Malaysia Airlines System

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  • Topic: Malaysia Airlines, Airline, Kuala Lumpur International Airport
  • Pages : 9 (2394 words )
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  • Published : December 8, 2008
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Abstracts

The purpose of this paper is to illustrate the importance of studying the internal and external market forces that could contribute to a company’s sales decline. This piece also delves into the ensuing strategies-revamp in the corporation’s marketing mix to counter declining sales. As a scenario, this study would be taking the point-of-view of a Marketing Manager idealising and justifying the team’s actions in a sales boost bid.

For this paper, studies would be based on the national carrier of Malaysia, Malaysian Airlines System (thereafter referred to as MAS). They have been dogged by continuous sales decline since the beginning of this decade. In the beginning of 2006, the company recorded some RM 10 billions of loss for just over the past 2 years.

As of February 2006, the newly government-elected CEO Idris Jala overhauled operations to introduce the Business Turnaround Plan (BTP). According to the plan ‘MASWay’, their aims are to reach profitability by 2008. This paper would build upon the several successes of the BTP to date, to provide more recommendations for battling their dwindling sales.

Current Market Situation

For the Financial Year ending 2005, MAS posted a total loss of RM 1.3bn. This was shocking as it does not represent the Asian aviation industry in its entirety. Regional competitors are not merely sustaining but instead are posting profits through consecutive quarters. After the BTP implementation, MAS posted a gross profit of 240Mil for the 3rd quarter ending September 2006.

MAS revenue postings from its several destination sectors 2001-2005

As illustrated above, MAS’s servitude towards several destinations is low-yield and needs appropriate actions to improve sales figures. Under the newly-implemented BTP 2006, many of these low-yield routes have been terminated or reduced in frequency. Domestic routes have been reduced from 118 to 22, whilst international routes from 114 to 90.

‘The Asian Business Aviation Conference & Exhibition’ (ABACE) in 2005 studied and agreed that the growth capacity of Asian aviation market is still enormous. This study along with MAS’s self-reassurance profit-posting suggests a positive regional market situation.

Global market situation however, are hammered with crisis trends. According to studies conducted by MAS 2005, there are several key hurdles the entire aviation industry has to clear, the declining growth of global Revenue Passenger Kilometre (RPK), commoditisation as a result of pricing transparency, factor costs, rise of the Low Cost Carriers and the high frequency impacts of global demand shocks.

Market Environment Analysis.
Internal Problems.

Like most large corporations, MAS is plagued with insurmountable problems. Being so, the airline’s sales limitation is internally contributed by several key factors. These mainly include, but not limited to, Company’s organizational structure, Supplier’s pressure, Public doubt and Competitors’ pressure.

Organizational Structure
Being a semi-government organisation, MAS possesses limited leeway in speedily solving problems when necessary. This was due to their complex organisational structure with no clear line of command. To illustrate, if research links low sales to high prices, the price rectification process would be long and slow as approval is needed from several parties. Thus, their market reaction competitiveness is lost.

Adapted from MAS management Organisational Chart.

Suppliers’ Pressure
Unlike conventional school of thoughts, MAS possesses little control over a majority of their suppliers. This unfortunate term arises from the principle that the products in question (such as planes and fuel) are of unsought nature, characterized by price inelasticity. This prevents prices from being subjected to most industrial forces and thus keeping leisure at supplier’s dispense. This can also be referred to as factor costs.

For example, when global oil prices were...
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