Turbulent Times For Malaysia Airlines

Topics: Malaysia Airlines, Airline, Kuala Lumpur Pages: 6 (1440 words) Published: March 19, 2015
Turbulent times for Malaysia Airlines
Malaysia airlines was an award-winning, highly reputable air organisation. But with the recent tragedies of flights MH370 and MH17 further exposing a need for a management overhaul, will Malaysia Airlines ever be able to land a secure future? From a small-scale, domestic airline that was established in 1937, Malaysia Airlines has transformed itself into an extremely successful international air service. Aligned with Oneworld, the airline is now connected to 850 destinations in 150 countries (Malaysia Airlines n.d.). On the surface, it appeared that Malaysia Airlines were only progressing as a business. That is until tragedy struck the airline twice in 2014, with the disappearance of flight MH370, flying from Kuala Lumpur to Beijing and the downing of flight MH17 in Ukraine, when flying from Amsterdam to Kuala Lumpur only highlighting the hidden management flaws within the company. Prior to the two disasters, Malaysia Airlines was suffering from increasing losses, debt and a poor business strategy and now faces its last chance for survival (Mouawad 2014). Malaysia Airlines has been struggling financially for years due to poor management. This is the result of a combination of Porter’s competitive five forces, which involves dominating an existing market that is the result of five competitive forces in a business’ industry (Samson and L.Daft 2012), and a vertical structure which consists of a traditional, authoritarian control over the company (Samson and L.Daft 2012). However, Malaysia Airlines’ ultimate downfall was the failure to stay competitive. This was evident in the last year as the market value of Malaysia Airlines dropped by 40 per cent and the airline’s total losses extended to $307 million Ringgit ($117 million Australian Dollars). In fact, the last time the company made a profit was in 2010 (Tobin 2014). Perhaps the carrier would benefit from a more divisional approach as it enables smaller, specialised groups to focus on a particular task at hand. Furthermore, assisting the Chief Executive Officer and higher management to focus on strategic planning (Samson and L.Daft 2012). As a result of poor management and finances, the Malaysian independent wealth fund, Khazanah Nasional Berhad has completely bought out the airline and ambitiously plans to delist and relist the company from the stock market by 2019, turn it into a nationalised airline, cut jobs and search for a new Chief Executive Officer. All while investing a massive $6 billion Ringgit ($2.06 billion Australian Dollars) into the airline in the anticipation that the organisation will become profitable by 2018 (Khazanah Nasional 2014). Although the Khazanah Nasional Berhad is trusted by the government to plan strategic investments and encourage economic development (Khazanah Nasional 2015), the schemes to salvage the airline from its crisis however, remain questionable. One of the main sources of Malaysia Airlines’ suffering management is a consequence of a lack of previous experience in the aviation business from their Chief Executive Officer, Ahmad Jauhari Yahya (B. K Sidhu 2014). Prior to working in the air travel industry, Yahya spent decades in the energy industry, even becoming Chief Executive Officer of Malaysia’s largest independent power company, however, stepping out of the company when they had to de-list from the Malaysian stock market (Malaysia Airlines CEO 2014). Could this be a trend for the under-fire Chief Executive Officer? The Khazanah Nasional Berhad have chosen Aer Lingus Chief Executive Officer Christoph Mueller to become head of the carrier. For the first time in Malaysia Airlines’ history, a foreigner will become the Chief Executive Officer of the airline (B. K Sidhu 2014). This is an opportunity for the airline as personal bias and national pride will not become a possible threat to strategic planning for the air company. Christoph Mueller is a suitable choice for the airline as he is best...

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Appendix:
Samson, D. and Daft, R.L. (2012) Fundamentals of Management, 4th ed., South Melbourne: Cengage, p.303, illus.
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