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UOB-NUS Case - Malaysia Airlines
1. | Edison Lim Jun Hao | Lim Jun Hao | Ong Jun Hao | Wayne Kaiends Kang |
Malaysia Airlines
Soaring with the
Phoenix
J & W Consulting
2. Executive Summary
Where are you now:
Questions to consider:
Strategy:
Where you want to be:
Strategies ResultsAnalysis
Malaysia Airline has to reverse the impact of high profile
aviation disasters on its financial performance
How to curb rising
operational costs?
How to rebuild lost
confidence?
How to increase revenue
stream?
How do you balance
expectations as a National
Carrier?
Rising from the Ashes Soaring through the Skies
To provide safe and reliable air travel services,
underscored by efficiency and transparency
Implementation
4. Strategies ResultsAnalysis
Malaysia Airlines Analysis
Implementation
12000
13000
14000
15000
16000
17000
2009 2010 2011 2012 2013
RMâ000
Year
Total Revenue Total Expenditure
Expenditure CAGR of 6%
Revenue CAGR of 5%
Source :CompanyAnnual Report
5. Strategies ResultsAnalysis
Malaysia Airlines Analysis
Implementation
12000
13000
14000
15000
16000
17000
2009 2010 2011 2012 2013
RMâ000
Year
Total Revenue Total Expenditure
Expenditure CAGR of 6%
Revenue CAGR of 5%
Source : Company Annual Report
MAS Core Problem:
Unit costs have remained persistently higher than unit revenue.
7. National Flagship Carrier
Strategies ResultsAnalysis
Stakeholder Analysis
Implementation
Any analysis of Malaysia Airlines will have to juggle Social and Political
obligations, yet still provide value for Customers
Social Political
8. Strategies ResultsAnalysis
Malaysia Airlineâs SWOT Analysis
Strengths
ī˛ 5-Star airline accreditation
ī˛ 94 fully-owned fleet
ī˛ 4.5 average aircraft age
ī˛ OneWorld Alliance
ī˛ Prestige as national courier
ī˛ Low labor costs
Weaknesses
ī˛ Poor financial performance over
last 3 years
ī˛ Unionised Workforce
ī˛ Weak public relations
ī˛ Almost non-existent Social Media
presence
Opportunities
ī˛ Prime geographical location
ī˛ Center of region primed for
exponential growth
ī˛ Business Related Travel
ī˛ Medical Tourism
Threats
ī˛ Erosion of international and
domestic market share by
competitors
ī˛ Negative public opinion stemming
from recent aviation tragedies
ī˛ Increase in fuel prices
Positive Negative
Internal
Factors
External
Factors
S W
O T
Summary of Malaysia Airlineâs Competitive Positioning
Implementation
9. Positive Negative
Strategies ResultsAnalysis Implementation
Malaysia Airlineâs SWOT Analysis
īļ 5-star Accreditation
īļ OneWorld Alliance
īļ Low Labor Costs
īļ Prime Geographical Location
īļ Center of region primed for
exponential growth
īļ Business Related Travel
īļ Poor financial performance
īļ Negative public opinion
īļ Erosion of international and
domestic market share
10. Negative
Strategies ResultsAnalysis Implementation
Key Challenges
Poor financial
performance (High
costs)
Erosion of international
and domestic market
share (Low Revenues)
Negative public opinion
Low
Revenue
Demand Supply Lower Price
Decrease in domestic market
share
12. Negative
Strategies ResultsAnalysis Implementation
Key Challenges
Poor financial
performance (High
costs)
Negative public opinion
Weak social media
presence
Erosion of international
and domestic market
share (Low Revenues)
High Costs
Increase in
Fuel Prices
Unprofitable
Flight Routes
01234567
MnASKsPerEmployee
MalaysiaAirlines
CathayPaciīŦc
SingaporeAirlines
Unproductive
Employees
13. Negative
Strategies ResultsAnalysis Implementation
Key Challenges
Poor financial
performance (High
costs)
Negative public opinion
Weak social media
presence
Erosion of international
and domestic market
share (Low Revenues)
High Costs
14. Negative
Strategies ResultsAnalysis Implementation
Key Challenges
Poor financial
performance (High
costs)
Negative public opinion
Weak social media
presence
Erosion of international
and domestic market
share (Low Revenues)
Unprecedented
Aviation Disasters
15. Negative
Strategies ResultsAnalysis Implementation
Key Challenges
Poor financial
performance (High
costs)
Negative public opinion
Weak social media
presence
Erosion of international
and domestic market
share (Low Revenues)
Poor Social
Media
Engagement
16. Positive
Strategies ResultsAnalysis Implementation
Malaysia Airlineâs SWOT Analysis
īļ 5-star Accreditation
īļ OneWorld Alliance
īļ Low Labor Costs
īļ Prime Geographical
Location
īļ Center of region primed
for exponential growth
īļ Business Related Trave
Established and
Quality Brand
17. Strategies ResultsAnalysis Implementation
Malaysia Airlineâs SWOT Analysis
īļ 5-star Accreditation
īļ OneWorld Alliance
īļ Low Labor Costs
īļ Prime Geographical
Location
īļ Center of region primed
for exponential growth
īļ Business Related Trave
Positive
Prime
Geographical
Location
Potential
Exponential Growth
Untapped Markets
27. Strategies ResultsAnalysis Implementation
Low Cost Economy Business Class First Class
Relatively less price-sensitive
Frequent and Loyal Flyer
Aligns with Business Strategy to establish a premium
branding
Target Customer Profile
âĸ Asian Professional
âĸ Age 25 â 50
âĸ Flies frequently on business trips
Areas for Growth
Segmentation
28. Strategies ResultsAnalysis
Profile of Malaysia Airlineâs Target Consumer
Implementation
Who he is
īļ ASEAN Professional
īļ 21-50 years old
īļ Above average
disposable income
What he cares about
Why he travels
What attracts him
īļ Safety is paramount
īļ Keeping connected even while he flies
īļ Convenience
īļ Comfort
īļ Competitive Pricing
īļ Availability of in-flight WiFi option
īļ Above average disposable income
īļ Business trips around the region
īļ Personal trips
30. Strategies Implementation
Rising from the Ashes
Analysis Results
Five-year Initiative 2019Present
1.
2.
3.
4.
Customer Base
Too diverse, too little volume
Profitability
3 straight years of losses, costs far
outweigh, many unprofitable routes
Government Independence
Government-owned and backed
Brand
Significant misalignment between
goal of being premier and operating
strategies
Customer Base
Regional outreach, focus on niche
Businessmen market
Profitability
Year-on-year increase in
profitability, regional juggernaut
in commercial flights
Government Independence
Healthy balance sheets and stable
independence from grants
Brand
Long-term realignment to being strong
regional Jaggernaut
> >
31. Strategies Implementation
Rising from the Ashes
Analysis
Reduce Cost Increase Revenue
Results
Rebrand
īļ Repositioning
īļ Regain trust and confidence
īļ Re-haul the public relations
team
īļ Focus on social media as an
outreach tool
īļ Focus on core
competencies
īļ Regional market
īļ Increase productivity
īļ Target labor cost
īļ Increase sources of
revenue
īļ Increasing profitable
routes
īļ Provide value adding
ancillary services
32. Strategies ImplementationAnalysis Results
Rebrand
Increase Relevancy
To provide safe and reliable air travel services,
underscored by efficiency and transparency
Brand Repositioning Statement
Staying Focused
through Repositioning
Unprecedented
Aviation Disaster
Stiffening Industry
Competition
Declining
Profitability
33. Strategies Implementation
Strategies to Substantiate Brand Repositioning
Analysis Results
Rebranding
To provide safe and reliable air travel services,
underscored by efficiency and transparency
Brand Repositioning Statement
Achieved by:
Driving Business Results
with Analytics
Structural Analytics
âĸ Customer-centric Public
Relations
âĸ Greater focus on Social
Media platforms
34. Strategies Implementation
MAS must focus on Customer Intimacy to grow
Analysis Results
CompetitiveAdvantage
Customer Engagement key to
expanding consumer baseDerivation:
Reach out to Customers via
Social Media Platforms
Action:
Rebranding
35. Strategies ResultsAnalysis
Company Social Media Analysis
Source: Facebook
Implementation
Malaysia Airlines
Singapore
Airlines
SIA
1 million likes
MAS
1.4 million likes
10k likes, 712
shares
83 likes,
1share
MALAYSIA AIRLINES HAS MORE LIKES
ON FACEBOOK
SINGAPORE AIRLINES HAS MORE
CUSTOMER ENGAGEMENT
âLikesâ
Customer
Engagement
Malaysia Airlines has great market outreach,
but is doing badly in customer engagement
36. Strategies Implementation
Growing with the Social Media
Analysis Results
Rebranding Social Media Strategy
Create greater customer
engagement via FacebookWhat:
How:
Dedicated 24/7 Social
Media Team
Social Media Analytics
37. Strategies Implementation
Using Analytics for Future Growth
Analysis Results
Rebranding What is
Social Media Analytics
Technology that enable
analytics for social media
sentiments over Twitter and
Facebook
Connect more efficiently with
customers
38. Strategies Implementation
Taking Public Relations on Social Media Platforms
Analysis Results
Rebranding
CrisisManagement
Response Time
Market Outreach
Emotional
Sensitivity
Public Relations
Faster Response Time
Customer Intimacy
Goal
Social Media Strategy
Better Crisis
Management
39. Strategies Implementation
Increasing Productivity
Analysis Results
Reduce Cost
Technical and Service
Staff
Upper Executive
Employee Remuneration
Packages
īļ Align remuneration
with KPI (Key
Performance
Indicator)
īļ Replacing portion of
salary with stock
options
īļ Rewarding Staff for
Timeliness of Flights
īļ Flat rate bonus payout
40. Strategies ImplementationAnalysis Results
ncrease Revenue
Value-Adding Ancillary Services
Steady Increase in
Ancillary Revenue
Large Growth
Potential
Source: Ancillaries derived from IdeaWorks 2013 report, IATA forecast
42. Strategies ImplementationAnalysis Results
Value-Adding Ancillary Services
Ancillary Charges
Business Class
Fare
In-flight WIFI charges
Current Prevailing Price
+ 6 USD
30 Minutes of WIFI
Included
For additional usage of
WIFI:
12 USD / hour of WIFI
usage
ncrease Revenue
45. Strategies Implementation
Code Sharing
Analysis Results
MSA with 3%
International
Capacity Share in
Middle East
Untapped Market
Potential
Source: CAPA â Centre for Aviation & OAG
26%
18%
13%
12%
3%
1%
27%
MalaysiaAirlinesInternational Capacity Share (%ofASKs) By region:1st Sep 2014 - 7t
Western Europe
Others
Middle East
South East Asia
SouthAsia
North East Asia
Southwest PaciīŦc
Source:CAPA - Centre for Aviation & O
Working with Qatar Airways
ncrease Revenue
46. Strategies Implementation
Code Sharing
Analysis Results
Working with Qatar Airways
Limited Codeshare: Only
Kuala Lumpur â Doha
Middle East - 9.2 %
passenger growth to
capacity increase of 8.2%
Improved offline Access for
Qatar to SEA and Australia
ncrease Revenue
47. Strategies Implementation
Code Sharing
Analysis Results
Focusing on Chinese Market
17.6% CAGR
Average household
income
(2007-2012)
LARGEST
Middle class population in
the world and still growing
Negative Public Sentiments
ncrease Revenue
48. Strategies Implementation
Increase Sources of Revenue through Code Sharin
Analysis Results
Working with China Southern
Airlines and Xiamen Airlines
Large Domestic Volume
of Air Travel
Source: Boeing
ncrease Revenue
49. Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Countries Identified
MyanmarVietnam
Key Reasons:
īļ Emerging Markets
īļ Growing air travel demand
īļ Additional Demand for Capacity as the countryâs middle class
expand
ncrease Revenue
50. Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Vietnam
âVietnamâs long-haul market is also incredibly
underserved, with big prospects for additional
capacity from both Vietnam Airlines and other
flag carriers.â
Source: CAPA â Centre for Aviation and Innovata ; Airline Leader
ncrease Revenue
51. Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Myanmar
âDemand will continue to
grow as the Myanmar
economy continues to grow
rapidly and it will continues
its emergence as a major
tourist destinationâ
ncrease Revenue
52. Strategies Implementation
Implementation Timeline
Analysis Results
Strategy 2014 2015 2016 2017 2018
Reduce Cost +
Increase Revenue
Brand Re-
positioning and
branding
% Revenue
Analyze
salary
structure
Wi-Fi Installation
Survey potential markets
Realign Strategy
Source
for IT
Vendor
Train
Social
Media
Team
Implement
IT System
Revamp employee
remuneration
package
Evaluat
e
Perform
ance
Increasing Service Standards
Evaluate
Perform
ance
Evaluate
Perform
ance
Implemen
t new
payment
scheme
Continuously access and improve if possible
Continuously access and improve if possible
Revamp employee remuneration
package
8%
CAGR
Tie up with authorities in Vietnam
and Myanmar
Tie up with Airlines in China
Tie up with Airlines in Middle East
CBA
Analysis
53. Strategies Results
Financial Projections
Analysis Implementation
12000
13000
14000
15000
16000
17000
18000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
RMâ000
Year
Total Revenue Total Expenditure
Revenue CAGR of 6%
54. Maintaining their 5 star
rating on Skytrax through
conducting regular audits
Strategies Implementation Results
Risk Mitigation
Analysis
Customer
Industry
Long-Term
Potential
Internal
Might feel that MAS is
sizing down and loses its
âpremierâ Image
Threat of other
Airlines
Unsustainable
growth
Mission
misalignment
Engage in regular
stakeholdersâ meeting
Engage in partnerships to
reach out to more markets
Monthly reviewing of financial
statements to streamline cost
coupled with economic of scales
to create barrier to entries
Risk Group Risk Mitigation
55. Strategies Results
Conclusions
Analysis Implementation
Rise from the
Ashes
īļ Optimize internal
structure
īļ Remuneration
īļ Get in the âblackâ
Soar through the
Skies
īļ Market creation
īļ Profit from these
markets
īļ Strategic Alliance
Target
īļ Relisting of MAS
īļ Stabilize
Revenue and
Costs
īļ Rebuild Image
īļ Sustainability
Short Run Long Run
Value Proposition
To provide safe and reliable air travel services,
underscored by efficiency and transparency
56. Appendix
Appendix 1: Income Statement
Appendix 1: Income Statement (Part 2)
Appendix 3: Statement of Cash Flow
Appendix 4: Comparison of Price with Competitors
Appendix 5: Air Traffic, RPKs (billion)
Appendix 6: China Domestic Frequencies
Appendix 7: Major ASEAN Aviation Markets
Appendix 8: Vietnam Airline Market Capacity
Appendix 9: MAS Group Financial Performance (2013/2014)
Appendix 10: Analysis of Malaysiaâs Aviation Market
Appendix 11: Assessment of MAS in Airline Industry (2013)
Appendix 12: MAS Financial Difficulties in the last 14 years
Appendix
60. Appendix 3: Comparison of Price with Competitors
Appendix
Comparing Air Fares with Close Competitors
Singapore Airlines $1,888.00
Air Asia $534.10
Malaysia
Airlines
$267.19
Comparing prices of Malaysia Airlines to its competitors on the
following parameters
From: Singapore
To: Osaka International Airport (Japan)
Departure Date: 7 September 2014
Return Date: 11 September 2014
Search Date: 3 September 2014
68. Appendix 11: MAS Financial Difficulties in the last 14 year
Appendix
Editor's Notes
Drew out the key positive and negative MAS points.
Drew out the key positive and negative MAS points.
Drew out the key positive and negative MAS points.
Drew out the key positive and negative MAS points.
Drew out the key positive and negative MAS points.
We have identified the three key areas that is pertinent to the challenges that Malaysia Airline will have to address. Firstly, Malaysia Airline has to curb their rising operating cost, specifically their labor costs. Secondly, Malaysia Airline has to source for new revenue stream, so as not to directly compete with the LCCS and Premium FFC. Thirdly, and more importantly, there have to reconnect to their customer base by rebuilding their brand.
Over the next twenty years the airline industry is expecting to triple or quadruple its services in order to serve the demand for air travel and cargo services generated by the expansion of the middle income classes in Asia-Pacific and emerging economies in Latin America, MENA and Sub Saharan Africa.
Too attractive to turn down.
Revenue will rise in higher
So, what have we done today. We have outlined a path to recovery for Malaysia Airline without sacrificing upon their other responsibilities as a National Carrier. We have introduced both short term and long term strategies. For short term strategies, we focused our attention on