2012 FINANCIAL

CRISIS

BACKGROUND

BACKGROUND

Malaysian Airline System (MAS)is theflag carrier airline of

Malaysia

Headquarters - Sultan Abdul Aziz Shah Airport, Subang

Board of Directors
Tan Sri Md Nor Md Yusof (Non-Independent Non- Executive
Chairman)
Ahmad Jauhari Yahya (Managing Director)

Khazanah National (investmentholding arm of the government

of Malaysia) holds nearly 69.5% stake of MAS

BACKGROUND

Comprises of:
1 aircraft maintenance repair and overhaul unit
2 community airlines
1 freighter services unit

5 Subsidiaries

A joint partnership of the Ocean Steamship Company of

Liverpool, the Straits Steamship of Singapore and Imperial
Airways

BACKGROUND

Malayan Airways Limited (MAL) was formed on 12 October

1937

2 April 1947 - First domestic flight

MAS first aircraft type

BACKGROUND

MAL was renamed Malaysian Airlines Limited

1965 - Malaysia Singapore Airlines (MSA)

1972- Rebranded as Malaysian Airline System Berhad

1 February 2013- MAS joined Oneworld airline alliance,

connected to some 850 destinations in 150 countries across
the world

MAS was awarded with The Worlds Best Cabin Crew several
times in row

WHAT IS THE CRISIS?

WHAT IS THE CRISIS?

Malaysian Airlines Systemis situated under Financial Crisis

due to its severe net losses

Reports showed Malaysian Airlines System technically

declared bankrupt in 2011. But because of government
support they sustained in the business

THE CRISIS, THROUGHOUT THE YEARS

Before the 2012 crisis, MAS had faced several severe financial
losses in the preceding years

The first time ever MAS faced huge losses financially was in
1997, they lost around 265 million

The worst year forMAS airlines was the majorfinancial

crisisin 2005, losing about RM1.3 billion

THE CRISIS, THROUGHOUT THE YEARS

During the 2005 crisis, MAS underwent a business

turnaround plan under Datuk Seri Idris Jala which helped
MAS recover

But despite the publicised turnaround, the airline soon fell

back into the red and registered its worst loss in 2011

In 2012, MASfaced a RM 1.7 billion loss in the business

Carrier admitted it was in "crisis", forcing it to

implement a cost-cutting campaign centred on
slashing routes and other measures

MAS reported RM 1.17 billion losses in the entirety of 2013

Due to the ringgits depreciation, unrealised foreign

exchange losses and finance costs

THE CRISIS, THROUGHOUT THE YEARS

443 million ringgit of losses as of 2014

Challenged by high fuel prices, volatile foreign
exchange and intense competition
This financial crisis of Malaysian Airlines has been ongoing
and it will take quite sometime for them to recover their
losses and also to gain peoples trust on their organization
especially after the MH370 incident

SITUATIONAL ANALYSIS

CAUSES OF THE CRISIS

Poor Management System

Increasing maintenance and repair costs; staff costs and the

airlines management were constantly changing routes and

destination

Rising Fuel Prices

Statistics showsthat fuel prices have increased drastically

Increased competition
Highly competitive market due to rise of low cost carriers

Handling & Landing costs

Consumers were charged with high handing & landing fees

Unprofitable routes
Their KL- Manchester United routed was dysfunctional to the

extent that the organization had to achieve at least 140% for

afull flight

AFFECTED PARTIES

Malaysia Airlines
Travelers stop travelling with Malaysian Airlines due to heavy
air ticket prices

Stakeholders
Khazanah Nasional

Public (Customers)
Due to the changes in the routes, time and price,the public
chose to fly with other airlines for cheaper prices and better
time management

Government
The government invested a lot of money to help rebuild the
image of Malaysian Airlinesso if the company faces a crisis it
will also affect the governments image

AFFECTED PARTIES

The Malaysian Economy

Due to major incidents connecting with air flight / flight
organizations, tourism attraction from outbound
travelers will decrease

Jet fuel statistics

ACTIONS TAKEN BY THE

ORGANIZATION

ACTIONS TAKEN BY THE

ORGANIZATION

The actions taken are based on John K.S. Chongs 6 Steps

to Better Crisis Management (2004)

A six stage model for crisis planning: Coping, Rethinking,

Initiating, Sensing, Intervening and Sandbagging

ACTIONS TAKEN BY THE

ORGANIZATION

Coping
MAS suffered from financial losses

in 2005
A Business Turnaround Plan was
crafted in 2006 as MAS Crisis
Management Plan (CMP)
Actions within the 2006 CMP was
utilized in the 2012 financial crisis

ACTIONS TAKEN BY THE

ORGANIZATION

Rethinking
The need for MAS to rethink the

adequacy and effectiveness of its

2005 CMP
Both 2005 and 2012 crises differed
in nature
MAS sought to develop an
improved version of its CMP the
MAS Business Plan (2012)

ACTIONS TAKEN BY THE

ORGANIZATION

Initiating
The 2012 CMP was disclosed to

MAS target public via a press

statement
The account brought to light
MAS net-loss and its solution
The emphasis within the press
statement was intended to
convince MAS stakeholders
The 2012 CMP had not been
accepted by all stakeholders

ACTIONS TAKEN BY THE

ORGANIZATION

Initiating
Route rationalization
Winning back loyal and satisfied

customers with state-of-the-art

passenger amenities.
Proper revenue management.
Ancillary business spin-offs

ACTIONS TAKEN BY THE

ORGANIZATION

Sensing
MAS Risk and Policy Advisory Services (RPAS) were to

oversee the companys Enterprise risk Management

Framework (ErM)
A risk escalation channel was established

ACTIONS TAKEN BY THE

ORGANIZATION

Intervening
Designed a series of game

changers within the second and

third quarter of the CMP
The launch of a new regional
premium airline
The affiliation with oneworld
Alliance
The collaboration between MAS
and AirAsia Berhad

ACTIONS TAKEN BY THE

ORGANIZATION

Sandbagging
MAS worse-than-expected fourth quarter result for

2012.
Activated a plan and put all members on full alert
Back-up resources (personnel and equipment) are
moiblized and put on stand-by mode
Focussed on increasing revenue and managing costs

EVALUATION

ACUTE-CRISIS

MAS crisis communication methods utilized the Linear

Communication Model for the entirety of the crisis

Based on Edward S. Devlins Steps in Managing a Crisis

(2006), a crisis in the acute-crisis stage should be handled
by:

Taking charge quickly

Establishing facts and telling your story

Utilizing Experienced and Knowledgeable
Spokespersons

Fixing the problem

Committing to Stakeholders and Establishing Credibility

ACUTE-CRISIS
Despite their commitment to stakeholders, MAS
overlooked their employees concerns during the MASAA swap deal

MAS worker unions protested the MAS-AA swap deal

Caused by lack of faith in AirAsia

AirAsias cost-cutting philosophy would bring about
lower salaries and potential layoffs

Prime Minister Datuk Seri Najib Razak intervened and

reviewed the deal

In the end, the deal was scrapped by MAS, due to it

becoming a distraction to MAS turnaround

POST-CRISIS

Recouping losses & making necessary changes

Focus on the Asia-Pacific market
Increase the size of its fleet
Further reduce operational costs

RECOMMENDATIONS

RECOMMENDATIONS

Management to look into status/well-being of the internal

organs of company
Treat staffs as equals
This means, more committed and dedicated workforce

RECOMMENDATIONS

Approach the United Kingdom Civil Aviation Authority

(UKCAA)
Take democratic ties into consideration
Expertise help and training (Long term plan)
Prevents/Minimizes small issues big issues

Voyage reports
Improves meticulousness, eliminates significant issues

CONCLUSION

CONCLUSION

MAS will need take a balanced and pragmatic approach in

reviewing any regulatory changes

This will be complemented with

A focus on Board and senior management effectiveness,
including their role in safeguarding the safety and
soundness of their company
Delivering fair dealing outcomes to their customers

The financial crisis for MAS is not new since it has been going
on for more than a decade and still continuing especially after
the missing flight

THANK YOU!

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