Sometimes love is better the second time around, and this may well be the case for Malaysia Airlines as the national carrier works steadily to rebuild its brand position and reignite the brand’s relationships with customers and other stakeholders.
Taken from Malaysia’s Most Valuable Brands 2007 and Malaysia Airlines is ranked 12
Revival is in the Air
JUST as old lovers often rediscover each others’ deepest strengths and most resolute virtues in times of turbulence, Malaysia Airlines (MAS) has finally affirmed its mettle before friends and critics alike by tackling — and, dare we say, taming — its daunting assortment of financial and operational problems.
The Highs and the Lows
After witnessing more than a decade of oscillating fortunes, many wondered if MAS had ceased to be much more than a pretty face — and a high maintenance one at that. While Malaysians have always been proud of the national carrier’s sparkling reputation for service and warmth, of late that pride had come at a high price.
To use the words of Malaysia Airlines Managing Director and CEO Idris Jala, MAS had been “bleeding cash and accumulating massive losses,” and as a state-owned airline, its desperate situation had an impact on public confidence as well as on the nation’s image as Malaysia prepared to fly in record numbers of tourists for its 50th anniversary celebrations and Visit Malaysia Year 2007. At the time of Interbrand’s brand valuation exercise, the national carrier had been in a financial quandary for many months, but even through the more publicised financial crises of the late 1990s and 2005, the airline never stopped accumulating accolades for distinguished in-flight products and services.
In 2003, Malaysia Airlines was ranked as a Five Star Airline by Skytrax, the leading research advisors to the world airline and air transport industry. This coveted position placed it among an elite handful of world class carriers — five to be precise — that have distinguished themselves among passengers for providing excellent service and hospitality, and it still retains that title today.
Malaysia Airlines continued to maintain momentum in garnering awards, and highlights of its attainments over the years include Top 10 Airline of the Year 2005, Top 3 Airline for Best Cabin Staff 2005, Best Airline South-east Asia 2005, winner of Favourite Airline Food by Smart Travel Asia’s 2005 Favourite Airline Poll, Reader’s Digest Trusted Brand Platinum Award 2006, ‘Economy Class Onboard Service Excellence 2006’ award by Skytrax and first place for Best New Business class at the Global Traveler Awards 2006. The airline also swept more than half a dozen titles for its 2004/2005 annual report at the Silver Quill Awards 2006, organised by the Malaysia Chapter of the International Association of Business Communicators. Overshadowing these distinctions, however, was the airline’s persistent inability to stay out of the red despite repeated government intervention to help it remain profitable. It was a major blow for Malaysia Airlines and concerned onlookers alike when it had to announce a net loss of rm1.26 billion in 2005.
Winds of Change
In December of 2005, Idris Jala was brought on board as Managing Director in hopes that his leadership would help steer the company away from bankruptcy and towards regaining profitability.
He would later recall, “I joined MAS… at possibly the worst and most difficult time in the airline’s history.”
Nevertheless, Idris and his team plunged into the work at hand and unveiled the company’s Business Turnaround Plan (BTP) in February 2006. While the airline’s brand tagline and vision, “Going Beyond Expectations,” may sound lofty and somewhat intimidating, its mission statement is pure pragmatism and humility: To be a profitable airline.
After decades of management failures, changes and financial instability, it would take tough love to get the brand’s internal self-image off the ground again. To expose malpractices, irregularities and negligence within the organisation, a whistle-blower programme was implemented to forward every genuine complaint to the management for consideration or investigation while protecting the anonymity of the whistle-blower. Since the programme’s inception, about a hundred whistle blower cases have helped raise employee concerns which were duly addressed by the management through warning letters, contract renegotiations and other disciplinary measures. Though unnerving, the programme brought a fresh sense of transparency and accountability that the organisation had been lacking for so long.
Another BTP initiative much talked about was the Mutual Separation Scheme, or MSS. By the management’s assessment, Malaysia Airlines had become overstaffed and ‘right-sizing’ was necessary to better manage the company’s productivity. In just over a year, the combined effect of the MSS and natural attrition brought staff size down by 3,000 or 14 percent, sending a clear message to everyone that MAS was now serious about travelling light wherever possible.
Back to Essentials
Following exhaustive route profitability analysis, Malaysia Airlines moved to restructure its international network. It rerouted a number of flights via KLIA as the hub, terminated almost 25 routes which represent seven percent of its international network and applied huband-spoke where point-to-point flights were not profitable. Other routes were streamlined to eliminate unnecessary stops or retimed to improve connectivity between the carrier’s domestic and international networks.
However, to ensure minimal impact on Malaysia’s position as a top tourist destination in Asia, the airline is working aggressively with code-sharing partners to sustain viable and frequent international connections. While rising fuel prices remains an uncontrollable issue, the airline hedges its fuel requirements, charges fair and competitive fuel surcharge, and implements the best practices as per the International Air Transport Association’s (IATA) guidelines on fuel efficiency. Malaysia Airlines posted a rm240 million profit by the end of September 2006 — its first profit after five consecutive quarters of losses. This was partly due to the sale of the MAS headquarters building in Kuala Lumpur and from government compensation, but its core products and services revamp were already showing signs of taking off.
Malaysians embraced the airline’s improved offerings, helping the recently beleaguered enterprise to hit revenue targets and to re-establish itself as one of the nation’s most cherished icons. Malaysia Airlines’ recent Travel Fairs were a hit and have even been extended due to the overwhelming public response.
Yet another early vote of confidence for the recovering airline came from CAPA (Centre for Asia Pacific Aviation) when they recognised MAS with the Airline Turnaround of the Year ’06 Award. CAPA’s good faith has since been rewarded. In the first quarter of 2007, Malaysia Airlines posted profits of rm133 million. Many had expected a positive turnaround, but this figure surpassed all expectations by not only exceeding the anticipated targets for Q1, but also overtaking its 2007 full year profit target of rm50 to rm99 million. At the same time, the airline retained its 5-star airline rating by Skytrax.
Truly Malaysian
Malaysia Airline’s unique position as Malaysia’s premier national carrier has often been a double-edged sword. Its role as one of the nation’s most recognisable and essential brand ambassadors to the international tourist and frequent traveller market made it crucial to keep the brand viable and successful. At times, public sector stakes in Malaysia Airlines’ financial recovery made it resemble a nationalscale rescue effort of sorts.
These particular considerations of working in a GLC or Government Linked Corporation such as MAS are not lost on Idris Jala, despite his multinational corporate background as a Shell executive.
“I realise that there are a lot of common things between GLCs and MNCs, except for one aspect. The balance between the business interest and social obligation is a lot more tightly connected in GLCs than in a private company,” he observed in a July 2006 interview with The Edge. “On one hand, we want to improve our yield so that we can cover the high cost of fuel. On the other, it is quite clear that we have social obligations to the tourism industry.”
Idris points out that studies done by Khazanah in 2005 indicated that the airline industry had an economic multiplier effect of 12. In other words, every RM1 invested or spent on the aviation business goes on to generate RM12, so that even at times of loss for MAS, the airline is helping the Malaysian hotel and tourism industry to continue making money. What’s more, many who have worked in or with Malaysia Airlines will note that almost any average Malaysian will have an opinion to express on how the airline should be run. There is a sense of shared entitlement to the Malaysian Airlines brand that goes beyond its status as a GLC.
“Every Malaysian thinks they own a piece of the brand,” a Malaysia Airline executive observed wryly after receiving yet another piece of ‘business turnaround advice’ from an opinionated relative over her mobile phone. But therein, perhaps, is the essence of why Malaysia Airline’s brand allure will always be more than the sum of its parts.
It could be more than just coincidence that the company made its financial turnaround on the 50th anniversary of Malaysia’s independence. As a nation searches its soul and marshals renewed vigour to face future opportunities, so has one of Malaysia’s most alluring brands found its second wind and geared up for a new journey ahead.