uob-nus case - malaysia airlines
TRANSCRIPT
| Edison Lim Jun Hao | Lim Jun Hao | Ong Jun Hao | Wayne Kaiends Kang |
Malaysia AirlinesSoaring with the
Phoenix
J & W Consulting
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
Strategies ResultsAnalysis
Aviation Industry Analysis
Implementation
Porter’s 5
Forces
Strategies ResultsAnalysis
Malaysia Airlines Analysis
Implementation
12000
13000
14000
15000
16000
17000
2009 2010 2011 2012 2013
RM‘0
00
Year
Total Revenue Total Expenditure
Expenditure CAGR of 6%
Revenue CAGR of 5%
Source : Company Annual Report
Strategies ResultsAnalysis
Malaysia Airlines Analysis
Implementation
12000
13000
14000
15000
16000
17000
2009 2010 2011 2012 2013
RM‘0
00
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.
Strategies ResultsAnalysis
Malaysian Aviation Industry Analysis
Implementation
Source: Boeing CMO 2013-2032
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
Strategies ResultsAnalysis
Malaysia Airline’s SWOT Analysis
Strengths
5-Star airline accreditation
94 fully-owned fleet
4.5 average aircraft age
OneWorld Alliance
Prestige as national courier
Low labor costs
Weaknesses
Poor financial performance over
last 3 years
Unionised Workforce
Weak public relations
Almost non-existent Social Media
presence
Opportunities
Prime geographical location
Center of region primed for
exponential growth
Business Related Travel
Medical Tourism
Threats
Erosion of international and
domestic market share by
competitors
Negative public opinion stemming
from recent aviation tragedies
Increase in fuel prices
Positive Negative
Internal
Factors
External
Factors
S W
O T
Summary of Malaysia Airline’s Competitive Positioning
Implementation
Positive Negative
Strategies ResultsAnalysis Implementation
Malaysia Airline’s SWOT Analysis
5-star Accreditation
OneWorld Alliance
Low Labor Costs
Prime Geographical Location
Center of region primed for
exponential growth
Business Related Travel
Poor financial performance
Negative public opinion
Erosion of international and
domestic market share
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
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
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
01
23
45
67
Mn A
SKs P
er E
mplo
yee
Malaysia A
irlines
Cath
ay Pacifi
cSin
gapore
Airlin
es
Unproductive
Employees
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
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
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
Positive
Strategies ResultsAnalysis Implementation
Malaysia Airline’s SWOT Analysis
5-star Accreditation
OneWorld Alliance
Low Labor Costs
Prime Geographical
Location
Center of region primed
for exponential growth
Business Related Travel
Established and
Quality Brand
Strategies ResultsAnalysis Implementation
Malaysia Airline’s SWOT Analysis
5-star Accreditation
OneWorld Alliance
Low Labor Costs
Prime Geographical
Location
Center of region primed
for exponential growth
Business Related Travel
Positive
Prime
Geographical
Location
Potential
Exponential Growth
Untapped Markets
Strategies ResultsAnalysis Implementation
Malaysia Airline’s Aim
Curb Rising
Operating Cost
Increase Revenue
Stream
Rebuild their
brand
Strategies ResultsAnalysis
Criteria to Evaluate Strategies
Implementation
Degree of
ComplexityHigh Impact Growth Potential Competition
Simple
Matches well
with core
competencies
Cost
effectiveness
Sales
Impact on Brand
Expertise
Future Potential
Scalability
Cost-benefit
Analysis
Similarity to
competition
Economies of
scale
First-mover’s
advantage
Simple. Impactful.
Sustainable
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Evaluating Strategic Options
Implementation
Degree of Complexity High Impact Growth Potential CompetitionStrategies
Internal Restructuring
Heavy Marketing
Brand Differentiation
Reduce C
ost
Incre
ase R
evenue
Consolidation of
Flight Routes
Source for potential
growth locations
Strategies ResultsAnalysis
Areas for Growth
Implementation
Geographical
Asia Pacific Middle EastSouth
America
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
• Asian Professional
• Age 25 – 50
• Flies frequently on business trips
Areas for Growth
Segmentation
Strategies ResultsAnalysis
Profile of Malaysia Airline’s Target Consumer
Implementation
Who he is
ASEAN Professional
21-50 years old
Above average
disposable income
What he cares about
Why he travels
What attracts him
Safety is paramount
Keeping connected even while he flies
Convenience
Comfort
Competitive Pricing
Availability of in-flight WiFi option
Above average disposable income
Business trips around the region
Personal trips
Strategies Implementation
Rising from the Ashes
Analysis Results
Short-term
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
> >
Strategies Implementation
Rising from the Ashes
Analysis
Reduce Cost Increase Revenue
Results
Rebrand
Repositioning
Regain trust and confidence
Re-haul the public relations
team
Focus on social media as an
outreach tool
Focus on core
competencies
Regional market
Increase productivity
Target labor cost
Increase sources of
revenue
Increasing profitable
routes
Provide value adding
ancillary services
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 DisasterStiffening Industry
Competition
Declining
Profitability
Strategies Implementation
Strategies to Substantiate Brand Repositioning
Analysis Results
RebrandingTo provide safe and reliable air travel services,
underscored by efficiency and transparency
Brand Repositioning Statement
Achieved by:
Driving Business Results
with Analytics
Structural Analytics
• Customer-centric Public
Relations
• Greater focus on Social
Media platforms
Strategies Implementation
MAS must focus on Customer Intimacy to grow
Analysis Results
Co
mp
etitiv
e A
dv
an
tag
e
Customer Engagement key to
expanding consumer baseDerivation:
Reach out to Customers via
Social Media PlatformsAction:
Rebranding
Strategies ResultsAnalysis
Company Social Media Analysis
Source: Facebook
Implementation
Malaysia AirlinesSingapore
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
‘Likes’
Cu
sto
mer
En
ga
gem
en
t
Malaysia Airlines has great market outreach,
but is doing badly in customer engagement
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 TeamSocial Media Analytics
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
Connect more efficiently with
customers
Strategies Implementation
Taking Public Relations on Social Media Platforms
Analysis Results
Rebranding
Crisis
Managem
ent
Response Time
Market Outreach
Emotional
Sensitivity
Public Relations
Faster Response Time
Customer Intimacy
Goal
Social Media Strategy
Better Crisis
Management
Strategies Implementation
Increasing Productivity
Analysis Results
Reduce Cost
Technical and Service
StaffUpper Executive
Employee Remuneration
Packages
Align remuneration
with KPI (Key
Performance
Indicator)
Replacing portion of
salary with stock
options
Rewarding Staff for
Timeliness of Flights
Flat rate bonus payout
Strategies ImplementationAnalysis Results
Increase Revenue
Value-Adding Ancillary Services
Steady Increase in
Ancillary Revenue
Large Growth
Potential
Source: Ancillaries derived from IdeaWorks 2013 report, IATA forecast
Strategies ImplementationAnalysis Results
Value-Adding Ancillary Services
In-flight WIFI
services
Increase Revenue
Strategies ImplementationAnalysis Results
Value-Adding Ancillary Services
Ancillary ChargesBusiness 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
Increase Revenue
Strategies Implementation
Soaring through the Skies
Analysis Results
Long-term
Strategies Implementation
Code Sharing
Analysis Results
Code Sharing Partners
Qatar Airways
China Southern
Airline
Xiamen AirlineGoals
Market
Penetration
Market Capture
Increase Revenue
Strategies Implementation
Code Sharing
Analysis Results
MSA with 3%
International
Capacity Share in
Middle East
Untapped Market
Potential
Source: CAPA – Centre for Aviation & OAG
26%
18%
13%
12%
3%1%
27%
Malaysia Airlines International Capacity Share (% of ASKs) By region: 1st Sep 2014 - 7th Sep 2014
Western EuropeOthersMiddle EastSouth East AsiaSouth AsiaNorth East AsiaSouthwest Pacific
Source: CAPA - Centre for Aviation & OAG
Working with Qatar Airways
Increase Revenue
Strategies Implementation
Code Sharing
Analysis Results
Working with Qatar Airways
Limited Codeshare: Only
Kuala Lumpur – Doha
Middle East - 9.2 %
passenger growth to
capacity increase of 8.2%
Improved offline Access for
Qatar to SEA and Australia
Increase Revenue
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 SentimentsIncrease Revenue
Strategies Implementation
Increase Sources of Revenue through Code Sharing
Analysis Results
Working with China Southern
Airlines and Xiamen Airlines
Large Domestic Volume
of Air Travel
Source: Boeing
Increase Revenue
Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Countries Identified
MyanmarVietnam
Key Reasons:
Emerging Markets
Growing air travel demand
Additional Demand for Capacity as the country’s middle class
expand
Increase Revenue
Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Vietnam
“Vietnam’s long-haul market is also incredibly
underserved, with big prospects for additional
capacity from both Vietnam Airlines and other
flag carriers.”
Source: CAPA – Centre for Aviation and Innovata ; Airline Leader
Increase Revenue
Strategies Implementation
Sourcing For Profitable Routes
Analysis Results
Myanmar
“Demand will continue to
grow as the Myanmar
economy continues to grow
rapidly and it will continues
its emergence as a major
tourist destination”
Increase Revenue
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
Strategies Results
Financial Projections
Analysis Implementation
12000
13000
14000
15000
16000
17000
18000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
RM‘0
00
Year
Total Revenue Total Expenditure
Revenue CAGR of 6%
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
“premier” Image
Threat of other
Airlines
Unsustainable
growth
Mission
misalignment
Engage in regular
stakeholders’ 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
Strategies Results
Conclusions
Analysis Implementation
Rise from the
Ashes Optimize internal
structure
Remuneration
Get in the ‘black’
Soar through the
Skies
Market creation
Profit from these
markets
Strategic Alliance
Target
Relisting of MAS
Stabilize
Revenue and
Costs
Rebuild Image
Sustainability
Short Run Long Run
Value Proposition
To provide safe and reliable air travel services,
underscored by efficiency and transparency
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 Malaysia’s Aviation Market
Appendix 11: Assessment of MAS in Airline Industry (2013)
Appendix 12: MAS Financial Difficulties in the last 14 years
Appendix
Appendix 1: Income Statement
Appendix
Appendix
Appendix 1: Income Statement
Appendix 2: Statement of Cash Flow
Appendix
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
Appendix 4: Air Traffic, RPKs (billion)
Appendix
Appendix 5: China Domestic Frequencies
Appendix
Appendix 6: Major ASEAN Aviation Markets
Appendix
Appendix 7: Vietnam Airline Market Capacity
Appendix
Appendix 8: MAS Group Financial Performance (2013/2014)
Appendix
Appendix 9: Analysis of Malaysia’s Aviation Market
Appendix
Appendix 10: Assessment of MAS in Airline Industry (2013)
Appendix
Appendix 11: MAS Financial Difficulties in the last 14 years
Appendix