Engineering

Management
JOSPER ANAK EDDIE(30543)
MICHEAL CLINSMAN ANAK ANDY(30984)
MOHAMMAD ALIFF BIN ABD RAHMAN (31093)
MUHAMMAD HANIF BIN SANI(31393)
MUHAMMAD HARMAINEY BIN JASNIH(27126)

Discussion: 1. Leadership Inconsistency

According to US expert, Malaysian officials and the CEO of the Malaysia

Airline have thus far been poor communicators; at worst, they are
incompetent at best.

1. Poor communicator

2. Lack of coordination during the calamity of twin tragedies

3. Status as Government-Linked Corporations

The proposed solution

1. Challenge

2. Recognition

3. Support

4. Replacing the current CEO

5. Privatization

Bloated Workforce

The airline has approximately 20, 000 full-time employees on its books
(International Business Review, 2014).

1. MAS has been accused of being overstaffed.

2. Its rival, Airasia has only 7,000 employees in total.

To reduce the labour surplus

1. Implement a hiring freeze.

2. End outsourcing contracts

3. Begin a mandatory furlough system.

4. Offer early retirement or buyout plans for workers with seniority.

5. Reduce workers hours or pay across the board.

6. Layoff excess employees.

Discussion : 2.

Discussion : 3.

FUELLING CONCERN
Fuel
It

cost is an unavoidable expense for any airline, and in MASs case.

accounts for just for just below 40% of expenditure.

From

2012 to 2013, the amount that MAS spent on jet fuel rose by more than
MAS spent on jet fuel rose by more than RM542m(US$167.64m) an increase of 9%.
It

also had to take into consideration a 15% increase in the number of flight, as
well as a weaker ringgit against the US dollar, which resulted in the company
having to pay more for fuel.

Figure X: Malaysia Airlines Stock Price & Jet Fuel Price

Source: based on MAS annual report 2008

Figure X: Expenditure Composition

Source: based on MAS annual report 2012/2013

Group Aircraft Fuel Efficicency

Source : based on MAS annual report 2012/2013

AIRLINES STRATEGY WHEN FACE FLUCTUATION IN OIL PRICE

HEDGE
For

instance, they can buy crude oil or jet fuel contracts, and obtain a gain
with price rising, and this gain will compensate the higher cost of jet fuel.
Or

they can hedge by buying a call option that gives them the right to buy jet
fuel at a certain price. They can also use collar hedges, a combination of rights
to buy and sell at set prices (call and put options). Collars provide
protection from a decline in prices but less upside if prices rise.
Airlines

also use swaps, contracts that require them to buy oil or fuel on a
certain date at a set price.

Increase fuel efficiency

Certainly the airlines industry is one the most efficient of all energy sectors
in the economy. Aircraft produced today are about 70% more fuel efficient than
those of forty years ago. The industry has been able to increase its fuel
efficiency by 1% a year for the last three decades, which translates to a saving of
about 80,000 gallons of fuel for every plane every year.

A further 20% improvement in fuel efficiency is projected by 2015 and a 40

to 50% improvement by the middle of the century. Such progress has been
achieved through a combination of technology, improved air traffic control and
better practices.

3. Long Haul to Short Haul

Figure X: Route Revenue

Conclusion