- Information
- AI Chat
Malaysia Airlines SWOT Analysis Ethical
strategic management (MGNT314)
INTI International University
Preview text
History of Malaysia Airlines
Company History:
Malaysian Airlines System Berhad is the holding company for Malaysia's national airline carrier, one of Asia's fastest growing airlines. From a small air service that began with an 8-seater twin engined Airspeed Consul in 1937. Malaysia Airlines has grown into an award-winning airline with a fleet of more than 100 aircraft, servicing more than 114 destinations across six continents. The airline's network will grow widely in response to consumer demand for worldwide coverage. The airline's enhanced in-flight services reliable ground support and excellent infrastructure will set new world standards.
A joint idea of the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore and Imperial Airways led to a proposal to the Colonial Straits Settlement government to run an air service between Penang and Singapore. The result was the incorporation of Malayan Airways Limited (MAL) on 12 October 1937. Scheduled air passenger and mail services in Malaya commenced in 1937 when Wearne's Air Service (WAS) commenced operating services between Singapore, Kuala Lumpur and Penang. Wearne's Air Service was started by two Australian brothers, Theodore and Charles Wearne The service start as a 3 times weekly flight between Singapore and Penang The first flight, using an 8-seater de Havilland DH Dragon Rapide took place on 28 June 1937 flight departed Singapore from the then brand-new Kallang Airport which had just opened earlier in the same month on 12 June a second D.H enabled the expansion to daily services as well as the addition of Ipoh as a destination. The WAS services ceased with the onset of the Second World War Japanese occupation of Malaya and Singapore.
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 creative thinker, the domestic carrier turned into an international airline in less than a decade.
Sathiah Seelan Karappiah (830121-08-5833)
With the formation of Malaysia in 1963, the airline changed its name to Malaysian Airlines Limited. Soon after, Borneo Airways was incorporated into MAL. Within 20 years, MAL grew from a single aircraft operator into a company with 2, employees and a fleet operator using the then latest Comet IV jet aircraft, six F27s, eight DCs and two Pioneers.
Comet IV F27 DCs 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 in short, Malaysia Airlines.
The airline holds a lengthy record of service and best practices excellence, having received more than 100 awards in the last 10 years – the more notable ones are listed below.
SWOT ANALYSIS
Sathiah Seelan Karappiah (830121-08-5833)
Awarded by Skytrax UK World's Best Cabin Crew (2001–2004, 2007, 2009) 5-star Airline (2005–2007, 2009) Economy Class Onboard Excellence (2006) World’s Best Economy Class Award (2010) Staff Service Excellence for Asia Award (2010)
Awarded by World Travel Awards Asia’s Leading Airline (2010) Asia’s Leading Business Class Airline (2010) Asia's Leading Airline (2011) World's Leading Airline to Asia (2011)
1 Strong brand recognition
Malaysia Airline has an established brand image in the domestic as well as the international market. Malaysia Airline has consistently established high standards of service across its business segments. The group has joined the most exclusive group of world airlines, being ranked as a 5-Star airline by the aviation rating organization, Skytrax, with just four other airlines in the world. The company was honored with the World’s Best Cabin Staff Award for 2006. Apart from the airline operations, the company has also established its presence in the cargo operations. MASkargo won the ‘Excellence in Logistics – Air Cargo Services’ award from Technology Business Review magazine during 2006. The company has recorded an increase in the number of passengers carried and cargo carried over the past couple of years. The group has been leveraging its strong brand image to win the loyalty of consumers to grow its market share.
1 Personnel (MAS Cabin Crews)
Malaysia Airlines have their own branding strategy that involves its flight attendants to promote the airline. This strategy seeks to show cabin crews of Malaysia Airlines as representative of Malaysia hospitality and friendliness. During the late 1990s to year 2007, Malaysia Airlines has been decided to use the “Going Beyond Expectations” slogan to brand itself internationally by heavily promoting its service excellence. In a way to transform their business plan Malaysia Airlines have come out with the new branding strategy slogan which is “MH is Malaysia Hospitality”. It is to highlight the hospitality of its cabin crew instead of the airline’s extensive network and its premium cabin and economy class cabin products. Malaysia Airlines implemented an extensive training program for its cabin and flight crew. The airline holds a protracted record of service and best practices excellence, having received more than 100 awards in the last 10 years. Among the recent ones were the World’s Leading Airline to Asia, Asia’s Leading Airline and Asia’s Leading Business Class Airline awards by World Travel Awards 2010, United Kingdom. However, they focused not so much on awards but on the overall experience for our customers”. The cabin crews stewardess wore the Malaysian traditional ‘Sarong Kebaya’ to further highlight the Malaysian Hospitality within its services. With its excellent cabin crew services, MAS have the upper hand against rivals such Air Asia, Thai Airways and Singapore Airlines.
1 Management
Sathiah Seelan Karappiah (830121-08-5833)
Malaysia Airlines have strong and well designed organizational structure. Its talented management team always plays the most important role in planning and controlling every single action in their service system to perform the best brand experience. Although Malaysia Airlines management had face difficulties and losses several times, the management team always has their own strategies to make sure that they are able to take this challenge as their opportunity to improve their reputation and quality of the service. Malaysia Airlines uncover its Business Turnaround Plan (BTP) in February 2006 which highlighted low yield, an efficient network and low productivity. Employee productivity improved and Malaysia Airlines recovered from financial disorder within 1 year as a result returning to profitability. With their strong product and quality services, Malaysian Airlines was ranked as a 5 star Airlines by SKYTRAX on par with Singapore Airlines and above Thai Airways and Air Asia.
1 Fleet
Currently, Malaysia Airlines operates 5 types of aircraft in its fleet which comprised of :-
Boeing 747-400 Boeing 777-200ER Boeing 737-400 Boeing 737-400 and800 Airbus A330-
Their long haul flights which utilized the Boeing 747 and 777 are all prepared with advanced AVOD (Audio and Video on Demand) for its passengers even in Economy Classes, an advantage over their rivals such as Thai Airways and Air Asia. Although the 747 is considered as an aging plane, Malaysia Airlines took the opportunity to renew and improved its in-flight entertainment which has won many appraisals from its customers.. Malaysia Airlines B777-200ER fleet has a two configuration which is Golden Club Class and Economy Class. Its B747-400 fleet has a three-cabin configuration, also including First Class. Malaysia Airlines premium cabins and Economy Class have been giving numerous awards for excellence in product and service delivery. Malaysia Airlines moving forward, planned to replace its aging 747 fleet with the new Airbus A380-800 in 2012 to further compete for dominance in the Asian region.
Sathiah Seelan Karappiah (830121-08-5833)
The group has a diversified revenue stream owing to its global presence across six continents. In year 2006, Europe and Middle East; Orient and North America; Asia and Australia and New Zealand accounted for about 25%, 20%, 16% and 12% of the total revenues, respectively. As a result, the revenue risks are distributed across its geographies of operation. The risks related to a sudden regional passenger traffic downturn due to a natural disaster or an wave or regional political instability can be less damaging. This enables the group to maintain a consistent growth and gives it a competitive edge.
2. Weaknesses
Malaysia Airlines weaknesses during its offerings, personnel and financial. Introduction of low cost fares by certain airlines are certainly hurting Malaysia Airlines in the short run as they couldn’t compete with these fares as a result losing customers especially in the domestic market disorganized employees were the major contributor for Malaysia Airlines huge loss in 2005 and still continue to be an issue and financially weaker compared to its rivals such as Thai Airways and Singapore Airlines. Malaysia Airlines now needs to compete with international airlines Thai Airways and Singapore Airlines. Even though the fact where Malaysia Airlines does provides domestic and international flight services, majority of the customers of Malaysia Airline are international flight customers. If we compared with other airline companies, the cost offered by Malaysia Airlines is more expensive than others. Its domestic routes were almost completely taken over by Air Asia. With Air Asia’s low cost fares, Malaysia Airlines were not able to compete since its domestic offerings were more expensive. Customers willing to go without comfort for cheap air fares and Air Asia were the customer’s preferred choice. Since Malaysia Airlines cancelled a few routes due to their BTP activities, customers were switching to other airlines that still maintain those destinations such as Thai Airways and Singapore Airlines. Even Air Asia is taking advantage of this situation with their flights covering most Asian destinations especially in India and China and they’re charging it cheaper.
2 Low margins
Even though a strong revenue growth, Malaysia Airline has recorded low margins. The group’s operating margin has been oscillating between 1.6%-1% between 2003 and 2006, well below the industry average. For the trailing twelve month (TTM) period ended March 2007, the company recorded an operating margin of
Sathiah Seelan Karappiah (830121-08-5833)
2%, as compared to the industry average of 5%. Moreover, the net profit margin of the company was 2% well below the industry average of 4% during the same period. The below average margins might adversely affect the group’s growth plans and put it at a competitive disadvantage.
2 Personnel
From the evaluation on Malaysia Airlines, the previous management team has set their objectives clearly and has the best strategies to obtain their objectives but at the same time, a portion of their employees did not know exactly how to implement the strategies effectively. That is why Malaysia Airlines has met many difficulties and losses in their business and need to turnaround the business to recover the problems and sometimes it needs high turnover rate among employees. Employee inefficiency was the major contributor that led to the RM 1 billion loss in 2005 which relates to poor management and decision making in terms of hedging increasing fuel prices and poor cost management in other areas such as maintenance, repair and air route planning. Other obvious weaknesses were inefficient planning in pricing and revenue management, sales and distribution, lack of brand presence in foreign markets and alliances with other airlines. The BTP was implemented later to tackled these employee problems but much work are still needed to improve Malaysia Airlines employees productivity especially in operations.
2 Financial
Although Malaysia Airlines did manage to turnaround their losses in 2007, their financial performance was still mired by losses and this was proven in their 2011 first quarter loss of RM 237 million. In comparison with rivals such as Thai Airways and Singapore Airlines which recorded almost stable profitability run and higher than Malaysian Airlines. Air Asia which was Malaysia Airlines main local rival, succeeded in overtaking their profitability performances. Malaysia Airlines is categorized as a Government Linked Company (GLC) status and Air Asia a public listed company but still Air Asia was able to overtake them with minimal government incentives. Malaysia Airlines later implemented the second BTP which was BTP 2 to improvise their financial performance and there’s a plan to totally privatize the airline, free from government involvement. “There are merits to a privatization, it provides a shelter away from further downside instability in the share price, while the company reshapes itself up for a re-listing in the future years'' reported by May bank Investment Bank (Privatization of MAS)
Sathiah Seelan Karappiah (830121-08-5833)
During March 2007, Malaysian Airlines secured narrow approval to launch Firefly, Malaysia’s first community airline. Firefly is new low-cost community airline which currently offers 14 weekly flights to Kota Bahru, Kuantan, Kuala Terengganu and Langkawi and seven weekly flights to Phuket and Koh Samui from Penang. It is expected to become profitable by next year end is expected to tap into a potential customer base of 100 million in the Indonesia-Malaysia- Thailand Growth Triangle. Firefly is also expected to capture the growing leisure travelers market in the north and east coast of the Peninsula and South Thailand, flying from Penang to six destinations that are currently not served by any other airline. It is also the only airline connecting three popular tourist destinations - Penang, Koh Samui and Phuket. Apart from the opportunity to grow from a new market segment, Firefly will also function as a test-bed for Malaysia Airlines in managing a low-cost operation. Once it is proven successful, the group hopes to adapt Firefly’s processes into the operations of the national carrier and expand its customer base further.
3 Expanding passenger traffic in Asia Pacific
Malaysia Airline has a strong occurrence in Asia. The company covers several regional destinations and various destinations in China, Japan, India and the Middle East where demand for travel is high. The demand for air travel to the Asia Pacific is rising which is driven by increased economic activity in emerging Asian countries such as China and India. Traffic is projected to grow at 7% in China and India combined, above the world average of 5%. Further, the share of Asia Pacific region in world passenger traffic (revenue passenger kilometers) is forecast to rise from 25% in 2003 to 31% in 2023. Malaysia Airline already derives more than15% of its revenues from the Asian region and is well positioned to benefit from increasing air travel to Asia.
3 Improved Fleets
Malaysia Airlines has acquired newer and fuel efficient aircrafts such as the Airbus A380 and other Boeing aircrafts to compete further with its rival. Currently, Malaysia Airlines are still operating the aging Boeing 747-400 and by introducing
Sathiah Seelan Karappiah (830121-08-5833)
better and technologically advanced aircrafts coupled with an excellent in-flight services, customers may inclined to use Malaysia Airlines as a preferred airline.
3 Increasing cargo traffic
There has been a rise in cargo traffic in the South East Asian countries. The rise in demand is driven by growth of export related industries particularly agro-based products in Southeast Asian countries. The group has a dedicated cargo carrying subsidiary (MASkargo) and a wide global network in place. Therefore it is well poised to benefit from increasing demand for air cargo services.
3 Medical Tourism
With the Malaysian government’s effort in promoting Malaysia as a medical tourism, Malaysia Airlines is currently promoting medical packages for its customers. “They are expecting more than 200,000 passengers coming to Malaysia as medical tourists next year,” said MAS senior general manager (network and revenue management) Dr Amin Khan (MAS for medical tourism) This is indeed an opportunity for Malaysia Airlines to introduce medical packages for potential health customers all over the world by partnering with local hospitals. Currently, most of the medical tourists are from Indonesia, Cambodia, Vietnam and Bangladesh. This trend is expected to increase by 16% over the next three years.
4. Threats
Threats are the elements from outside of the organization which could have negative effect on the company. There are some threats that will affect Malaysia Airlines such as economy, competitors, intense competition, terrorism and political unrest, and technology, Increasing jet fuel prices and foreign currency fluctuation.
4 Economy
Changes in economic conditions will adversely affect every business in many aspects. If the economy is in a crisis, it will affect the whole business globally. Malaysia Airlines has many connections throughout the world and it will give a big impact to the company if there are any changes in economy level. As a result, it is important for the organization to prepare some alternatives to overcome this problem because these unpredictable problems may occur anytime. Malaysian Airlines suffered its first unprofitability during the 1997 Asian economic crisis, a
Sathiah Seelan Karappiah (830121-08-5833)
4 Technology
Consumers satisfactions are the most important in any airline company, and it will be satisfied if that airline commands better technology within its aircrafts and ground operations. Malaysia Airlines need to stay ahead in the market with improved technology to maintain its customers from defecting by using other airlines as a substitute. For example, Thai Airways recently announced that they are procuring newer and cost efficient planes from Boeing such as the new Dreamliner which is more cost efficient in terms of fuel consumption and bigger cabin space. Airlines will always look for better ways to improve its services and by procuring the best technology thus Malaysia Airlines need to continuously invest in technology to maintain and improve customer’s satisfaction.
4 Increasing jet fuel prices
In recent past, the prices of jet fuel have increased sharply, hurting the bottom lines of most airlines. For instance, the prices of jet fuel have increased from $1 per gallon in May 2005 to $2 per gallon in May 2007, representing an increase of about 40%. Jet fuel accounts for a significant portion of the operating expenditure of airlines. If jet fuel prices reach higher levels, then the margins of these companies will come under pressure.
4 Foreign currency fluctuation
As an international airline, the group's revenue streams are denominated in a number of foreign currencies resulting in exposure to foreign exchange rate fluctuations. The use of foreign currency borrowings and currency derivatives to hedge future operating revenues is the group's strategy to manage the risk of foreign fluctuations. In addition, fluctuations in inflation and interest rates could also have some impact on the exchange rates between two currencies. In spite of risk management strategies, the group remains exposed to foreign currency risk which could lead to decline in top line growth and put pressure on the group's margins
Sathiah Seelan Karappiah (830121-08-5833)
Ethical issues
Introduction
Ethics are very important in the Airline industry because they are the framework
that guides individuals in the process of making business decisions. They usually
covers three features i. an application of one's professional skills, incorporation
of one's personal values and lastly, good judgment. Codes of ethics are formal
declarations of the moral values that guide companies. Ethics is an area of
corporate responsibility where businesses are legally and socially obligated to
conduct business in an ethical manner. Business ethics includes five key elements:
honesty, integrity, trust, confidentiality and openness. Within the business world,
ethical decisions are made each day that have an impact across all organizations.
Therefore, in the field of ethics, Malaysian Airline industry through its practical
implementations and also through its formal declarations.
Ethical Issues in Malaysian Airlines
Malaysia Airlines have formal declarations of their codes of ethics. Usually, this
can be categorized under a series of topics such as conflict of interest, asset
protection and working together. Conflict of interest refers to those scenarios
where employees or company representatives have to decide between their
interests to their employer or their personal, investment, relationship obligations.
Business Ethic and Safety
Ethics in the Malaysia Airlines Industry stems from the safety of passengers.
Malaysia is known as one of the safest airlines worldwide. Malaysia has developed
their civilian airline infrastructure along the regulations of the International Civil
Aviation Organization (ICAO). The ICAO is under the jurisdiction of the United
Nations as the technical agency for aviation. This was done with the aid of the US
Federal Aviation Administration (FAA) by way of the International Aviation
Safety Assessment (IASA) program, whose purpose is to bring about proper
following of ICAO regulations for flight procedures, operations, and maintenance.
All around us, we see companies cutting corners to save money, sometimes at the
Sathiah Seelan Karappiah (830121-08-5833)
supervisors, and by the age of 40 otherwise – 15 years earlier than their male
counterparts.
Whistleblowers
Malaysia Airlines has introduce a whistleblower policy inviting employee to report
corruption, abuses of power, security risk and other bad practices to an
independent committee. This policy is being introduce to provide a safe and
acceptable way for the employee to raise their concerns about malpractice affecting
MAS without fear or effect .It allows to raise matter in independent and fair
manner. Employee would not be ask to prove their accusations and warned any
attempt to react against victimize or threaten a whistleblower making a good-faith
reports is a serious violation and will be deal with disciplinary action.
Conclusion
Airlines must not be distracted by economic, regulatory, safety, environmental and
other external influences beyond management’s control and must maintain a very
important customer relationships and brand management. Airlines have many
consumer touch points and each is an opportunity to reinforce brand value and
loyalty. Often these opportunities are squandered with irritating service, petty fuel,
baggage or other surcharges that can make airlines seem a distasteful commodity.
Marketing plays an important role in addressing the issues that have diminished
brand perception and in restoring a positive consumer experience. Marketers must
understand every stage of the customer journey and ensure that customers are
engaged throughout. There is a transformation underway in the business world as
social media force companies to reinvent the way they build brands. This has made
brands more participatory. The new brand is much more collaborative. Airlines
need to build strong brands and influence to compete in a much-changed
environment. A new approach to the challenges of the digital world Influence
allows us to determine the most successful strategies for brands in every channel.
The customers have a right to be given quality services, flexibility and also easy
access to their various destinations. They need to be safe and rest assured that the
services received will be timely and that there is safety to their luggage. It is
important for Malaysia airlines to tailor and provide their services in a way that
Sathiah Seelan Karappiah (830121-08-5833)
customers’ heartily values are given a priority. The management team needs to
restructure the rewards program and at the same time put the customers’ needs
first.
Shareholders need a promising return on their investment and they should be
assured of security and knowledge that Malaysia Airlines is working for their
interests. All the shareholders and investors have a right to be informed of the
company’s’ whereabouts for instance when the company is facing difficulties, they
should be informed and know the strategies and measures taken to solve the
mentioned problems.
References
Corporate Info - Our Story Malaysia Airlines
http://www. malaysiaairlines .com/.../...
invest malaysia conference/.../...
Business Transformation Plan (BTP 2)
ir.chartnexus/mas/doc/presentation/1Q11_Presentation.pdf
khazanah.com/docs/JointPressRelease-090811.pdf
^ Malaysia Airlines to join one world alliance - Yahoo! News
eturbonews/1442/malaysian-airline-returns-profit-2007-exceeds
nst.com/latest/mas-to-suspend-4-more-sabah-routes-1.
Fleet (Malaysia Airlines - Fleet)". Malaysia Airlines.
malaysiaairlines/my/en/mh-experience/fleet.html.
Malaysia Airlines Human Resource
Malaysia Airlines' short-term outlook bleak despite new alliance with AirAsia CAPA
Malaysia Airlines - Wikipedia, the free encyclopedia
The Star Online Business - MALAYSIAN AIRLINE SYSTEM BHD - MAS
Malaysian Economy Updates
Sathiah Seelan Karappiah (830121-08-5833)
Malaysia Airlines SWOT Analysis Ethical
Course: strategic management (MGNT314)
University: INTI International University
- Discover more from:
