MALAYSIA AIRLINES

Year History
1947 • Known as Malaysia Airways Ltd. (MAL)
• British Overseas Airways
• Corporation (BOAC - now British Airways), Ocean Steamship Company of
Liverpool and the Straits Steamship Company of Singapore.
• End of 1947, Malayan Airways engaged in an expansion exercise and MAL
began providing regional flight services.
• MAL's entry as a member of IATA.

1958 • MAL was launched as a public limited company.

• MAL then entered the jet age with the purchase of Vickers Viscount
aircraft

1960 • MAL propelled into other far-flung regions of Asia. The acquisition of an
82-seater Briston Britania in 196 made mass transport by air a reality.

1963 • Renamed as Malaysian Airlines Limited (MAL)

1965 • Borneo Airways merged with MAL resulting in fleet and network
expansion
• With the separation of Singapore from Malaysia, MAL became a bi-
national airline and was renamed Malaysia-Singapore Airlines (MSA)

1973 Malaysia introduced Malaysian Airline Limited, which was subsequently

renamed Malaysian Airline System or in short, Malaysia Airlines
1976 Computerized its whole operation

1980 • MAS became the first major government agency to be privatized

1986 • First flight service to the United States

1987 • End of the year, established itself as an international carrier of choice,

offering 34 domestic routes and 27 international destinations.

1991 • Expand its fleet of aircrafts

2001 • Had a fleet of 95 aircrafts in its network serving over 114 destinations

Today • MAS flies around 50,000 passengers daily to some 100 destinations
worldwide.
3Quarter2011 Results Overview
Financial Performance
80
Assets Turnover
70
60
50
40
30
20
10
0
TATO FATO A/C R O ITO
 Financial Performance
Assets Turnover
80

70

60

50

40

30

20

10

0
TATO FATO A/C R O ITO
 Financial Performance
Profitability
20

10

0
MAS QANTAS SINGAPORE CATHAY THAI ROA
ROC
Axis Title -10 ROE

-20

-30

-40
 Financial Performance
Margin Analysis
30

20

10 GM
OPM
LEVERED FREE C/F M
0 SG & AM
MAS QANTASSINGAPORECATHAY THAI

-10

-20

-30
 Financial Performance
Credit Ratio

1.4
1.2
1
0.8
0.6
0.4
0.2
0
CURRENT RATIO QUICK RATIO
 Financial Performance
Long Term Solvency

MAS QANTAS SINGAPORE CATHAY THAI

207.6 204.9

98
81.2 75.2
71.3 70.5
58
42.4
15.3

TD/TE TD/TA
 Financial Performance
Growth Over Prior Year %
150

100

50

0 MAS
TR BIT LES E PS PE
LU E
FIT RY R E
O W
QANTAS
E - O O O U
-50
V AB E D M V A
PR N T
D IT FL
EI T R O O S V E N S H SINGAPORE
C L U F O S E A
-100 RE DI H B R O IN XP C CATHAY
S LE G E E
CA I B A L
F RE THAI
G IT
-150
TA
N
A P
R ED
C E
V
-200 LA

-250

-300

-350
 Financial Performance
5-YEARS AVERAGE
RETURN ON EQUITY RETURN ON INVESTED CAPITAL
OPM PRETAX MARGIN
NET MARGIN

12.04

9.39 9.49 9.31

8.49 9.03 8.94
8.2
7.6
7.06
5.82 5.77
5.73
5.07 4.63 5.1
4.61
3.92 4.39
3.03 3.18
2.17 2.52.5

THAI SINGAPORE MAS QANTAS CATHAY

-3.58
Visio
n
To be the Number One Airline in Asia by 2015

Missio
n
To be a Consistently Profitable Airline

World-class World-class
products ground
and service services

World-class World-class
cabin crew employer
MAS Event 2010
WHAT WE DO ???
• Malaysia Airlines Cargo Sdn Bhd (MASkargo), the
cargo arm of Malaysia
• Airlines, had a sterling year for the period under
review, registering a pre-tax profit of RM142 million, in
a dramatic reversal of fortune after thelosses of 2009.
• The 2010 performance represented the highest
operational profit ever attained in the company’s
history.
• In line with industry trend, total cargo revenue for the
company for FY2010 increased by 29.2% compared
to 2009.
• November 2010, Firefly announced its biggest
expansion plan to date that will see it operate a
base fleet of 30 Boeing B737-800 jet aircraft by
2015.
• Firefly’s jet operations began on 15 January, 2011
with flights to domestic destinations, notably
between Peninsular Malaysia, Sabah and Sarawak.
• It will introduce new routes to selected ASEAN cities
from end 2012 to complement Malaysia Airlines’
network
• In the year under review, MASwings
undertook 13 major initiatives to improve
productivity and customer service, as well as
to reduce operational costs.
• Measures include the F50 Fleet Renewal
Programme, consolidation of its operational
hubs
Top Shareholders
Fleet Status
 Board of Director
Tan Sri Dr. Mohd Munir bin Abdul Majid
●
Chairman, Non-Independent Non-Executive Director

Dato’ N. Sadasivan a/l N. N. Pillay

●
Deputy Chairman, Independent Non-Executive Director

Tengku Dato’ Sri Azmil Zahruddin bin Raja Abdul Aziz

●
Managing Director/CEO, Non-Independent Executive Director

Keong Choon Keat

●
Independent Non-Executive Director

Datuk Mohamed Azman bin Yahya

●
Non-Independent Non-Executive Director

Martin Gilbert Barrow

●
Independent Non-Executive Director
Board of Director

Tan Sri Dr. Wan Abdul Aziz bin Wan Abdullah

Non-Independent Non-Executive Director
Datuk Amar Wilson Baya Dandot
Independent Non-Executive Director
Mohammed Rashdan bin Mohd Yusof
Non-Independent Non-Executive Director
Datuk Sukarti bin Wakiman
Independent Non-Executive Director
Dato’ Puteh Rukiah binti Abd Majid
Alternate Director to Tan Sri Dr. Wan Abdul Aziz bin
Wan Abdullah
Datuk Amar Haji Mohamad Morshidi bin Abdul Ghani
Alternate Director to Datuk Amar Wilson Baya Dandot
Datuk Pengiran Hassanel bin Datuk Pengiran Hj Mohd
Tahir
Alternate Director to Datuk Sukarti bin Wakiman
 
IFE MATRIX Weight Rating Weighted score

Factor cost – particularly fuel – fluctuations of price 0.1 4 0.4

Threat of possible terrorist attack 0.03 2 0.06

Green house gas emission restriction 0.02 1 0.02

Overcapacity 0.07 3 0.21

Economic condition 0.09 4 0.36
Rising cost 0.08 3 0.24
Global pandemic of Airborne diseases 0.03 2 0.06

Emerging in Low- Cost- Carrier 0.09 4 0.36

       
Rising of technology and information system 0.1 4 0.4

Product line expansion 0.03 2 0.06

Online sales 0.05 3 0.15

Government supported 0.06 3 0.18

Business class growth 0.04 2 0.08

Tourism industry 0.09 4 0.36

New market segment 0.06 3 0.18

Increase in traffic volume (cargo and passengers) 0.06 3 0.18

  1.00   3.3
Revenue Improvement Offset by
fuel Price and Currency Volatility
Analysis of Airlines Operations
Overall Load Factor
Route Revenue
 Strengths Weight Rating Weighted Score

1. Highly recognizable brand name 0.15 4 0.6

2. Total revenue increase by 5 % 0.11 3 0.33

3. Low labour costs compared other airline. 0.02 4 0.08

4. Accredited by international bodies(received more 0.07 4 0.28

than 100 awards in the last 10 years).

5. Strong technical skills and highly trained cabin crew 0.05 4 0.2

6. Wide variety of customers and has loyal customer 0.05 3 0.15

7. Innovative features that distinquish the company 0.05 3 0.15

name(based on product and service).

8. Diversified revenue stream such as maintenancen 0.05 3 0.15

and aircraft leasing.
 Weight Rating Weighted
Weaknesses Score

1. Cargo capacity down -12% 0.02 2 0.04

2. High costs included staff costs and 0.07 1 0.07

aircraftmaintenance up by 11%.
3. High rate of airlines tickets 0.03 1 0.03
compare others
4. Net income decreases by RM 711 0.06 1 0.06
million.
5. Marketing skills are inefficient 0.03 2 0.06

6. Fuel price increases by 37% 0.14 1 0.14

7. Very sensitive to equity markets 0.05 1 0.05

8. Negative cash flows 0.05 1 0.05

Score 1.00 2.44

MAS Critical Success Factor
Operati
Operati
onal
onal
Proble
Proble
ms
ms

Financial
Financial
Issues/
Issues/
Problem
Strategic
Problem
Problem
s
s

Manag
Manag
ement
ement
Issues
Issues
 Operational Problems
• MAS was facing was the government intervention
which required MAS to fly routes that didn't make
any commercial sense and MAS, as a GLC had no
choice but to abide to the requirement.
• MAS’ product marketing and yield management
division focused merely on selling their products to
fill the quotas and not to improve the profit yield.
 FINANCIAL ISSUES/PROBLEMS

• MALAYSIA Airlines says its net profit of RM876mil for

the second quarter of 2011 is its highest ever quarterly
profit. That’s true but that’s not the whole truth.
• The accounting profit due to hedging gains masks
Malaysia Airlines’ serious operational problems caused
by declining traffic and prices, and high costs.
• Malaysia Airlines’ current profit and more are coming
entirely out of the provisions for hedging losses it
made – if there had been no provision, there would
have been no profit.
• The problem is pricing. Despite a good, and
even excellent, product it is not able to
price it properly and this is reflected in its
yield, which is the revenue per revenue
passenger km flown (sen per RPK – the
average amount an airline gets for flying a
paying or revenue passenger one km)
• Hence there are no profits but losses now.
 MANAGERIAL ISSUES/PROBLEM

• MAS were facing the problems of management

competency. Most of its subsidiaries, like MAS
Catering and MAS Cargo were in bad financial
shapes (i.e. operating at loss). Besides, some of
the subsidiaries were transferring money for the
directors’ personal use. The previous
management has also failed to lead MAS
efficiently and makes a viable decision on its
expansion program.
 MANAGERIAL ISSUES/PROBLEM

• Three major human resource issues are

being identified including over-supply of
manpower and low productivity,
discrimination and diversity. 
 Strategic Problem
• MAS was hit by the high fuel price in the first 8 to 9
months of the year which had increases up to
USD$182 per barrel and affected the overall
operating cost.
• MAS was slammed by the economic crisis and
downturn which pressured the yield and profit
margin. The world's economy today is also being
treated by the uncertainty and volatilities which can
affect share price and trust from the shareholders.
Strategic Analysis
 SPACE MATRIX

1, -3.36

Reducing price flight ticket

MARKET
especially for customer who buying
PENETRATION
online ticket
 BCG MATRIX
QUESTION MARK:-
 Industry high sales growh
 MAS totally low on market share position
 RECOMMENDATION:
 Divestiture:- swap share between MAS and
Air Asia.
 Market penetration :- MAS should reduce
the price ticket and copy-cat strategies of
Air Asia.
 The Internal-External (IE) Matrix
• Refer on text book page 221
• Position in (ii)
• IFE- 3.3
EFE- 2.44
• Strategies: market penetration
 Reduce price ticket to stimulate demand
MANAGERIAL
• Human resource issues cause these problems to arise if it
was not being solved in a professional way. 

Solution such as retrenchment, equal employment

opportunity (EEO), work-life balance, training and
development, workforce diversity and performance
management have being done and suggested by MAS to
further cope with the human resource issue that they are
facing now and then.
• A new professional management team should be establish
to make management more efficient.
 Recommendation
OPERATIONAL
• Suspend or stop the routes which generates a loss for MAS
– Kuala Lumpur-Surabaya
– Kuala Lumpur-Dubai
– Kuala Lumpur-Karachi-Dubai 
– Kuala Lumpur-Dubai-Damman
– Langkawi-Pulau Pinang-Singapura
– Kuala Lumpur-Johannesburg
–  Kuala Lumpur-Cape Town-Buenos Aires
– Kuala Lumpur-Rome 
• MAS is also planned for aggressive global
advert campaign and trying to seek a strategic
alliance with other reputable airlines.
FINANCIAL
 Due to MAS bad financial standing, the
government has to step in to save the entity
from further deterioration.
 Should implemented a restructuring plan
 Issues more share
 Divestiture –swap share with Air Asia or other
establish company
MANAGEMENT
 In order to revive MAS back into its healthy
condition, A new professional management
team should be once again establish to manage
MAS. Key figures like Datuk Idris Jala.
 A few reputable consultant firms were also
appointed to advise and consult MAS on how to
transform the losing company into efficient and
profitable one.
MARKETING
• Market penetration – reducing flight ticket for
those customer who buying earlier through
online.
• Improved customer loyalty program
• Create student card to encourage them to
flying with MAS