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Malaysia Airlines is the national air carrier of Malaysia that started operations as the flagship brand of the country 1st September 2015. The company officially known as Malaysia Airline Berhad (MAB) came into existence when the previous airline group called the Malaysian Airline System (MAS) was dissolved. The government of Malaysia acquired the ownership from the remaining shareholders and transformed the company assets to the public. Through this process, the government renationalized the group. The company is a part of the Malaysia Aviation Group (MAG) which was formed to maintain better transparency and operation management for the subsidiaries owned by the group. This group has contributed to the setting and operations of the different service segments of Malaysia Airlines namely Firefly and MASwings that serves the national and international passengers. The MABKargo manages the freight, passenger, express and special cargo requirements of the airline company and also overseen by MAG (Malaysiaairlines.com, 2018). The MAB flights are operated from Kuala Lumpur International Airport and connect destinations including Europe, the Middle East, Australasia, and several cities in around Asia.
The airline company has significantly contributed towards the national development by hiring talents from around the country as skilled employees, engineers, pilots, cabin and ground crew. Not only did the organization enabled the connectivity of Malaysia with the world, but it had also aided in the integration of the nation too by offering the best services to fly in and around the country. MAB tend to embody the astonishing diversity of Malaysian traditions and cuisines. The uniform of the flight attendants is the traditional sarong with elements of local culture.
Measures of safety are an integral part of Malaysia Airlines' service delivery model. The company enforces strict compliance under stringent regulations and obligations. The airlines also substantially invest in training facilities which include company-owned simulator centre, the academy for flight crew training, computer based training for crew and engineers and training for dangerous goods handling as per the mandated by IATA. To maintain the customer loyalty, the company provides privileges, preferential treatment, and redeemable credit points to frequent fliers.
However, despite all the efforts put in by Malaysian Airlines, the company has faced hardships in maintaining the cost of operations as a result of competition due to the growth of the low-cost carriers. To meet the end, the company has suspended flight services to popular but unprofitable and long route destinations around America and South Africa. The company also intends to sell some of the units like the training facilities and has undergone internal restructuring. The present study attempts to analyse the current operating strategies of the company and identify some potential flaws. This study also attempts to provide some innovative approach to change management for the company to reduce cost and increase profitability.
1.2 Strategic Goals
With the appointment of new CEO Peter Bellow in 2016 Malaysian airlines had revised their strategies to suit the new change management with 9 strategic goals.
- Leveraging alliance and strategic partnerships
- Malaysian Flavour to customer-centric product
- Performance and Product improvement
- Consolidation at KLIA Main Terminal Building
- Fleet Optimisation
- Cost Savings
- IT tools
- Enhancing corporate governance
- Investing in the talent pipeline
For higher impact on change management, the study would focus on three key aspects which are performance and Product improvement, Fleet Optimisation and combination of IT enables for cost savings. According to Nasir et al. (2017) for the marketing management process to succeed, these three strategic goals need to be fulfilled.
1.2.1 Performance and product improvements
Based on the route optimization exercise conducted earlier by the airline company, the revenue has improved by 10% against each available seat kilometre scale. The load factor also has increased with more than 350,000 passengers availing the services. However, the sudden disappearance of MH370 had posed a negative impact on the performance and safety of the MAB brand. On-time performance and constant improvement of punctuality are among the core goal of the airline team. To render world class customer service, the benchmark is decided by the company board to give a competitive edge to Malaysian Airlines. Due to many recent initiatives, 68% sustainability is expected to occur in the coming years for the company (Khan & Dominic, 2017).
1.2.2 Fleet optimisation
The Malaysia Airlines has partnered with the Emirate Airlines to consolidate the fleet and retire B777-200s. The partnership can improve the maintenance, engineering and flight operations of the organization. The company’s A380 series of aircraft are out of service due to maintenance activity to improve upon the performance. This is a regular activity on the company’s schedule, especially for the aircraft of long-haul destinations (Gudmundsson, 2015). The company also reinstates into service some former flagship carriers to optimize the operations and the aircraft fleet.
With the arrival of some new Airbus A350-900s, the company is planning to deliver a greater performance while operating continuously from the home base at Kuala Lumpur to London and rest of Asia. The optimization of the seat layout and technical, the cost of maintenance decrease and the efficiency increases. The company is also evaluating the options of adding a number of A350s to attain a critical fleet size. This would allow standby aircraft for the occasion of scheduled maintenance or future expansion. As a part of the corporate strategy, the company actively assess novice service offerings and route opportunities. The airlines also evaluate new destinations and the requirement of new equipment.
1.2.3 Cost savings& IT enabler
Cost management is a key component to meet the projections of the business plan approved by the board of any company (Roman, 2011). One of the key performance indicators for the Malaysia Airlines is the focus on reducing cost by managing the budget and procurement. After a successful contract renewal with the most of the operating lessors, the revised lease rates are found cost effective terms with the expectation of the firm. These revised rates are consistent with the business plan devised by the Malaysia Airlines. It had allowed the company to provide the letter of intent to the lessor to go ahead with the aircraft. The entire review and negotiations of contract with the suppliers and vendors are crucial for the organization. It would set the company’s strategies towards the right path in order to recover from the losses in the past and to induce sustainable profitability and performance in the coming years.
The company has undergone a software upgrade program in recent times including an advanced collaborative platform for staffs to operate in a much more coordinated manner. These upgrades are part of the planned overhaul of the technical architecture and framework followed by the company. The company has transformed the data centre to secure and pay per use cloud facility. This can provide the company with agility, remove unwanted complexity and increasing seamlessness of operations (Rosnan & Mahmood, 2012).
2.0 Strategic Analysis
Strategic analysis can aid in the understanding of the internal and external environment working on theMalaysia Airlines. This is required to maximize the potential and capability of the company to interact between the environments. A strategy based on the previously narrated goals may be discussed in this section.
2.1 On-Time Performance
While MAB has maintained quarter to quarter of 68% OTP the current plan has not increase above 75% to allow healthy competition with Singapore Airlines which operates at 85% OTP and AirAsia at 72% OTP. MAB needs to put clear objective to their network planning team to achieve higher impact as it breaks away from the status quo. Poor holistic engagement on all area which has impact Network Planning is reason the OTP status quo since the current provider only concentrated to one area which is network technology (See & Rashid, 2016). 2 key area MAB can pursue in order to achieve 75% target with the recent trend of big data analytics.
Aggressivepartner for data analytics.
- Current provider for MAB is a network solution provider, they are not able to provide a comprehensive planning for OTP impact. Having a partner outside the comfort zone would allow more details analysis which would help to give holistic insight that would help the network planning to carry out improvement.
- New provider able to carry out an independent analysis of the robustness of the network and aircraft availability which links maintenance activity, which the airline needs to look into implementation with the incremental revenue planning.
- The biggest challenge in any company on allowing data analytics is the adoption of new insights and the input derived from its own data. To this, the company needs to set up a vertical team to look into big data across the business without sacrificing current performance (Alashty, 2015).
- This vertical alignment needs direct support from the management with a strong mandate to ensure a successful move to increase digitization effects to improve the OTP.
2.2 Fleet optimisation
The airline company has leased six second-handA330-200s and eight new 787-9s after completing the initial phase of fleet plan post the restructuring of the company in recent times. The company has commitments of 45 new aircraft to be delivered over the next 5 years
The majority of the aircraft would be used as replacements while Malaysia Airlines moves the A380s out for maintenances. The aircraftA380s has an average age of 6.0 years, the A330-300s average age of 7.3 years and 737-800s with 6 years. The six A330-200s that the company is supposed to receive in 2018 will replace six 737-800s while enabling the company to upgrade many regional routes inside Asia.
MAB need re-assume European expansion quickly with going all A350 vs the A380 for two main reasons:
- A380 seat fill rate vs A350 is 42% more and likely you will not fill all seat for in the European sector as to the strong competition from British Airways and Qatar Airways. So far only emirates airlines have maintained a higher seat fill rate since Emirates as using it for a hub and spoke model vs point to point system like MAB. Using two of the A350-900s in mid-2018 and acceleration either 787-9s or A350-XWB in early 2019 will allow gradual expansion as the A380 fleet put out of service. Malaysia Airlines must acquire an additional 20 new generation wide-bodied aircraft. The company is considering additional 787-9s or A330-900a which would enable the group to pursue the phase-out of the A380 fleet, thereby reducing the number of wide-body variants to a sensible number.
- Aircraft of the scale of the A380 could only be conceived with four large engines. When oil was comfortingly below $20 a barrel, fitting four engines on each wing was in trend and appreciated by passengers. Today with the fuel hovering at $50, just about every other aviation innovation and entrepreneurship is quite happy with two engines. The fuel burn per seat on the A350/B787 is lower than the A380, while capital and maintenance costs are commensurately reduced. The maintenance cost comprised of the direct labour and spares parts’ cost. Contrary to capital cost, these costs are incurred through the lifetime of any aircraft. Thus, by reducing the number of engines by half the amount, would effectively reduce the maintenance cost by the same amount (Escobari, 2012). Furthermore, the reliability of a twin-engine aircraft considering just the engines and all other things being equal would be .99 x .99 = .9801 (98.01% reliable) for 99% reliable engines. For four engines with the same 99% reliability each, the overall system reliability would be .99 x .99 x .99 x .99 = .9606 (96.06% reliable) Therefore, as an aircraft is not allowed to commence a journey without all of its engines fully operational, we can see that 98 times out of 100 we would be able to carry out flights with a twin-engine aircraft but only 96 times out of 100 for a four-engine aircraft.
2.3 Cost savings & IT enabler
MAB needs to look beyond cost savings and IT just for enabling with the current wave of big data as the airline companies are swamped with data. Gigabytes of data are produced by modern day aircraft daily including operational parameters, technical indicators, logs, and reports. According to Liau & Tan (2014), the annual data generation could reach 98 billion gigabytes. It is estimated that the future models of aircraft would produce somewhere between five and eight terabytes for each flight, which is almost 80 times what planes today generate.
Merceronet al. (2015) said that implementing the Big Data Analytics would allow the company to know the conditions of all the aircraft at a given time. The company can plan their operations in a better way. With predictive modelling, the risks associated can reduce significantly and improve on the flight safety, pricing models, and provide a reliable and robust planning mechanism. In the aviation industry, a tiny change in the numbers can have a significant impact on the overall performance. The aircraft manufacturers put a substantial effort to improve fuel efficiency andmaintenance by 1-2%. However, including data analytics to cover the commerce and operations, a wide array of opportunities can arise to improve the efficiency which would be much higher than the target pursued by the manufacturer as well as the company.
Big Data is a disruptive technology that affects the airline commerce. In the past, the airline companies segmented thepassenger market based on the categories of travel goals that can be further segregated as the business, leisure, trip to relatives, pilgrimage and so on. With the present data analytics framework, airline Malaysia airlines can collect a large volume of information regarding their customers. Analysing the information would allow the company not only to better segment the passengers, but also provide a unique and personalized experience to each customer (Yu, 2017). With the one-on-one relationship, Malaysia Airlines can significantly improve the customer satisfaction and gain loyalty towards their brand.
3.0 Way forward strategic
In order to change Malaysia Airlines to become a respected airline again in Southeast Asia, Malaysia Airlines need to be innovated how they approach to change in the 3 key areas, On-Time Performance, Fleet Optimization and Cost Saving with IT enable. The common approach that must be taken by the company for the above is Big Data Analytics. It is important for Malaysia airlines to find the right digital partner to tackle Big Data analytics on the following key areas:
3.1 Fuel Efficiency:
Apart from the cost of the labour, fuel is the second-highest expense for the chosen airline company, thereby proving it critical to the company performance metric. Use of the data analytics can render better efficiency in the fuel usage by the flights of the company. The use of visualisation tools coupled with Big Data can allow the company to gather massive data and represent them in a useful way to analyse the fuel consumption of each trip. The company can collect data from the sensors embedded in the aircraft regarding temperature, wind speed, net plane weight, flap condition, thrust etc (Gladovic, 2012). A data analytics engine can then combine these values with other operational data on passenger, fuel, cargo weight and weather can search patterns of trips that can yield profitability for Malaysian Airlines.
The data mining process can produce actionable and intelligent decisions for the airline company related to including or avoiding routes, adjusting fuel loads for individual aircraft, tariff restructuring, and performance-based navigation. Data analytics can provide pilots with live and detailed analysis related to the necessary adjustment when a flight may stick in turbulence or fuel combustion and the associated cost of flying at a certain altitude. Some of the rival companies of Malaysia Airlines have already started usingbig data to enable similar decision support systems with own pilots. Thus, it would definitely be a crucial step for the company.
3.2 Smart Maintenance
The insights from the aircraft sensors can be used for insights beyond fuel efficiency for the Malaysia Airlines. Boeing, One of the biggest supplier of aircraft to the company, use data analytics to survey more than a million conditions every day across 4000 aeroplanes under the Airplane Health Management (AHM) system. This data including the mechanic log, in-flight measurement, and shop findings aid the Boeing to plan the maintenance of equipment causing minimal flight schedule disturbance. In one such instance,data analytics had predicted the possibility of failure of an integrated drive generator. When investigated and rectified before posing a serious threat saved up to $300,000 in service delays and repair costs for a twin-engine aircraft and the cost-saving double for 4 engines aircraft. Having a clear view of maintenance creates a similar view on the aircraft availability which has a direct correlation to On Time performance (Bae & Kim, 2014).
3.3 Customer sales
Although the focus of the data collected from by the airline company lies much around the external and internal conditions of the aircraft there can be useful outcomes on the customer relationship and sales. The Malaysia Airlines must divert the focus from an aggregated view of the customer to more segment and individual profiles.Instead of identifying the most successful products, the company can use big data and attempt to explore the buying habits of customers. Liau& Tan (2014) said that, by analysing about 150 different variables about each customer, an analytical engine can predict the possible customer actions and dynamically suggest personalized offers for them.
The discussed approach towards the strategic change management for the Malaysian Airlines could bring a substantial increase in its performance and profitability. The company can gain many insights on the various aspects of the operations and passengers by the use of data analytics. The inclusion of Big Data concepts in aviation can steer the company towards a sustainable future.Therefore, it is crucial that MAB take a company-wide change to embed Big Data analytics with the Digital transformation as part of the change management. To evolve with this change management, the company must form a dedicated IT group to monitor and implement the technological framework across the verticals.
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