014,
MAS
had
one
of
the
world's
best
safety
records—just
two
fatal
accidents
in
68
years
of
operaJon,
including
the
hijacking
in
1977
of
Flight
653
that
resulted
in
100
casualJes.

5. An
economic
boom
in
Malaysia
during
the
1980s
spurred
growth
at
Malaysia
Airlines.
By
the
end
of
the
decade
MAS
was
flying
to
47
overseas
desJnaJons,
including
eight
European
desJnaJons,
seven
Oceania
desJnaJons,
and
United
States
desJnaJons
of
Los
Angeles
and
Honolulu.
The
airline
then
suffered
three-­‐cycle
of
unprofitability
starJng
with
the
Financial
Crisis
in
1997
and
they
had
several
business
turnaround
plan.
To
date,
ader
filing
on
a
bankfruptcy
and
bailed-­‐out
by
Khazanah
Nasional
(the
biggest
shareholder),
they
slowly
building
up
the
company
as
Malaysia
Airlines
Berhad
(MAB).
BACKGROUND
OF
MALAYSIA
AIRLINES

6. MAS
Financial
Crisis
and
series
of
event
Prior
97
:
Asian
Financial
Crisis,
loss
RM
260M.
03/04
:
Profit
RM
461M
00/01:
Loss
RM
417M
01/02
:
Loss
RM
836M
96/97
:
Profit
RM333
M
98/99
:
Loss
RM700
M
99/00
:
Loss
RM259
M
2005
:
Loss
RM
1.3B
cost
increases
included
staff
costs,
handling
and
landing
fees,
aircrad
maintenance
and
overhaul
charges.
Low
yield
per
available
seat
kilo
(ASK)
because
poor
management
and
inefficient
route
network
06/07:
Profit
RM
853M
2011
:
Loss
RM
2.52B
2014
:
Loss
RM
443.4M
MH
370
&
MH17
2014
:
Declared
bankrupt

7. MAS
Financial
Crisis
and
series
of
event
Dec
2014
:
Appointment
of
Christoph
Mueller
as
CEO
Nov
2014
:
Khazanah
Nasional
created
a
new
company
known
as
NewCo,
to
control
the
airline
group.
Sept
2014
:
Centre
for
AviaJon
(CAPA)
analysed
on
planned
job
cuts,
which
are
aimed
at
improving
producJvity
and
closing
the
gap
with
the
group’s
Asian
compeJtors.
CAPA
also
examined
the
expected
reducJon
of
long-­‐haul
capacity
as
the
recovery
plan
outlines
a
focus
on
regional
operaJons
within
Asia-­‐Pacific
while
relying
on
partnerships
to
cover
other
markets.

8. FLEET
AGE
LIST

9. PESTLE
ANALYSIS

10. PESTLE
ANALYSIS
PoliWcal/
Legal
• Ownership
&
effecJve
regulaJons
• Open
skies
agreement
with
the
US
in
1997
• Government
enforcement
on
unprofitable
routes
• Government
focus
in
developing
tourism
&
hospitality
industry
–
turning
KLIA
into
a
regional
air
hub
–
improve
connecJng
transportaJon
from
city
to
airport
(ERL)
• Bilateral
air
rights
agreement
increases
landing
&
navigaJon
chargers
• ImplementaJon
of
government
official
rates
&
discounts
Economic
(local
to
worldwide)
• Increasing
fuel
prices
(bunker
cost)
eg:
in
2008
• Global
financial
crisis
in
2008
• Large
populaJon
in
Asia
and
rapid
growth
of
air
travels
in
the
region
• Investment
in
improved
airport
infrastructure
• Increasing
number
of
low
cost
airlines

11. PESTLE
ANALYSIS
Society
• Passengers
are
looking
into
cheaper
flights
and
compromising
on
food
and
frills
• ARract
mostly
high
cost
and
premium
travellers
• Access
to
alternaJve
choices
like
low
cost
carriers
• Increased
working
populaJon
and
disposable
income
Technology
• IntroducJon
of
e-­‐commerce
for
online
Jcket
purchasing
• Online
check
in
services&
e-­‐kiosks
• IntroducJon
of
social
media/networks
and
mobile
applicaJon
• IntroducJon
of
onboard
infotainment
system
Environment
• Global
pandemic
disease
-­‐
H1N1
• Rise
of
terrorism
in
parJcular
ader
911

12. PORTER’S
5
FORCES
FRAMEWORK

13. PORTER’S
5
FORCES
FRAMEWORK
CompeWtors
(local)

14. PORTER’S
5
FORCES
FRAMEWORK
CompeWtors
(InternaJonal)
• The
worlds
top
10
airlines
• MAS
is
listed
as
18
best
airline

15. PORTER’S
5
FORCES
FRAMEWORK
CompeWtors
(world’s
low
cost)

16. Supplier
Power
PORTER’S
5
FORCES
FRAMEWORK
• 25
years
contract
with
one
food
caterer
• Airline
industry
is
monopolized
by
two
air
crad
manufacturers
• Increasing
fuel
prices
–
high
supply
power
• Ageing
fleet
–
increase
orders
for
new
air
crad
&
increase
use
of
fuel
• Sell
off
used
fleet
reduces
new
sale
by
Airbus

17. Bargaining
Power
PORTER’S
5
FORCES
FRAMEWORK
• High
cost
premium
travellers
• Mostly
Malaysians
• No
switching
cost
imposed
• Frequent
flyer
programme
–
Erich
Miles
• Online
travel
sites
provide
mulJple
choices
–
affordability,
locaJon,
service
provider
preference,
cost

18. PotenWal
New
Entrants
PORTER’S
5
FORCES
FRAMEWORK
• High
barrier
to
enter
and
exit
the
business
• License
to
operate
is
high
• No
economy
of
scale
• Di-­‐regulaJon
has
reduced
the
entrance
into
airline
industry

19. SubsWtute
PORTER’S
5
FORCES
FRAMEWORK
• Rail
transportaJon
local
and
internaJonal
• On
road
transportaJon
• Online
–
web
and
video
conferencing
AddiWonal
• Longer
lay
overs
• Crew
shuRle
services
• Strong
Union

20. VALUABLE,
RARE,
INIMITABLE,
NON-­‐SUBSTITUTE
(VRIN)

21. No
Items
V
R
I
N
1
• Established
and
strong
brand
name
-­‐
MAS
• Associated
with
tagline
Malaysian
Hospitality
Phase
II
• Renamed
to
Malaysia
Airlines
Berhad
(MAB)
O
O
O
O
O
O
O
O
O
O
O
O
S
S
S
2
Human
Resource
• World
recognised
and
well
trained
crew
• Crew
and
service
represent
Malaysian
Hospitality
(MH)
internaJonally
Phase
II
• New
CEO
&
Key
Management
with
Airline
&
Hospitality
experience
• Rightsizing
workforce
to
match
operaJonal
requirements
(14,000
offered/6,000
exiJng)
• Promote
business
ethics
and
integrate
high
ethical
standards
as
the
company’s
cultural
system
• Enforce
Conflict
of
Interest
Avoidance
• Encourage
whistle
blowing
/open
door
policy
O
O
O
O
O
O
O
X
O
X
X
X
X
X
X
O
X
X
X
X
X
O
O
O
O
O
O
O
N
S
N
N
N
N
N
3
Asset
• 5
types
of
air
crad
(Airbus
A330,
Airbus
A380,
Boeing
737,
Boeing
747,
Boeing
777)
• Ageing
fleet
of
average
5.1
years
(13
units
of
Boeing
777
aged
15.6
years)
• Entered
into
lease
agreements
for
4
new
Airbus
A350s
with
Air
Lease
CorporaJon
(2
x
A350-­‐900
&
2
x
A330-­‐900
neo
aircrad)
• In
2015
–
offer
sale
or
lease
of
six
Airbus
A380,
2
Boeing
747,
four
Airbus
A330
&
four
Boeing
777
–
may
cease
MAS
Cargo
operaJons
• 14
orders
Boeing
737
placed
and
10
opJons
unJl
market
improve
• Marketable
MAS
Airbus
A380
is
12
years
younger
and
more
than
Singapore
&
Emirates
Airlines
O
O
O
O
O
O
X
X
X
X
X
X
X
O
X
X
X
O
O
O
X
X
O
O
N
S
N
W
N
S
VALUABLE,
RARE,
INIMITABLE,
NON-­‐SUBSTITUTE
(VRIN)
• O
=
Yes
/
X
=
No

22. No
Items
V
R
I
N
4
FaciliWes
• Introduced
self-­‐service
kiosk
• Online
Jmetable
for
real
Jme
flight
informaJon
• Dedicated
premium
check
in
lanes
O
O
O
X
X
X
X
X
X
X
O
X
W
S
W
5
Financial
• Embark
on
a
route
profitability
project
&
revenue
enhancement
project
• Diversified
revenue
stream
–
established
global
presence
in
Europe,
Middle
East,
America,
Australia
&
Asia
O
O
O
O
O
O
O
X
S
S
6
Services
• Flies
direct
over
60
desJnaJons
worldwide,
over
30
countries
• A
part
of
One
World
Alliance
• Enter
into
code-­‐sharing
with
Cathay,
Qantas,
Japan
Airlines
to
enhance
air
connecJvity
• Enrich
loyalty
programme
with
major
hotels
–
earn
3x
Enrich
Miles
• Intro
six
feeder
flights
from
Kelantan
to
KL
for
Haj
• Collaborate
with
Tourism
Australia
for
first
redempJon
programme
focusing
on
Australian
market
–
Enrich
Hearts
Australian
• Launched
inaugural
redempJon
campaign
(30-­‐50%
discounts)
for
Greater
China
–
Wo
Ai
Ni
• Provide
5
star
special
charter
services
• Special
services
for
infants
• Offer
special
meals
–
muslim,
vegetarian,
koscher,
baby
meal,
health
related
meals
• Provide
faciliJes
and
special
services
for
physically
challenged
&
disabled
people
O
O
O
O
X
O
O
O
O
O
O
X
X
X
O
O
O
O
O
X
O
X
X
X
X
X
X
X
X
O
X
O
X
X
O
O
O
X
X
X
O
O
O
O
W
N
N
S
W
N
N
S
N
S
N
VALUABLE,
RARE,
INIMITABLE,
NON-­‐SUBSTITUTE
(VRIN)
• O
=
Yes
/
X
=
No

23. SWOT
ANALYSIS

24. STRENGTH
• Strong
brand
image
(well-­‐known
airlines
across
the
world).
• Strong
backing
from
Malaysian
Government.
Ader
filing
the
bankruptcy,
Malaysia
Airlines
was
bailed
out
by
Khazanah
Nasional
and
rebuilt
as
Malaysia
Airlines
Berhad
(MAB).
• Strong
workforce
with
more
than
20,000
employees
• Best
cabin
crew
• Cover
more
than
60
routes
internaJonally
and
domesJcally
with
the
fleet
size
of
97
aircrads.
• Won
a
lot
of
presJgious
awards
and
have
a
broad
network
of
desJnaJon.
• Offer
high
quality
services
to
their
customers.
• Offer
mulJple
range
of
meal
during
the
flight.

25. WEAKNESS
• High
operaJng
cost
such
as
the
landing
cost
and
airport
tax.
• War
price
with
Air
Asia
as
they
are
dominaJng
the
low-­‐
cost
carrier
market.
• Change
of
business
model
very
frequently
• Relying
heavily
on
the
internaJonal
routes
and
plenty
of
those
routes
are
not
revenue-­‐making
and
do
not
have
high
demand
from
customers.
• Limited
market
growth
domesJcally,
especially
ader
Air
Asia
entered
the
market.
• Weak
financial
status
especially
ader
having
a
loss
of
about
RM
1.3
Billions
in
2005.
• MAS
suffered
trust
issue
ader
the
crisis
of
MH
370
and
MH
17
• Senior
Management
with
no
Airline
experience.
• Strong
employee
union
prevenJng
change.

26. OPPORTUNITY
• The
launch
of
Firefly
–
to
compete
in
the
low-­‐cost
carrier
market.
• Expand
their
services
in
the
Asia
Pacific
region
as
there
is
a
trend
of
increasing
traveler
from
China
and
Japan.
• Increase
their
cargo
services.
• Increase
more
internaJonal
routes
to
highly
demand
desJnaJon.
• Rejuvenated
fleet.
• Improved
entertainment
onboard.

27. THREAT
• Have
no
control
on
the
highly
fluctuaJng
fuel
price.
• The
fast
emergence
of
low
cost
airlines.
• Highly
intense
compeJJon
with
other
airlines
in
the
region
such
as
Singapore
InternaJonal
Airways,
Cathay
Pacific
Airways
and
Garuda
Indonesia
Airways.
• CompeJng
with
other
well-­‐known
airlines
company
such
as
Emirates
and
EJhad
Airways.
• Changing
government
policies
and
regulaJon
of
regulatory
bodies.
• Terrorism
and
poliJcal
unrest.

28.
In
September
2015,
Malaysia
Airlines,
welcome
the
start
of
its
new
company
Malaysia
Airlines
Berhad
(MAB).
The
main
objecWve
of
the
restructuring
is
to
enhance
the
inflight
experience
of
their
customers
and
embodying
the
reason
for
people
to
travel
with
MAB.
Right
ader
the
announcement,
MAB
recorded
89.8%
on-­‐
Jme
performance.
One
of
their
vision
and
new
business
strategy
is
to
stabilise
its
operaJons
and
to
ensure
perfect
on-­‐Jme
performance.
MAB
also
introduced
a
refreshed
Senior
Management
line-­‐up
that
will
focus
on
improving
revenue
efficiency
and
network
design
for
MAB.
MALAYSIA
AIRLINES
NEW
BEGINNINGS

29. MOVING
FORWARD
PLAN
MAB
changing
the
business
model
:
The
development
of
a
business
model
is
on
track
and
will
change
the
following
:
-­‐ Flying
network
that
is
regionally
focused.
-­‐ Focus
on
routes
where
MAB
can
win
by
rebuilding
its
KUL
hub
-­‐ Review
incremental
and
fleet
replacement
for
2017
and
beyond
-­‐ Products
and
services
offering
befiung
targeted
customer
segments.
-­‐ Look
into
major
cost
reducJon
based
on
industry
benchmarked
-­‐ Apply
transformaJon
iniJaJves
by
NewCo
-­‐ Structural
cost
reducJon

30. COMPETITIVE
STRATEGY

31. Lower
Cost
Overall
Low-­‐cost
Provider
Strategy
Broad
DifferenWaWon
Strategy
• Brand
also
known
as
the
Malaysian
Hospitality
(MH)
• Acknowledged
to
have
the
World’s
Best
Cabin
Crew
•
OperaJons
excellence
–
Skytrax
Award
for
passengers
choice
• Provide
5
star
special
charter
services
• Customised
meals
MH
Gourmet
• Malaysian
Airlines
Golden
Lounge
• Enrich
miles
programmes
and
partnerships
with
major
hotel
chains
Focused
Low-­‐Cost
Strategy
Focused
DifferenWaWon
Strategy
MALAYSIA
AIRLINES
GENERIC
COMPETITIVE
STRATEGIES
DifferenWaWon
Broad
cross
secWon
of
buyers
Narrow
buyer
segment
(or
Market
Niche)

32. Low
GlobalisaWon
Strategy
• Treats
world
as
a
single
global
market
• Standardises
global
products/adverJsing
strategies
TransnaWonal
Strategy
• Balance
global
efficiencies
and
local
responsiveness
• Combines
standardisaJon
and
customisaJon
for
product/adverJsing
• DomesJcally
focused
• Exports
a
few
domesJcally
produced
products
to
selected
countries
InternaWonal
Strategy
• Handles
market
independently
for
each
country
• Adapts
products/adverJsing
to
local
tastes
and
needs
MulW-­‐DomesWc
Strategy
MALAYSIA
AIRLINES
GENERIC
COMPETITIVE
STRATEGIES
High
High
Low
Modern
Global
Need
for
Local
Responsiveness
Need
for
Global
IntegraWon

33. MALAYSIA
AIRLINES
POINTS
OF
PARITY
&
DIFFERENTIATION
Category
Point
of
Parity
Points
of
DifferenWaWon
Service
Offerings
Experience
and
skillful
pilots.
High
demand
in
market.
Provide
mulJple
range
of
seat
class
such
as
economy,
business
&
first
class.
This
is
to
accommodate
the
different
needs
&
types
of
customers.
Crew
Provide
onboard
services.
Provide
highly
trained
crew
and
best
quality
service.
Food
&
Beverage
Offers
selecJon
of
meals
that
does
not
specifically
cater
to
special
dietary
needs.
Can
cater
to
various
customer
dietary
requirements
for
all
types
of
classes.
In-­‐fight
entertainment
Provide
infotainment
for
customers.
Hubs
MAS
is
the
only
airline
that
has
3
airport
hubs.
Average
fleet
age
On
average
age
of
fleet
is
5.1
years.
One
of
the
youngest
in
comparison
to
other
airlines.
Branding
Other
airlines
focus
on
service
and
not
specifically
aRached
to
a
culture.
Well
known
for
Malaysian
Hospitality.

34. MALAYSIA
AIRLINES
POINTS
OF
PARITY
&
DIFFERENTIATION
Current
• MAS
main
compeJtors
focuses
on
service
efficiency
and
comfort
with
emphasis
on
ensuring
that
the
passengers
will
reach
their
desJnaJon.
• MAS
has
always
focused
on
their
best
crew
services
&
frills
and
downplayed
on
service
efficiency.
They
always
focus
on
customer
experiencing
the
Malaysian
Hospitality
in
line
with
Malaysia’s
Tourism
tagline
–
Malaysia
Truly
Asia.
Propose
• MAS
should
focus
more
on
their
service
reliability
and
greater
flight
experience–
eg:
Well
trained
&
skillful,
world
sought
pilots.
• DifferenJaJon
focus
should
be
more
on
only
selected
classes
like
Business
&
First
Class
services.
• Focus
on
revamping
their
routes
to
only
profitable
locaJons
and
reduce
government
influence.

35. REFERENCES
• hRp://www.worldairlineawards.com/Awards/worlds_best_lowcost_airlines.html
• hRp://www.cargoforwarder.eu/2015/05/03/final-­‐curtain-­‐for-­‐maskargo/
• hRp://www.worldairlineawards.com/awards/world_airline_raJng.html
• hRp://leehamnews.com/2015/04/30/malaysia-­‐air-­‐fleet-­‐restructuring/
• hRp://www.malaysiaairlines.com/my/en/corporate-­‐info/press-­‐room/2015/
rightsizing_workforce_mab.html
• hRp://www.nydailynews.com/news/world/malaysia-­‐airlines-­‐selling-­‐fleet-­‐airbuses-­‐jets-­‐arJcle-­‐1.2205379
• hRp://www.themalaysianinsider.com/malaysia/arJcle/mas-­‐sells-­‐enJre-­‐airbus-­‐fleet-­‐in-­‐move-­‐to-­‐manage-­‐
losses
• hRp://www.airfleets.net/agefloRe/Malaysia%20Airlines.html
• hRp://www.freemalaysiatoday.com/category/naJon/2015/05/04/sale-­‐of-­‐airline-­‐fleet-­‐too-­‐premature-­‐
mas-­‐ceo/
• hRp://www.airfleets.net/agefloRe/Malaysia%20Airlines.htm

36. THANK
YOU