Individual report: Malaysia Airlines

Introduction
The story of Malaysia Airlines begins in the golden age of travel. Malaysia
Airlines System or prominently known as MAS is a commercial air travel
organization that provides transportation service to a total of 850 destinations in 150
countries. On 1st October 1972, Malaysia Airlines System rebranded its name and
took the skies with its own vision of To be the Preferred Premier Carrier and
continues to be the countrys national airline. Malaysia Airlines has won more than
100 awards in the past decade including the Best Airline To Asia and awarded as a
five star airline (Malaysia Airlines 2015). This proves that Malaysia Airline is
globally recognizable.
Financial performance
Over the past two years ago, Malaysia Airlines has experienced significant
pressures in terms of number of passengers and total earnings per year (Reuters
2014). Since year 2011, MAS has been plagued by bouts of losses due to incompetent
management as well as great impacts from the external environments. According to
the Annual Report of Malaysian Airline System Berhad (2013), the airline suffered
about, 827 million Malaysian ringgit for the first nine months, and a total net loss of
roughly 1.169 billion Malaysian ringgit at the end of the 2013. However, distinct
increase is observed in September 2014 where Malaysia Airlines loss ballooned to
approximately 1.324 billion Malaysian ringgit, which is nearly two times larger than
the loss in September 2013. To make matters worse, the airlines financial
performance was also severely impacted on the following year by the twin tragedies
of disappearance flight of MH370 and the catastrophic accident of MH17 airplane
(Mulrenan 2014).
Management functions
Malaysia Airlines faces several problems issued arise not only in its financial
results but also serious flaws in the companys crisis management capability

(Mulrenan 2014). Poor management leads to negative returns of the business

performance. One of the management functions that the company loses on track is
planning. Robbins and Coulter (2014) state that planning involves setting goals and
implant effective strategies by assessing what an organization determines to
accomplish and how it will go towards achieving that goals. Based on the
aforementioned total net loss reported in 2013 and 2014, they did not anticipate and
prepared for the losses. Consequently, Malaysia Airlines failed to provide recovery
and future plans to keep their company constantly profitable. Malaysia Airlines did
not use the effective planning processes to optimize the performance of their company
that involves maximization of the human resources and equipment utilization against
demand pressures and government regulation (Buhalis 2003). This proves that the
Malaysia Airlines unable to restructure their plans and mapping out all those effective
strategies for them to avoid for another reduction in profits in the upcoming years.
Malaysia Airlines should not merely be putting too much emphasis on the short-term
goals plan.
Another obvious weakness that hugely contributes to the recent financial
performance of Malaysia Airlines is controlling. Controlling involves an evaluation of
whether things are going as planned, as well as taking the corrective actions along the
journey to improve the work performance of the company (Giraud et. al 2011). In
December 2011, the airlines board and management outlined a new business plan to
remit the carrier's burgeoning losses into profits by 2013 and attain the highest
customer satisfaction by improving their revenues and operating skills as efficiently
as possible in the document, named Business Plan; Our Way Forward(source).
Nonetheless, after evaluating on their current annual report, the company is not even
close to achieving its goals, and still recording significant growth of losses in the
following year. This proves that the Malaysia Airlines incapable in controlling, where
it continues to struggle having to match the actual performance of the company with
the standard goals that have been set.
External environment
In spite of poor management, the company also struggling with factors from
the external environments. Malaysia Airlines applies an open system basis, whereby
they are continually influenced by and interact with their environment (Robbins &

Coulter 2014). The recent world economic downturn in 2008-2009 has had a hit on
the Malaysia Airlines financial performance as well as other aviation industries (Johan
et. al 2014). This circumstance has weakening the Malaysian Ringgit by 0.4 percent
against U.S Dollar, leading to low spending power from the customers, which results
in lesser people to travel by air. Besides, escalating in higher fuel prices is also
estimated to drag the airline profit margins down to razor thin levels (Malaysia
Airlines Press Room 2013). As fuel price mainly contributes in airlines, an increment
of fuel prices lead to bigger operation costs. Due to the above scenorio, Malaysia
Airline was reported to incur two consecutive losses in 2013 and 2014.
Prior to 2014, two salient aviation disasters involving Malaysia Airlines planes
were quite an enormous hit that slammed the global crisis extremely hard. The issue
of MH17 airplane crashed has added to the growing financial problems on the carrier,
which is already mired in steep losses (Khazanah National 2014). This second loss
after missing of MH370 has triggered a record search involving several countries
around the globe and international agencies to deal with this incident and sacrificed a
total of 298 passengers in Ukraine-Russia border. The occurrence of these two
incidences within a short span of 4 months has adversely affected the safety, security
and service of the airline. Since then, especially Malaysians, together with peoples of
the world, were living under blanket of fear of traveling by airplanes. This has created
margin pressures on the carriers revenue and unstable profits for Malaysia Airlines
particularly on year 2014.
Conclusion
Overall, Malaysian Airlines still holds on to their reputation in aviation
industry for the last 63 years. The financial analysis shows that Malaysia Airlines
business performance is extensively not rewarding. The low profitability may show its
inefficiency in their management as well as due to factors of external environment
such as economy and global issue. Therefore, it is vital that Malaysia Airline needs to
be able to address the profitability issue along with effective strategies to reduce
further losses in nearest future and achieve long-term success by adopting a business
turnaround plan.
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