Change Mnagement

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g o v e r n a n c e

NOVEMBER 2008

Turning around a struggling airline: An interview with the CEO of Malaysia Airlines Idris Jala led the state-controlled carrier from the brink of bankruptcy to record-breaking profits. Now he wants it to become what he calls a “fivestar value carrier.”

Alex Dichter, Fredrik Lind, and Seelan Singham

When Idris Jala became CEO at Malaysia Airlines, his goal was to keep the

carrier flying. Now he wants to create a new breed of air service. Much has happened in the intervening three years. Malaysia Airlines, the Southeast Asian country’s national carrier, was less than four months away from running out of cash when Jala took charge, in December 2005. The state-controlled airline had been struggling for some time, but inadequate yield management, an inefficient network, and poor cost control finally brought it to its knees that year, when it posted a 1.7 billion ringgit ($500 million) loss. Yet in 2007, the airline earned record annual profits of 851 million ringgit. Such a swing would be remarkable for any company, much less one facing the hurdles common with state ownership: a large number of stakeholders, intense public scrutiny, competing priorities, insufficient freedom to operate commercially, and a host of legacy personnel challenges. Now Jala aspires to turn Malaysia Airlines into a “five-star value carrier.” Jala came to Malaysia Airlines with no experience in the aviation industry or state-run companies. But he had won a reputation for engineering business turnarounds during his 23 years at the oil giant Shell, whose Sri Lankan and Malaysian units he rescued from years of chronic losses. In Sri Lanka, he says, “The Shell leadership told me if I couldn’t fix it in two years, just tell them and they would shut it down. I’d be the last person to switch off the lights.” In this interview at his office, at Sultan Abdul Aziz Shah Airport, near Kuala Lumpur, Jala discussed the lessons he brought from Shell and how he met the urgent need for change when he arrived at Malaysia Airlines. The Quarterly: What were your first impressions when you took over Malaysia

Airlines, in 2005?
Idris Jala: The company was in a financial crisis—the worst in its entire 50-year

history. At the time, we just had enough cash to last three-and-a-half months. Before I joined, I looked at ten years of financial data. When you’re brought into a problem, you should first ask what’s wrong with the profit-and-loss statement. It’s crucially important to frame the problem in the context of the P&L rather than something nebulous, like the culture, the structure, the processes, and all these other things. You must anchor everything on the profit and loss. I’m boringly consistent on that point.

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Vital Statistics
Born August 21, 1958, in Sarawak, Malaysia Married, with 2 children

Education
Graduated with bachelor’s degree in development studies and management in 1982 from Universiti Sains Malaysia Earned MA in industrial relations in 1986 from Warwick University, UK

Career highlights
Malaysia Airlines (2005–present) Managing director and CEO

Idris Jala
Royal Dutch Shell (1982–2005) Managing director, Shell MDS, Malaysia (2002–05) Vice president, retail marketing, Shell International (2000–02) Managing director, Shell Sri Lanka (1998–2000)

Fast Facts
Member of Malaysia Board of Tourism and Board of Governors for IATA (International Air Transport Association) Appointed as adjunct professor, University of Technology Malaysia (UTM), in 2007

Here, it was clear that there were three problems with the P&L statement. The first was a very low yield. Average fares were unable to cover the cost of running the airline. The second problem was a very inefficient network. For a long time, we were asked to fly routes that didn’t make any commercial sense. The government wanted those routes, and we flew them. The third problem was high costs linked to low productivity—too many people. In the...
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