Near bankruptcy in 2005, the Kuala Lumpur-based airline has taken tough decisions which have returned it to profitability. Sheron Crossman looks at the transformation No one could accuse Malaysia Airlines' CEO Idris Jala of being timid. He kicked off 2008 by announcing a five-year Business Transformation Plan, which, he believes, will result in a US$309 million profit this year, rising to a giddy US$927 million by 2012.
Although analysts have said it would take a miracle for MAS to achieve such sums, Jala has some reason to be optimistic. Results last year were the best in the airline's 60-year history, turning the US$42 million loss for 2006 into a US$264.9 million profit. And the CEO's previous stratagem, the similarly titled Business Turnaround Plan, saved the airline from near bankruptcy in 2005, when it recorded a loss of US$404 million for the first nine months of the year. MAS's path to profitability has necessitated a radical shake-up, involving scrapping poorly performing routes, slashing staff numbers and accommodating more passengers by cutting the size of the business class cabin and squeezing in more economy seats. Under the new five-year plan, Jala sees Malaysia Airlines as a Five-Star Value Carrier, "We will offer products and services that provide our customers with more value compared to those of our competitors. Our target customers are those who want service excellence and quality and do not make decisions solely on price," he says.
Speaking at the launch of the Business Transformation Plan in January, Idris shrugged off doubts about the projected figures: "I always believe in miracles. I also believe you can create your own miracles," he said, pointing to the success of the first Turnaround Plan. The new plan focuses on five key areas – improving service standards, lowering costs, making fares more competitive, boosting passenger loads, and expanding its network in the Association of Southeast Asian Nations, China and India, destinations expected to see a massive growth in air traffic. Firefly and MASwings, the two subsidiaries launched last year, will be major players in this expansion. In fact, new figures from the United Nations' World Tourism Organisation show that Malaysia is one of the fastest-growing destinations in the Asia-Pacific region. The country's international passenger arrivals were 20% higher last year than in 2006, compared with a global average growth rate of just 6%. Consequently, airline competition, partic-ularly from low-cost carriers, has become feverish. A string of new airlines is now competing head-to-head with Malaysian Airlines from Kuala Lumpur. Last November, Air Asia X, a long-haul affiliate of Air Asia, launched services to Australia's Gold Coast and to China, with further routes from KL to North Asia, India, the Middle East and Europe in the pipeline. In addition, in February, Indonesia's largest private airline, Lion Air, revealed plans to form a Malaysian subsidiary, Lion Langkawi, and to open a base on the island. Lion Air operates 160 flights a day, including internal routes to KL and Penang, and plans to extend throughout the Asia/Pacific region. Meanwhile, Jetstar, the low-cost offshoot of Qantas, is considering making KL its hub for long-haul services. None of which will help MAS in its bid to become the world's 'Five Star Value Carrier' within its Business Transformation Plan. MAS is, however, fighting its corner. As part of the route expansion process, February saw a new direct service between Kuala Lumpur and Yogyakarta, its fifth city in Indonesia, alongside Jakarta, Medan, Denpasar and Surabaya. And last November, the airline started flying four times a week from KL to Macau. "We already have a strong market presence in Hong Kong, Guangzhou, Beijing, Shanghai, Kunming and Xiamen," says Rashid Khan, the airline's commercial director.
"Together with the new service to Macau we will operate 63 weekly frequencies between Malaysia and the seven cities in China." From June 22 to September 18 this summer, Malaysia is to operate a twice-weekly service from London Gatwick to Kuala Lumpur, using Boeing 777-200 aircraft in a two-class configuration. Idris Jala has also confirmed that the airline is considering joining one of the industry alliances. "It's on the cards and it is something we are working on," he says. "I believe between now and 2012 we will be a member of one of the alliances in one form or another."
What you get in Malaysia Golden Club Class
- Complimentary chauffeur pick-up service
- Golden Lounges (with saunas at some airports) at Kuala Lumpur, Kota Kinabalu, Kuching, Langkawi, Penang; Frankfurt, London, Los Angele, Melbourne, Perth, Singapore, Sydney
- Extensive in-flight menu choice, fine wines, china tableware
- Entertainment system with 12 video channels, 10.4-inch touch-screen TV on Boeing 747-400s and 777-200s, video games library, portable media player
- Angled lie-flat seats
- Enrich frequent flyer programme, with four levels of membership: blue, silver, gold and platinum; miles earn upgrades, free flights and companion tickets
- Website: www.malaysiaairlines.com
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