Turning Around Malaysia Airlines

Topics: Financial ratios, Gross profit margin, Profit Pages: 5 (1422 words) Published: December 1, 2012

Nur Ain Binti Muhammad Yusuf

Turning Around Malaysia Airlines
Turning Around Malaysia Airlines

Table of Content
1.0| Executive Summary| 1|
2.0| Introduction to Case Study| 1|
3.0| BTP1 Assessment| 1|
3.1| Financial Analysis| 1|
3.2| SWOT Analysis (BTP1)| 2|
3.3| BTP1 Turnaround Analysis| 2|
4.0| BTP2 Assessment| 3|
5.0| Bottlenecks & Recommendation| 3|
6.0| References| 4|
7.0| Appendices| 5|

1.0 Executive Summary

Malaysia Airlines (abbreviated MAS), is the government-owned flag carrier of Malaysia. Due to fuel price hiking, inefficient management, global economic crisis, government intervention and low load factor, MAS suffers substantial loss which peaks during 2005. Afterward, Tan Sri Idris Jala was brought into MAS strategizing for turnaround program to bring MAS back to profit. The main target for Business Turnaround 1 (BTP1) is for profit turnaround of 1.1 Billion improvements in 2006 Exhibit 1.1. MAS proposes plan to tackle on the financial aspect, as well as non financial aspect such as operational, enriching stakeholders bonding, increasing customers value as well as for people. Several decision made includes selling off headquarters, increasing fares, cutting-off unprofitable routes (Exhibit 1.9) and Mutual Separation Scheme to enhance its financial. Firefly and MasWings are launched to cater domestic flights. BTP1 proved to be a success and subsequently, BTP2 follows. BTP2 focuses on detailed project and procedure to carry on the success of BTP 1.

2.0Introduction to Case Study
This report will discuss and analyze the positioning of Malaysia Airlines. The key objectives are to identify the current market situation as well as analyzing the Business Turnaround Plan 1 and Business Turnaround Plan 2 and its success or failure as well as providing some recommendation for future sustainability.

3.0Assessment on Business Turnaround Plan 1 (BTP1)
3.1Financial Analysis
During the implementation of BTP1 (2006 &2007), the operating profit recorded high. Based on the computation of MAS’ ratio as shown in Exhibit 1.2, BTP1 period shows a favorable ratio as compared to other year. Based on efficiency ratio, there is remarkable increase in the ratio in 2006. It measures how effectively the firm is managing its assets in generating the sales, and it is due to increase in operating profit. The gearing ratio as per Exhibit 1.5 show a slight dipped in 2006, however recovers in 2007 due to sale of the headquarters building. Exhibit 1.7 favors greatly to MAS as the cash flows increase in 2006 and 2007 show near 4 million of cash flows due to issues of shares and selling off the building. Overall, financial analysis during BTP1 period shows favorable impact financially to MAS, however does not improves continuously during period in which BTP2 commence. 3.2SWOT Analysis (BTP1)

By initiating Mutual Separation Scheme, it emphasis on increasing staff efficiency, cutting down routes leads to a focus on services and network structures that were profitable. The intention to diversify with MasWings and Firefly promotes larger scope for market.

The BTP1 initiative focuses on the financial aspect, since they have to recover from massive losses previously. The extreme cost reduction might impact the service indirectly, or being too financial-focus, BTP1 merely recognized the non financial aspect. The decision also largely attributed to gaining quick cash to solve the liquidity problems; ie; from the selling off the building. Whilst it can become their advantage, but by diversifying, because MAS itself in a shaky state, thus by diversifying, it lack focus as well as imposing larger operating cost for MAS as a whole. Opportunity

Connell (2006) comments that medical tourism has been a success in Asia especially and has prompted global interest, with the increasing in GDP worldwide including...
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