Malaysia Airlines

Route Rationalization How this turned the business around a third time
Ankita Dash 12DM -026 Mayank Singh 12DM-084 Mithila Kanugo -12DM-088 Vishal Godara 12DM-127

INTRODUCTION - I
Flag carrier of Malaysia
Commenced operations as Malayan Airways Limited (MAL) in 1937 when Liverpool

based Ocean Steamship Company partnered with the Straits Steamship Company and
Imperial Airways.

Went public in 1955.

Changed name to Malaysian Airlines in 1963 when

Malaya, Singapore, Sabah and Sarawak formed the Federation of Malaysia.

Changed names again to Malaysia Airlines in 1972 due to political issues with Kuala

Lumpur and Singapore.

First period of unprofitability in 1997 due to the Asian Financial Crisis. Reported losses

of of as much as RM 260 million after earning a record-breaking RM319 million profit in

the financial year 1996/1997.

Result : Business Turnaround Plan 1 was implemented .

INTRODUCTION - II
Second period of unprofitability in 2005 primarily due to escalating fuel

costs.

Result: Dato' Sri Idris Jala appointed as the CEO of Malaysia Airlines by

the Govt. of Malaysia.

The second Business Turnaround Plan was rolled out.

What is BTP2?
A continuation of BTP1 Business Turnaround Plan 1.
Called Transformation . Goal was to transform MAS into the worlds Five Star Value Carrier (FSVC).
Requirement of turnaround plan was to get results fast!
RRPK Revenue per Revenue Passenger Kilometer
RASK -Revenue per Available Seat Kilometer

Source : http://www.malaysiaairlines.com/content/dam/mas/master/en/pdf/corporate-info/Business%20Transformation%20Plan%20(BTP%202).pdf

Premium Segment - MAS under pressure from

full service carriers (FSCs)
FSCs have first class products, new and modern
aircraft and more routes.
Low Cost Carrier (LCC) Segment competition on
fares.
Hence challenge for MAS to reinvent itself.
Source : http://www.malaysiaairlines.com/content/dam/mas/master/en/pdf/corporate-info/Business%20Transformation%20Plan%20(BTP%202).pdf

MAS implemented a hub and

spoke strategy t increase the
feeder traffic onto the trunk lines.

Source : http://www.malaysiaairlines.com/content/dam/mas/master/en/pdf/corporate-info/Business%20Transformation%20Plan%20(BTP%202).pdf

The story today:

After the success of the BTP 2, Malaysia Airlines found itself in the grips of yet another
downturn, the worst they have experienced till date.

In 2012, MAS posted a meagre profit as compared to their expectations. (USD 16 Mil)
The culprit was the rising fuel prices coupled with inefficiency creeping into the routing
system.

MAS found themselves operating at the costs associated with a Full Service Carrier (FSC)
even though their revenues were those of an LCC.
The high competition from Air Asia , Emirates and Singapore Airlines did not help
matters.
In addition , the competition intensified when Lion Air Groups affiliate Malindo was
launched in March 2013. They have since encroached on the LCCs domestic market in
Malaysia.

Source : MAS

These figures highlight the start of the downturn

The Way Forward:

MAS should increase their Asia focus as these markets are experiencing tremendous growth and are more profitable.
The APAC (Asia Pacific region) is currently leading in terms of adding high net worth individuals.
Selective route optimization required for Europe. The unprofitable routes should be phased out.
Existing fuel inefficient carries should be phased out in preference to newer fuel efficient versions of Boeing 737-800
and Airbus A330s.
Routes in Africa and Argentina which are unprofitable should be cut.
Focus should be on new premium carriers to focus on international destinations within South -East Asia.

Source: MAS

THANK YOU!