Our Way Forward
5 December 2011
Malaysia Airlines is in crisis. Our combined losses in the first three quarters of 2011 have already exceeded RM1.2 billion, and the final numbers for the year will not improve upon this. The core passenger airline business is chronically challenged. The new Board and Management team, in place for three months, has been hard at work on a plan, referred to as the Business Plan, for Malaysia Airlines. This Business Plan outlines our near-term recovery plan to move us to profitability by 2013, as well as a set of ‘game changers’ to sustain our performance and create a platform for continued growth for Malaysia Airlines’ future. Executing this plan is key to our recovery. It will require complete focus and commitment to make hard and difficult decisions in the next 24 months and the strongest determination to see these initiatives succeed. To the Malaysia Airlines Team, all our stakeholders and customers, I ask for your unwavering support, patience and continued patronage in this time of challenge and opportunity.
Ahmad Jauhari Yahya Group Chief Executive Officer
Executive Summary Current Situation Our Recovery Plan Game Changers: Sustaining Our Performance Foundations Our Commitment
4 13 21 31 38 42
This Business Plan document is issued to Malaysia Airlines staff and external stakeholders with the purpose of disclosing a balanced and objective management view of the current situation, as well as the plan for recovery and our future growth. In the spirit of transparent management practice, we share some financial information as part of the discussion. For all intents and purposes, the financial information and figures pertaining to the future should not be construed as forecasts, projections or estimates of future profitability or representations of the company’s future performance. These figures are merely a set of aspirational targets which are aligned to the Company’s strategy as outlined in this Business Plan. This document and its contents have been approved by Malaysia Airlines’ Board of Directors, but are not to be considered as estimates, forecasts nor projections reviewed by external auditors.
Malaysia Airlines is in crisis. We have incurred a net loss of RM1.2 billion in the first three quarters of 2011 alone. More than 40 percent of our routes are loss-making and our unit cost position is 10 – 15 percent above corresponding revenues. In fact, we are in a much more tenuous position than we were in 2006 when we were in a similar crisis. The aviation market has become even more competitive with the rapid increase of the low cost carrier (LCC) segment, continued growth of the Middle Eastern full service carriers and revival in the fortunes of Asian full service carriers such as Garuda, Japan Airlines (JAL) and Thai Airways.
Meanwhile, Malaysia Airlines has not focused adequately on the premium segment of the market, and our product quality has fallen. Our marketing efforts have been predominantly focused on tactical sales promotions rather than brand-building. With such adverse odds, our intensifying sales efforts could only generate low yields insufficient to cover an increasingly uncompetitive cost structure. Thankfully, we are still flying high in service standards, due to the valiant efforts of our superb Malaysia Airlines team.
Yet the demand outlook for Asian aviation is strong. Across Asia, there is huge growth in disposable income, ramped-up access to credit cards and the Internet, and increased cross-border trade. Southeast Asia, in particular, with its combined population of over 500 million, myriad islands and underdeveloped road and rail infrastructure, is well-placed for aviation growth. Indeed, we expect ASEAN passenger demand to double by 2020. This is rightfully an exciting market for all...
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