Malaysian Airlines Strategy

MALAYSIAN AIRLINES STRATEGY 1

Executivesummary

The Malaysian Airlines has suffered a major setback in terms ofoperations and business. Occasioned by a number of setback, beginningat the turn of the new millennium, and culminating in the 2014 MH370and MH17 tragedies, the company has made losses to the tune ofbillions of dollars. The key issues affecting it are customer loss,loss of revenue and stakeholder dissatisfaction. There are threeproposed strategic alternatives, which are stakeholder involvement,partnerships, and corporate restructuring. The paper proposes thefirst option, which over two years, is projected to help the airlineregain its ground.

Background

Malaysian Airline was for a long time the leading airline in theworld, in terms of reputation and income. Since inception, theairline has been the national carrier of Malaysia (Pandey &ampSingh, 2015). It grew in the 1980s, increasing its capacity in termsof routes it serviced and the returns it made. The airline receivedquantifiable support from the Malaysian government, despite a numberof investment regulations that affected the aviation industry in thecountry. Towards the end of the 21st Century, the airlinewas making revenue in terms of billions of dollars, making it one ofthe most respected airlines in the continent, and across the globe.

However, the airline’s fortunes began taking a turn as itapproached the new Millennium. Since then, the company has beenmaking big losses, attributed to the turbulent nature of the aviationindustry, and global financial problems. For instance, in 1997, theAsian aviation market suffered a financial crisis, which reduced theairline’s revenue by 63% (Yong, 2014). There were other similardisasters that affected the airline, culminating in the grandest ofthem all, the 2014 MH370 and MH17 tragedies. The impacts of the twodisasters have adversely affected the airline’s business, causingit to lose billions of dollars of revenue.

Confirmationof negative impact

After the incidences, the airline’s stock prices dropped by 13% (Ma&amp Wires, 2014). This did not only affect the airline, as globalstocks had a detrimental effect on other airlines, affecting theentire aviation industry as well. At the same time, the tragediesaffected the routes that the airline served. Initially, it wasrecognized as the global tourist career. However, the airline lostthe trust of tourists, who went to use other airlines’ services.The third effect is employment. The numbers of jobs that the airlineprovided initially, both directly and indirectly, have greatlydecreased (Agence France-Presse, 2015). This is because they lay offsome employees to carter for the losses that they made after thetragedies.

Keyissues

The first major key issue is the losses that the company has madesince the two tragedies. Directly, the company has been making lossessince 2014, as they do not serve as many routes as they used to do.The airlines ‘market in the United States and Europe has greatlydecreased (Bachman, 2014). These two markets were among the leadingin the entire globe. Initially, the airline was able to overcomefinancial issues by seeking the help of the Malaysian government andother stakeholders. However, none has been able to help the airlinerecover from the effects of the two tragedies.

Thesecond issue is the loss of customers. The airline was initiallyknown to be one with the highest level of customer loyalty. However,this disappeared on the onset of the two tragedies. Most of the loyalcustomers came forward questioning the airline management’scommitment to customer safety and comfort. After the first disaster,the management, together with the government, managed to keep theirmost loyal customer, assuring them that the same would not occuragain. However, after the second incident, the customers were pushedaway from using the airlines air travel services. Efforts to convincethe loyal customers to stay with the airline have been futile.

Thethird major concern is the decreasing shareholder stock. Themanagement of the airline has not been able to keep the shareholderssatisfied with their operations since the tragedies. As such, the newmanagement, which was installed to address the shareholders’issues, has to deal with internal and external forces that areadversely affecting them. At the same time, there has been pressurefrom worker unions regarding the laying off of several employees. Themanagement has to solve all internal matters that are resulting inthe laying-off of hundreds of employees. If these issues are notaddressed, the airline is set to lose revenue, reputation, customersand even the best employees in the industry.

Strategicalternatives

The first option for the airline is to comprehensively involve allstakeholders in finding the way forward. This includes the employees,management, the government and shareholders. By creating a specialforum, the stakeholders can come together and deliberate the wayforward by broadly addressing the issues that affect its operation.The bottom line is that the family that makes up the airline is themost viable way forward. By doing this, for instance, the airline canuse the information to secure customer loyalty, open up more routes,and avoid issues with workers’ unions.

The second most relevant option is to have the airline makecollaborations with other airlines. Already, the airline is a memberof the Oneworld Airline Group (oneworld.com, 2015). However, thereare some issues that an airline alliance cannot help a single airlineto solve, for instance, matters of customer loyalty. Forming apartnership with one of the leading airlines across the world wouldhelp Malaysian airline to serve more routes. At the same time, thecompany will be in a position of countering pressure from workers’unions, as it will have the option of outsourcing labor from theirpartner(s).

The second option is to restructure the airlines’ management.Shoven &amp Waldfogel (2012) describe restructuring gas a corporatemanagement move to reorganize the operation of an organization. Thisis in realization of the fact that there is need to do a totaloverhaul of the airlines’ top management, and replace the officerswith more competent ones. Already, there have been restructuringefforts, which have resulted in the placement of a new CEO. However,there is need to carry out a more detailed restructuring to solve theissues from the root.

Recommendations

Of the three options, the best alternative recommended is involvingall stakeholders in strategizing and executing the way forward. Inthe airline industry, various groups have almost an equal impact onthe net success of an airline. The management has the responsibilityof defining the policies and executing plans. The customers are thebackbone of the business, which gives them the revenue. The investorsact as the drivers of the business, determining the investmentcapacity that the airline deploys. On the other hand, the governmentis in charge of almost every regulation in the aviation industry.According to Kjlin, Eshuis &amp Braun (2012), Stakeholders can beinvolved in the evaluation planning process, which determines thelevel of success that the company can achieve. Below is a summary ofstakeholder involvement that the paper recommends.

Task

People

Timeline

Collection of suggestions

Customers

5 months

Securing funds

Government and shareholders

3 months

Diversification

All stakeholders

2 years

Developing new strategy (such as routes and destinations)

Management and shareholders

1 year

Regaining customer loyalty

Customers

2 years

References

Agence France-Presse. (1 June 2015). Malaysia airlines o cut 6,000jobs in bid for survival. The Guardian. Retrieved on 11October, 2015 fromhttp://www.theguardian.com/world/2015/jun/01/the-terminator-to-cut-6000-jobs-at-malaysia-airlines

Bachman, J. (24 March, 2015). Malaysia airlines has been missingprofits for years. Bloomberg Business. Retrieved on 11October, 2015 fromhttp://www.bloomberg.com/bw/articles/2014-03-24/malaysia-airlines-was-in-trouble-long-before-flight-370

Klijn, E. H., Eshuis, J., &ampBraun, E. (2012). The influence of stakeholder involvement on theeffectiveness of place branding.&nbspPublicManagement Review,&nbsp14(4),499-519.

Ma, W. &amp Wires. (18 July 2014). Malaysia airlines share pricedrops significantly after MH17 tragedy over Ukraine. News.Retrieved 11 October, 2015 fromhttp://www.news.com.au/finance/markets/malaysia-airlines-share-price-drops-significantly-after-mh17-tragedy-over-ukraine/story-e6frfm30-1226993327955

oneworld.com. (2015). Malaysia airlines. Retrieved 11 October2015 from: https://www.oneworld.com/member-airlines/malaysia-airlines

Pandey, N. &amp Singh, G. (2015). Malaysia airlines: Themarketing challenge after MH370 and MH17. Iver Publishing.

Shoven, J. B., &amp Waldfogel, J.(Eds.). (2012).&nbspDebt,taxes, and corporate restructuring.Brookings Institution Press.

Yong D. (9 March, 2014). Missing plane adds to CEO’s woes asMalaysian air losses mount. Bloomberg Business. Retrieve 11October, 2015 fromhttp://www.bloomberg.com/news/articles/2014-03-09/missing-plane-adds-to-ceo-s-woes-as-malaysian-air-losses-mount