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Documenti di Professioni
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SCHOOL OF BUSINESS
B.A (HONS) BUSINESS MANAGEMENT
In Collaboration with
Lecturer: Ms Malathi
Student: Chan Yee Teen (0771472)
Submission Date: 21st May 2008
Word Count: 2,949 words
CONTENTS
1. Introduction
3
3
4
4
5
7
10
10
11
15
17
18
4. Conclusions
20
5. Appendices
21
6. References /Bibliographic
44
Introduction
This assignment has set out to perform a strategic review on the operations of Malaysia
Airlines (MAS), a full-fledge flagship international airline of Malaysia, for the purpose of
identifying strategic options that could enhance its growth and development.
The nature, generic basis and direction of each of these strategic options will first be
described. The suitability, acceptability and feasibility of these strategic options will next
be analyzed. Based on this analysis, one of the strategic options will be selected for
implementation, and issues related to its implementation will be further discussed.
2.
2.1
A SWOT analysis was conducted on MAS based on information and data obtained from its
website (http://www.malaysiaairlines.com) and other published news concerning its
operations and performance.
surrounding the commercial aviation industry was also made. From the results of these
analyses (see Appendices 1, 2 & 4), three strategic options were identified as listed below.
2.2
2.2.1
Description
MAS should aim to further develop new routes and increase frequency on existing routes
with growth potential by the following action plan:
1. Identify high-value code share and Special Pro-rate Agreement (SPA) partners.
2. Increase agreements with partners that have positive P&L impact to MAS.
3. Discontinue agreements that are not beneficial to MAS.
4. Perform misconnect analysis to optimize network connectivity.
5. Identify new code share and SPA agreements to pursue.
Specific steps should be taken to optimize the existing network where possible via
rescheduling and redeployment of aircrafts to match individual routes. Unprofitable routes
should be stopped, while capacity should be increased on profitable routes like Jakarta,
Bangkok and Los Angeles. Similar approach should be followed for the domestic routes.
The Hub-and-Spoke strategy started earlier (see Appendix 3E) should be further
strengthened to increase the feeder traffic onto MASs trunk routes. Capacity through
existing code-share and interline partners, namely KLM for North Europe, Alitalia for
South Europe, Virgin Blue for Australia, South African Airways for Africa, China Southern
Airlines for China should be closely monitored and enlarged where possible. Additional
efforts and resources should be directed to widen capacity in MASs core network in the
ASEAN, China and India, all of which are estimated to experience higher-than-average
growth in air traffic (Based on IATAs industry data) (http://www.iata.org/index.htm).
To serve this core network better, MAS should acquire long range narrow body aircraft to
operate the new routes where the Airbus 330 is too large and the Boeing 737-400 does not
have the range.
The elements of Strategic Option 1 may be classified into the following generic basis and
direction:
Elements
Generic Strategies
unprofitable routes
Development
(Ansoff
Matrix);
load
factor,
reducing
fuel
2.2.2
Description
To stand up to competition from rising number of low-cost carriers (LCCs), MAS should
continue to cut its cost base. The immediate challenge should be to reduce its system-wide
unit cost (CASK) by 20%, from the current 17.5 sen/ASK down to 14 sen/ASK, to achieve
a breakeven load factor of 60%-65%. Only with a breakeven load factor of 60%-65%, can
MAS expect to grow its network (http://www.malaysiaairlines.com).
This system-wide structural cost reduction effort should be carried out and monitored
closely to ensure its success. A list of initiatives for structural cost reduction is given in
Table 1 below. With lower structural costs, MAS would be able to offer more competitive
fares on routes as and when it wants to compete with other airlines.
Department
Flight Operations
List of Initiatives
- Introduction of new alternate airports
- Improve accuracy of Zero Fuel Weight
- Flight Planning & Flight Following optimization
- Reduction of over flight charge rates
- Revised taxi fuel policy to minimize fuel burn off
Airport
Operations
- Jet fuel saving through the increased usage of GPU & ,minimize
APU usage
- Excess hand baggage collection at the gate
- Rationalize baggage tags & boarding passes
Operations
Control
Engineering &
Maintenance
MAS has implemented zero commission for its travel agents in order to reduce its
distribution cost since January 2008. MAS should now aim to improve its existing internet
booking facility (IBF) and target to increase its internet sales to above 60%. This would
certainly help reduce its distribution cost by 2-3%.
It should be stressed that these cost-cutting measures should not result in shortchanging its
customers, cutting corners or compromising on safety and quality.
Elements
Generic Strategies
segment
2.3
(1)
MAS should further improve its passenger pre-flight services (PPS) to offer passengers a
more convenient, efficient and hassle-free traveling experience. MAS should implement
fully the Simplifying the Business (StB) programme initiated by International Air
Transport Association (IATA) (http://www.iata.org/index.htm) in 2004 which aims to
reduce complexity and cost in PPS. Utilizing advance IT and automation processes, the
StB programme has 5 project streams (see Table 2): eTicketing, eCheck-In, eBoarding Pass,
eBaggage Management and eFreight.
Project
Streams
eTicketing
eCheck-In
Web check-in or kiosk check-in facilities would reduce the long queue at the
check-in counters and make the life of light travelers easier.
eBoarding
Bar-coding boarding passes would simplify the boarding process and reduce
the boarding time.
eBaggage
eFreight
Table 2
Paper-free cargo would reduce processing time and cargo turnover volume
(2)
It is well known the MAS in-flight services are among the best in the world. MAS has won
the Worlds Best Cabin Staff accolade for four consecutive years from 2001 to 2004, and
again in 2007 by Skytrax, UK. (http://www.malaysiaairlines.com) These prestigious
awards have certainly added much strength to the MAS brands tagline of Cabin Services
Other Airlines Talk About.
It is vital that MAS should keep up with its renowned in-flight services as a brand strategy
to seek growth in passenger load. Measures that need to be given attention are:
(a)
(b)
To add more varieties to the recipes of meals and change or rotate them more
regularly to increase the appetite of regular travelers not eating the same meals
too often.
(c)
To spruce up the cleanliness and decors of the toilets, making visiting them a
pleasant experience.
(d)
To station at least one air crew with nursing or medical training background to
cater for the needy passengers at any times.
The elements of Strategic Option 3 may be classified into the following generic basis and
direction:
Elements
Generic Strategies
Premium pricing for core customers who Differentiation (b) with Price Premium
appreciate comfort and extra services, Strategy (5) (Bows Strategy Clock)
reinforcing its internal capability
The three strategic options identified in Section 2 are to be evaluated on the basis of their
suitability, acceptability and feasibility in implementation.
Implementation issues
concerning one of the three strategic options will be discussed in some details.
3.1
Suitability
The suitability of the strategic options is assessed based on their compatibility with the
current competitive environment of the aviation industry, MASs own corporate vision and
mission and MASs internal resources and core competency.
(1)
Environment Macro/Micro
All the three strategic options proposed are suitable for tackling all the competitive trends
being identified in the macro-environment analysis (see Appendix 1). Each option could
handle one or two trends which come with two main objectives: increase profitability and
reduce unnecessary cost. As the aviation industry has begun to enter into phase three
development (see Appendix 1B), MAS would have to react fast in order to survive in the
market.
(2)
All the three strategies are consistent with MASs corporate vision of creating a 5-star low
cost carrier and the mission of pursuing consistent profitability (see mission statement
analysis in Appendix 3C).
objective of improving its service/ product quality and reducing cost to maintain
profitability.
10
(3)
Generally, financing the implementation of these strategies should not be a big problem as
MAS has returned to profit zone and showing healthy cash flow. However, MAS has to
exercise extreme care in planning a suitable fleet of aircrafts that could meet the eventual
growth and demand arising from new route expansion.
MASs present human resources may be a little weak to ensure satisfactory implementation
of these strategies. Intensified staff training and new talent injection will be necessary.
However, MASs current top management team appears to be dedicated and competent.
(4)
Summary of Suitability
Based on the above evaluation, all the three strategic options could be regarded as suitable
for MAS in its pursuit for future growth and development. To ensure their successful
implementation, MAS must pay special attention to prudent financial planning and
strengthening of its human resources.
3.2
Acceptability
The acceptability of the three strategic options is assessed based on the stakeholders
expectations, expected profitability and capital injection, the associated risks and impact on
the environment.
(1)
Stakeholders Expectations
The stakeholders of MAS are comprised of (1) Malaysian government, (2) shareholders, (3)
management, (4) employees, (5) suppliers, (6) travel agents and (7) the customers.
11
The Malaysian government is likely to accept all the strategic options that will benefit MAS
and the country. A study by Khazanah and the global consulting firm, Bain & Company,
shows that aviation has a high multiplier effect of 12.5 to the Malaysian economy in terms
of tourism, infrastructure and logistics development (Malaysia Annual Report 2006).
The shareholders are likely to accept all the strategies as they have already witnessed
MASs successful turnaround and regain of profitability.
The new management team built up by MASs CEO who took over since 2006 is made up
of high-caliber professionals who would love to see MAS taking more positive steps in
achieving its vision and mission. On the other hand, the employees may not be very
supportive of the cost-cutting and business simplifying measures recommended in strategic
options 2 and 3.
The suppliers and travel agents would have learnt by now to live with MASs cost-cutting
measures and have realigned their operations to fit themselves into MASs operating style.
MASs customers are likely to welcome the cheaper air tickets and less-hassle pre/in-flight
services.
(2)
Expected Risks
As mentioned in Section 2, all the strategic options are posing relatively low to moderate
risk to MASs operations. This is because these strategies are focusing mainly in changing
MASs internal structure and organization to improve efficiency and reduce cost. Given
MASs current strength in financial planning and control, the risk of building an oversize
fleet for unrealistic expansion is not likely.
The aviation industry in the Asia pacific is still remain attractive even the slow down and
the emerge of the LCCs. (See Appendix 1A)
12
(3)
MAS suffered a loss of nearly RM1.3 billion in year 2005. However, with the launch of a
turnaround plan initiated by its new CEO in 2006, MAS has trimmed its loss to RM133
million in less than a year (see Table 3).
This shows MAS has fully recovered from the red with a very healthy cash flow and able to
finance its operations and capital requirement for development. (More detail information
in Appendix 2E)
13
(4)
There are no significant negative ethical or environment impacts for all the three strategic
options. Even with future route expansion, MAS is likely to look for fuel efficient aircrafts
as a matter of bring down its running cost. Therefore, the effect on global carbon emission
is not going to be any issue. IATA has estimate that the current figure of 2% share in
global carbon emission by aviation is small compared with land transport.
(http://www.iata.org/index.htm)
(5)
Summary of Acceptability
Based on the above evaluation, all the three strategic options could be regarded as suitable
for MAS in its pursuit for future growth and development. To ensure their successful
implementation, MAS must pay special attention to managing its stakeholders tactfully and
minimize its exposure to political interference.
14
3.3
Feasibility
The feasibility of the three strategic options is assessed based on the MASs current
resources, external constraints and internal constraints.
(1)
Current Resources
The actual resources required for the implementation of the three strategies are summarized
in Table 4 under four categories: (1) management systems, (2) financial systems, (3) human
resources and (4) technology.
Table 4: Current Resources of Malaysia Airlines
Category
1
Actual Resources
Management
Systems
revamped and streamlined its top management team in the past 2 years.
Its current management team is comprised on highly dedicated
professionals.
Financial
Under the competent stewardship of its current CFO, MAS has built up
Systems
very sound financial systems that ensure very healthy cash flow. For
example, annual cash saving of RM147m and capital expenditure
reduction of RM141m were achieved in 2006. MAS has also secured
RM1b short term loan to boost its working capital.
Technology
Development
systems
and
cargo
handling
systems
in
line
with
IATAs
recommendations.
Human
MAS has started to streamline its staff in 2006, resulting in some 2,600
Resources
redundant employees being laid off through VSS. MAS has initiated
staff re-training and re-deployment programme to improve the work
culture and productivity of its workforce.
(Sources: Malaysia Airlines; Constructed by the Author Using Relevant Value Chain)
With the above-mentioned current resources at hand, MAS should be able to implement
any of the three strategies or even all of them.
15
(2)
External Constraints
There are some external constraints that might affect the smooth implementation of the
three strategies. The recent rapid rise of the low-cost carriers (LCCs) in the Asia pacific
region would certainly intensify competition among them and may lead to a price war
which may affect MAS in its implementation of strategic option 1. A price war is likely to
affect MASs bottom line and in turn may affect MASs capability in implementing the
other two strategic options.
In addition, the current surge of crude oil prices, rising more than 25% over a period of 3
months, is indeed a big blow to the whole aviation industry. This uncontrollable hike in
fuel price would pose a big headache to airline operators.
(3)
Internal Constraints
There appears little internal factors to constraint the current MAS management team in
deciding to adopt and implement all the three strategic options.
However, the fact that MAS is one of the Malaysian government-linked companies may
present some internal constraints.
government has the final say on MAS will be run. At it is, the current government appears
to have given MASs top management a free hand to run MAS in a professional manner. If
there is a change of government, then something could happen to MAS management and
upset its strategic direction.
16
3.4
The above evaluation data have indicated that in fact all the three strategic options are
equally important and necessary for the future growth of MAS and should be implemented
to the long term benefits of MAS. The complexity and risks in implementation of the three
options are summarized in Table 5 below.
Strategic Option
(1)
To grow network &
build capacity
Implementation Requirements
(2)
Involves strong management will and
To reduce structural resolve to implement. Changing staffs
& operational costs
working attitudes and instituting a new
low-cost culture would need a lot of
patience and tact.
(3)
To improve pre/inflight passenger
services
Naturally, among the three, strategic option 3 should be selected as the first choice since it
can be implemented quickly and getting faster results.
17
3.5
Implementation Issues
The issues that may arise from the implementation of Strategic Option 3 (to improve
passenger pre/in-flight services) are summarized below, taking into consideration the
perspectives of finance, customers, and internal processes and learning (Kaplan and
Norton, 1996).
(1)
Financial Perspective
MAS has secured a short term loan of RM 1 billion from the CIMB bank in March 2006 to
boost its working capital for its turnaround programme. With prudent management of its
cash flow and disposal of RM147 million of non-core assets, plus the over RM800 million
of profit from its 2007 operation, MAS is now in a very cash fluid position. There should
be no immediate problem to undertake all the required capital investments for improving
passenger pre/in-flight services as described in Section 2.3 above. (Malaysia Airlines
Annual Report 2006)
(2)
Customer Perspective
While most business travelers have little problem to use all the electronic or internet-based
passenger pre-flight services, there is still a substantial fraction of MASs core customers
that are keyboard-shy. This means MAS has a duty to educate its customers to getting used
to all its e-services. For a reasonable period of time, MAS should station specially trained
ground crew at the airports to provide guidance to needy customers and at the same time
getting feedback from the customers on the correction of any faults or further
improvements that would make them more satisfied.
proper implementation of its upgraded in-flight services, MAS should encourage interactive
feedback from its customers by rewarding those who provide good constructive criticisms
or suggestions with special gifts or ticket discounts.
18
(3)
Internal Processes
(4)
Learning Perspective
Non-learners
19
Conclusions
In this research study, by way of SWOT analysis, three strategic options that are thought to
be useful in enhancing the future growth and development of Malaysia Airlines have been
identified as: (1) to grow network & build capacity, (2) to reduce structural & operational
costs, and (3) to improve passenger pre-flight & in-flight services
.
These three strategic options have been evaluated on the basis of their suitability,
acceptability and feasibility in implementation. All the three strategic options have been
shown to be equally important and necessary for the future growth of MAS although they
would present different degrees of challenges in their implementation.
Strategic option 1 which calls for higher capital injection in the face of uncertainties like
competition from LCCs and surging jet fuel prices may be considered as the hardest to
implement with higher risks among the three options. Strategic option 2 which calls for
strong management attitude and resolve to institute a new low-cost culture may be
considered as the second hardest to implement. Strategic option 3 may be considered as
relatively the easiest among the three options as MAS has already in the past built up a
good foundation in passenger services.
Issues that may arise during the implementation of the chosen strategic option 3 have been
discussed from the perspectives of finance, customers, internal processes and learning.
20
Appendices
List of Appendices
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Appendix 1:
21
Based on industry estimates, about 400 plus new aircraft have hit the skies of Asia Pacific,
India and the Middle East in 2007, with another 400 plus expected in 2008. The total of 800
aircraft in 2007 & 2008 alone translate into an annual supply growth of -8% against a
projected demand growth of -6%. This is likely to lead to lower price and/ or erosion of
profit margins since demand does not increase in tandem with capacity (Stage 4).
Although many of the planes are to replace the existing fleets; the fact is that the old planes
will remain in the system. They are not going to be scrapped like cars. The older planes are
deployed elsewhere for other purposes and many of them will find their way back to the
soon-to-be saturated Asia market. (http://www.airliners.net/aviationforums/general_aviation/read.main/3814984/ )
In addition to growing their fleet through new aircraft purchases, many of the traditional
full-services competitors are also investing heavily to enhance their premium service
offering. For instance, several mega full-service carriers have upgraded their B777s with
premium business class seats and state-of-art in-flight entertainment systems. With more
and more airline upgrading their aircraft, and adding new aircraft to their fleet, industry
analysis predict that a product war is inevitable. The pressure on yield will be significant.
Airlines (and aircraft manufacturers) have traditionally based their forecasts on assumptions
of relatively large ratios between air traffic growth and GDP growth. For several decades,
airline growth significantly outstripped aligned with the economic growth. However, since
the 1990s, airline growth in most parts of the world has become more closely aligned with
the economic growth. Nearly all additional growth in Europe, for example, has come from
the low cost carrier (LCC) segment.
A joint study done by Malaysia Airlines and the global consulting firm, Mckinsey &
Company, shown that there has been a slowdown of global air traffic growth (Malaysia
Airline Annual Report 2005) Much of the growth of the last 40 years has been driven by
price declines and increases in access. Both drivers are reaching natural limits. Prices
22
cannot go below zero- or not likely to- and virtually every point in the world can be reached
from another in less than 24 hours.
As revenue growth slow, the factor cost fuel, labor and airport charges which have been
rising in the background all these years will catch up with the airlines. The good years of
growth have also shielded all the inefficiencies in the airlines. These inefficiencies, which
were not addressed but rather postponed, will eventually, haunt the airlines when the
revenue growth slows down.
23
24
With global warming and climate changes being the topics of debate at would forums,
attention is frown towards aviations role and its stand on the issue. Governments in various
parts of the world are unison in supporting the global strategy i.e. to curb the increase of
greenhouse gas emission; however, there is a lack of globally accepted standards and
solution to the issues. There are governments or economic regions which are talking an
unilateral approaches to address the issue. For example, EU is forging ahead unilaterally to
design a legislation on emission trading-which is not aim tandem with developments in
other parts of the world e.g. Asia, Middle East, South America, Etc, Once this law is passed
in EU, it will affect a lot of non =EU airlines which are unprepared. Causing these airline to
suffer financial losses as they will need to stop flying the European sectors overnight.
(IATA, Building Greener Future available at http://www.iata.org/NR/rdonlyres/0B9EA28EF311-4EFD-A24C-CCDB3AA85A71/0/Building_greener_future.pdf)
IATA is currently advocating a 4-pillar strategy: invest in new technology, operate efficient
infrastructure, fly planes efficiently, and introduce economic measure (Tax credits for refleeting, offset programmes and emission trading). It has also made public its interims fuel
efficiency target i.e. 25% improvement in fuel efficiency by 2020.
25
Many international airlines are rallying behind IATAs strategy because it offers more
structured and palatable solutions to the environment issues. In fact, IATA;s strategy has
shown positive result to date: 15 million tones of CO2 savings in 2006 and further 10
million tones in 2007. (IATA Release Press available at
http://www.iata.org/pressroom/pr/)
IATA is now working with the international Civil Aviation Organization (ICAO) to map
out the options to achieving carbon neutral growth and to develop a strategy to guide the
efforts of governments, airline and manufactures. Most airlines, Including MAS, continue
to be guided by IATAs direction.
26
Appendix 1B
Current Phase
In the early 1980s, the US began a complete deregulation of its airline, with free access to
nearly all markets and a complete release of pricing controls. Europe followed in the late
1990s/ early 2000s. The US experience in the early 1980s is the archetype of this third
phase. Multiple new players ended the market and supply quickly outstripped demand. The
advent of the internet allowed customer to opportunity to shop around for the lowers price
and the best schedule. The advent of price and schedule as key purchase drivers quickly
turned the competitive battlefield into a size and cost-game. The airline with the most
flights and lowest cost were able to sustain themselves in a price and schedule-shopped
environment and outlast the competition. Europe is largely in Phase 3, with incumbents
closely controlling costs while pursuing consolidation to maintain scale. (Malaysian
Annual Report 2006 available at http://mas.listedcompany.com/misc/AR2006.pdf
[accessed 15 March 2008].
Future Phase
It is now clear that the deregulated environment of phase 3 leads to a natural end: new
entrants proliferate-some free of the legacy cost that plagues incumbents-and low-cost
supply dramatically outstrips demand. To keep planes full, all players radically reduce price,
and the resulting customer bases, with its high mix of discretionary travelers become nearly
100% influenced by price. In the final, fourth market phase, it is only the player with the
lowest cost that is able to make money. The only avenue to sustainable price increases in
collaboration among the players to increase load factors through joint capacity reduction. It
is clear that consolidation through mergers and acquisition is a strategy that many winners
will have to pursue. (Malaysian Annual Report 2006 available at
http://mas.listedcompany.com/misc/AR2006.pdf [accessed 15 March 2008].
In 1973, due to the differing needs of the two shareholders, it led to the break-up of the
airline. The Singapore government preferred to develop the airlines International routes,
while the Malaysian government had no choice but to develop the domestic network first
before going regional and eventually international. MSA ceased operations in 1972, with its
assets split between two new airlines; Malaysia Airlines Berhad (now Malaysia Airlines),
and Singapore Airlines.
Soon after Malaysian Airline took all the domestic routes within Malaysia in 1 October
1972, its expanded rapidly toward international routes such as introducing long-haul
flights form Kuala Lumpur to London. The economic boom in Malaysia during 1980s
helped spur growth at Malaysia Airline. Today, Malaysia Airlines flies nearly 50,000
passengers daily to some 100 destinations worldwide and has more than 19,546 employees
across the globe on its payroll.
losses in the following year, amounting to RM 417 million in FY2000/2001 and RM836
million in FY2001/ 2002. With these losses, the airline cut many unprofitable routes, such
as Brussels, Darwin, Honolulu, Madrid, Munich and Vancouver. The airline recovered
from its losses in the year 2002/2003. It achieved its then-highest profit in the year
2003/2004, totaling RM461 million.
Yet it strike again in the year 2005, Malaysia Airlines reported a loss of RM1.3 billion.
Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the
same period for 2004, driven by a 10.2% growth in passenger traffic. International
passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo
revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8%
or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel
prices. Other cost increases included staff costs, handling and landing fees, aircraft
maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and
leases. (Malaysian Airline System Berhad, Annual report 2005). Available at
http://mas.listedcompany.com/misc/AR2005.pdf
80.0%
51.0%
49.0 %
60.0%
Investment in Associates
30.0%
2
3
4
49%
23.53%
20%
2
3
4
5
Companies
Malaysia Airlines Cargo Sdn Bhd
MAS Aerotechnologies Sdn Bhd
Syarikat Pengangkutan Senai Sdn Bhd
MAS Golden Boutiques Sdn Bhd
MAS Golden Holidays Sdn Bhd
MASkargo Logistics Sdn Bhd
MAS Academy Sdn Bhd
FlyFirefly Sdn Bhd (formerly known as Kelas Services Sdn Bhd)
Malaysia Airlines Capital (L) Limited
Macnet CCN (M) Sdn Bhd
Malaysian Aerospace Engineering Sdn Bhd
MASWings Sdn Bhd
FlyFirefly Holiday Sdn Bhd (subsidiary of FlyFirefly Sdn Bhd)
Abacus Distribution Systems (Malaysia) Sdn Bhd
Aerokleen Services Sdn Bhd
Aerofine Meat Sdn Bhd
MAS Catering (Sarawak) Sdn Bhd
Honeywell Aerospace Services (M) Sdn Bhd
GE Engine Services Malaysia Sdn Bhd
LSG Sky Chefs - Brahim's Sdn Bhd (Formerly known as MAS Catering
Sdn Bhd)
Hamilton Sundstrand Customer Support Centre (M) Sdn Bhd
Pan Asia Pacific Aviation Services Limited
Taj Madras Flight Kitchen Limited
29
13
Boeing 777-200
17
Airbus 330-300
11
Airbus 330-200
Boeing 737-400
37
Total
81
Cargo
Boeing 747-400
Boeing 747-200
Total
Firefly
Fokker-50
Grand total
90
30
Balance Sheet
Balance Sheet
Non-Current Assets
Aircraft, Property and
equipment
Others
31-Dec-06
2,496,764
590,744
31-Dec-05
2004
2003
2002
2001
2000
2005
2004
2003
2002
2001
693,714
729 745
636,426
267,328
291,181
3,087,508
2,853,134
385,769
454,720
Receivable
1,902,351
1,796,196
1,584,699
1,179,409
2,194,578 2,190,893
3,872,819
3,430,325
10,647
1,202,060
1,473,159
20,457
22,033
Payables
2,808,509
2,764,431
Borrowings
1,050,000
5,081,026
4,259,623
(1,197,560)
(829,298)
1,889,948
2,023,836
6,259,778
9,528,255
1,253,244
1,253,244
778,000
770,000
620,181
756,613
437,290
482,148
1,873,425
2,009,857
1,215,290
1,252,148
15,246
13,152
13,779
12,347
1,888,671
2,023,009
1,229,069
1,264,495
Borrowings
4,680,289
7,829,873
Deferred Income
347,733
431,752
1,277
827
956
1,262
2,650
2,687
2,135
1,889,948
2,023,836
6,259,778
9,528,255
Current Assets
Inventories
Non-current assets
held for sale
Total Assets
Current Liabilities
Sales in advance of
carriage
Taxation
Share capital
Reserves
Shareholders equity
Minority interest
446,038
369,419
1,487,752 1,153,723
23,042
24,674
362,342
352,127
346,345
1,540,403
1,584,816
416,376
335,950
2,308,906
2,267,111
842,056
632,715
576,754
26,613
45,459
83,695
3,394,454
2,479,325
4,287,720
1,321,002
8,360,348
4,460,776
932,186
582,225
10,706
645,625
12,098
120,944
11,082
(6,051,442) (2,193,665)
31
Route Revenue
32
Award List
World Travel Awards
34
Despite the reduction in manpower, the company continued to maintain a high quality of
service to its Customers. Emphasis has also been placed on the inculcation of a
performance-driven work culture and to ensure the success of the BTP. The campaign to
instill the performance-driven work culture has been undertaken with the collaboration of
various in house unions and associations. Memoranda of Understanding and Collective
Agreements entered into with these organizations reflected a common appreciation of the
need for employer and employee to work together to help the airline get out of its
difficulties.
A major milestone in the reorganization of the company was the roll-out of the Integrated
Human Resource Management System (iHRMS) in June 2006. This has helped reduce
administration costs, improved data management and increased the efficiency of the Human
Resources Division.
The training and development of employees competencies remain a key priority for the
Human Resources Division, with major training programmes offered at the Malaysia
Airlines Academy. In 2006, a number of new modules in leadership development and
aviation knowledge enhancement were introduced to nurture talents and improve
performance.
(Malaysian
Annual
Report
2006
available
at
http://mas.listedcompany.com/misc/AR2006.pdf [accessed 15 March 2008].
Malaysia Airline Organization Human Resources List:
01. Dato' Dr. Mohd. Munir Bin Abdul Majid >>
Chairman
Appointed on August 1, 2004
02. Dato' N. Sadasivan a/l N. N. Pillay >>
Deputy Chairman
Appointed on December 1, 2001
35
08. Datuk Haji Yusoff bin Datuk Haji Mohd Kassim >>
Independent and Non-Executive Director
Appointed on January 23, 2006
11. Dato' Sri Wan Abdul Aziz bin Wan Abdullah >>
Independent and Non-Executive Director
Appointed on Mar 20, 2007
36
37
Qatar Airways
Royal Brunei
Airlines
SilkAir
Singapore
Airlines
South African
Airways
Sri Lankan
Airlines
Swiss
International
Airlines
Thai Airways
International
Transaero
Airlines
Uzbekistan
Airways
Virgin Blue
Doha
Brunei
Singapore
Singapore
Johanesburg
Colombo, Kuala Lumpur
Zurich
Bangkok, Phuket
Moscow, Kuala Lumpur
Tashkent
Balina Byron, Broome, Cairns, Canberra, Coffs Harbour, Darwin, Frasers Coast, Gold
Coast, Hamilton Island, Hobart, Mackay, Newcastle, Rockhampton, Sunshine Coast,
Townsville
38
Threats
1.
2.
3.
4.
5.
6.
7.
8.
Strengths
1.
2.
3.
4.
5.
6.
Named the Best Full-Service Airline leader for the last three consecutive years.
Diversity in upper management.
Dominates the Long haul segment of Airline Industry.
Market Experience of more than 50 years.
Primary user of Kuala Lumpur International Airport.
Provide 5 star flight services
Weaknesses
1. Low capacity usage.
2. Low revenue/yield
3. Inefficient network and obtain unprofitable routes.
39
4.
5.
6.
7.
G.
SWOT Matrix
Strengths
-Named the Best FullService Airline leader for
the last three consecutive
years.
-Diversity in upper
management.
-Dominates the Long haul
segment of Airline
Industry.
-Market Experience of
more than 50 years.
-Primary user of Kuala
Lumpur International
Airport.
-Provide 5 star flight
services
Weakness
-Low capacity usage.
-Low revenue/yield
-Inefficient network and
obtain unprofitable routes.
-Low productivity on front
/back workforce.
-Old procurement practice.
-Decentralized monitoring
of operational performance.
-High distribution costs.
Opportunities
S-O strategies
W-O strategies
Strategies Option 3:
Strategies Option 1:
40
Threat
products/services
S-T Strategies
W-T Strategies
Strategies Option 2:
T- Liberalization Policy on
Malaysia Air Market
-Rising Factor CostsParticularly Fuels
W- Old procurement
practice.
- Decentralized monitoring
of operational performance
-High distribution cost.
- Low revenue/yield
41
This create a barrier that a firms must tie up large amounts of capital for maintaining its
daily operation, this will deter smaller firms from entering.
Brand identity: Brand identify is consider important in this industry, however due to the
unstable economic and moderate inflation rate. Consumer became more prices sensitive
than brand identities, which reduces the barrier to entry toward Malaysias airline market.
B) Supplier:
There are many suppliers for the supporting activities in an airline, but in this section, the
supplier of airplane is mainly focused because it is the key item that an airline in this
industry must have. The supplier consists: Boeing, Airbus and McDonnell Douglas.
42
D) Substitute:
There is a lot of substitute transportation available in replacing air transport in Malaysia
such as train, automobile, ship and even telecommunication. Recent year, the advances in
telecommunications, video-conferring become a common tool for business man to reach
out to other countries rather than using face to face intercourse meeting. Other than that, the
advances in automotive industry and infrastructure such as highway or road in Malaysia
able the Malaysian to travel within the country by using automobile such as travels buses or
cars.
In the mere future, fast trains could be used to transport people within the countries to
reduce the usage of petrol oils or jet fuel.
43
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& Strategy, Prentice Hall
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Butterworth Heinemann
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44
45
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46
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47
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48
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49
50