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How to save Malaysia Airlines?

Updated on September 11, 2015

What Malaysia Airlines should do to save the airline financially and operationally?

Staff reduction

Staff reduction is common measures but painful one. Seasonal or excess flight crews, ground crews, cabin crews, and airline management staff will have to be reduced and the organization be restructured to an efficient management level. It can provoke outrage among laid-off staff but it is necessary in reducing the over-staffing of an airlines and ensure a manageable organization. For the case of Malaysia Airlines, despite long debate and defending by its unions, finally a massive lay off is inevitable considers the financial dire straits the airlines faced in 2015.

Cut unprofitable routes

Unprofitable route cuts are painful but necessary to reduce operational loss of an airline. When a route are cut especially the routes that is served for long period but now unprofitable, it is a route ventures that had to be omitted. It reduces loss to an airlines but provides a great opportunity instead for rival airlines which serves the same route terminated by Malaysia Airlines, either from competitor full-service airlines or low-cost carrier. The terminated routes especially the long-haul routes can still be served though, this time through codeshare agreement with other airlines, which will be discussed further later.

More efficient aircraft

More fuel and cost efficient aircraft is crucial in maintaining the profitability per mile carried. Malaysia Airlines has the mix of Airbus A380, Boeing 777-200ER, Airbus A330-300X and Boeing 737-800. From the list of fleet, the A380 and B777 is inefficient and most of its fleet should be phased out within years’ time. The possible replacement aircraft can be Boeing 777X, Airbus A350, or the Boeing 787. But given the terrible financial state of Malaysia Airlines now it is first necessary to phase out and sell off its inefficient fleet first before even considering any new and more efficient replacement fleet later. For the Airbus A380 it has been a symbol of pride for Malaysia Airlines at first, only to be a burden in this dire times. But phasing out the Superjumbo will be difficult given its high cost of operating and its pride to the Malaysian flag carrier that may be hard to maintain. For now, it is essential that the A380 is deployed to high profitable routes as soon as possible, preferably those currently served by B777 or A330.

Setting up subsidiary

A subsidiary by a parent carrier can be supplement for extra routes and extra profit. For now, Malaysia Airlines has its subsidiary, Firefly and MasWings working together in domestic and regional routes. However, it will be better if Malaysia Airlines forms another subsidiary in short-haul jet routes especially in ASEAN region to better compete with low-cost carrier such as AirAsia and Malindo Air. It can be done by deploying existing Boeing 737-800 or acquiring smaller jets such as Bombardier CS100 or Embraer E195 to serve more international regional routes. Of course the jet itself had to be more efficient than present mainline carrier fleet to serve the regional route efficiently.

Increase fleet utility

All fleet need to be increased in utility time for increased operations. This rule needs to be applied to Malaysia Airlines newer fleets of Airbus A330-300X and Boeing 737-800. As mentioned earlier, these newer fleets has better cost efficiency and better mileage profit and therefore best be fully utilized for short-haul and medium-haul routes. Of course it goes without saying that increased fleet utilization reduces fleet storage and idle time on the ground which increases parking and storage cost for Malaysia Airlines, but it need to be balanced with flight safety and maintainence aspect of the aircraft. The fleet utilization itself is not limited to flying times but also fleet spaces utilization which will be discussed further in cargo section later.

Codeshare agreements

As Malaysia Airlines are part of the Oneworld alliance since 2013, the carrier needs to take advantages of the benefits from this alliances. Airline alliances allows airlines cooperates in codeshare agreement. Codeshare agreement generally means two or more airlines shares the same route, either only one or all carriers in the codeshare shared the same route. Through this codeshare agreement, Malaysia Airlines can surrenders the unprofitable routes to other codeshare partner airlines through codesharing. While at the same time, Malaysia Airlines can also ventures new routes without serving them by codesharing with other carriers in Oneworld alliances plus other carriers from Star Alliance and Skyteam.

Regional markets

With Asia Pacific region becoming the fastest growing economy in the world, Malaysia Airlines should take more advantage of this current situation and focus more route expansion and ventures into ASEAN, East Asia, and Southern Asian region with more efficient and fully-utilised fleet. The expansion should not only focused at Kuala Lumpur alone but the expansion can also be done at secondary hubs at Kota Kinabalu and Kuching. However with ever increasing competition from low-cost carrier and some foreign airlines, it may be difficult for Malaysia Airlines to achieve this aim in short time. Unless Malaysia Airlines uses new subsidiary as mentioned above to ventures into more new routes, at least there is something that can be done.

Fuel hedge

The concept of buying fuel when it is cheaper is common among low-cost carrier to reduce operational cost but it is also can be applicable to Malaysia Airlines too. To reduce cost per seat and increased mileage profit it is best that Malaysia Airlines to hedge jet fuel cost immediately when the global oil prices was cheaper as of 2015. The lower global oil prices should be an opportunity for Malaysia Airlines to reduce fuel costs for each flight operations, however it remains to be seen as this benefit also enjoyed by the low-cost carriers which have better cost efficiency supplemented by lower hedged fuel costs.

Introduce cheaper in-flight class

Premium Economy Class maybe the measures Malaysia Airlines can introduce to encourage more passengers to enjoy the in-flight service, although this concept is common for all airlines all around the world. It may involves some increase cost in improving the services but with the improved services especially Premium Economy Class passengers will have better flight experience with cheaper fares. Plus the introduction of improved service, which will be discussed later, will restore passengers confident in the airline.

Service improvement

Many airlines are introducing better in-flight service and in-flight meal to attract more passengers. Malaysia Airlines should also follow the good example of better Malaysian Hospitality (MH) as portrayed in the airline code. Improved local delicacies as well as in-flight entertainment systems in all flights are way to go for Malaysia Airlines. However, this is also remains to be seen as low-cost carrier also competes in some form of good service as well.

Joint ventures (JV) with other airlines

Joint ventures (JV) essentially means working together with other airlines. It is different than codeshare agreement because the JV agreement goes not only in route sharing, but also in hub sharing. One good example of airline JV are Qantas-Emirates, which enables Qantas to ventures to Europe via hub in Emirates hub in Dubai. If Malaysia Airlines can create a joint venture with other airlines, particularly with Oneworld partner airline, surely the benefits will exceeds beyond the codeshare agreement alone. Now, with Middle Eastern airlines such as Emirates, Etihad Airways, and Qatar Airways quite successful in route network, there is logic for Malaysia Airlines to start JV with either one of these airlines, particularly Oneworld partner, Qatar Airways which has the large route network from its hub in Doha.

Disassemble its cargo unit

For years although MASKargo are synonym with Malaysia growing global cargo business, it still struggle to provide profit for parent airlines. By ending the unprofitable cargo service and combining cargo with passenger plane service, Malaysia Airlines can maximize its fleet utility whilst at the same time, increases the passenger and freight profitability per mile. Or the Malaysian cargo carrier can contract another cargo company such as DHL, UPS, or other cargo related foreign carriers to handle the freight operations in Malaysia.

Eco-friendly flight

As public grows more environmental-friendly concern, the need to implement eco-friendly services especially in airlines is growing vital. The eco-friendly approach not only helps to save the environment but also helpful in reducing airline operational cost. For Malaysia Airlines, the eco-friendly concept begins by using eco-friendly materials in packaging of in-flight meals, in which the paper box itself is made of recycled sugar cane waste and the plastic cup itself is made of biodegrable plastics. However, the eco-friendly concept for Malaysia Airlines can still go even further by introducing eco-friendly jet fuel, reducing paper usage in in-flight operations, and acquiring more efficient and eco-friendly fleet. This may takes time considers Malaysia Airlines unprofitable state but should be implemented as soon as possible for better environmental friendly flying in the future. Maybe Malaysia Airlines can start by using biofuel initially in domestic routes and flight crews use iPad for flight information to cut down on paper usage.

Promote Malaysia Airlines name globally

Other than more international routes. Malaysia Airlines can also promotes its MH concept overseas either by travel expos or by becoming sponsors in any events or sports clubs. Malaysia Airlines once the shirt sponsor of Queens Park Rangers (QPR) along with low-cost carrier AirAsia but pulled out following failed JV with the low-cost carrier and QPR has subsequently relegated to Division 1 from the Premier League a year after sponsorship started. It is time that Malaysia Airlines needs to think seriously of more positive publicity now and to recover its tainted image following the twin disasters that struck in 2014.

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