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A Case Study

Malaysia Airlines
In 2011 there was a heavy increase in competition, as firms (such as Air Asia and
Firefly) began operating at lower costs in similar areas.
Mismanagement of Employee relations had serious consequences
MAS unable to downsize
Poor employee-manager communication
These issues led to poor practices and disregard for safety regulations during
routine operations, losing the faith of the public and furthering the deficit cycle.

Captain: Jessica McRae


Co-pilot: Devon Atherton
Flight Attendants: Mahin Siddiqi, Jennifer Cauthers, Emma Thuot, Stephanie
Marshall-White, and Dana Kritsch
Meet Your Cabin Crew
Malaysia Airlines operates flights from Kuala Lumpur International Airport to
destinations across Asia, Europe and Oceania.
MAS is a nationalized company, owned by Khazanah Nasional, which is the National
Treasury of Malaysia
It employs over 19,500 staff members, 5000 of which are cabin crew and pilots.
Labour relations regulated by Unions, the largest of which is Malaysia Airlines
Employees Union, which represents 13,000 workers.
Fiscal Issues
Key Issues
Company Background
Malaysia Airline System (MAS) is one of the largest airlines operating primarily in
Asia and the Pacific.
Has been going through many ineffective structural and managerial changes
following the crashes of flights MH370 and MH17 in 2014
Union conflicts
Increased fiscal losses
Mismanagement of Privatization
Though the accidents have exacerbated the issues, the company was facing
financial and labour related problems long before 2014; due to poor management.
Overview of The Case
Sources
Implementation
Recommend Implementation of Alternative #1
To achieve long-term positive lasting results, it is worth it in the short run for the
company to undergo a massive overhaul
The long-term survival of the airline cannot occur without massive budget cuts and
a higher portion of the overall budget going towards the maintenance and
refurbishment of the Malaysia Airlines fleet.

Timeline of Implementation
Privatization of the company should be carried out as soon as possible (under 2
years, before next federal election)
Essential to build a realistic timeline, this could potentially take months as the
backlash will most likely be quite strong
Government would favour a quick transition to avoid election repercussions from
the unions
Additional Recommendation of Alternative #3
Fairly easy to implement and a change in management will have a big payoff for the
company in the short run.
Publicly owned MAS, should be handed off to new management when it goes private
as to ensure separation
The Board of Governors should handle the transition to new management
Recruiting process can begin shortly so as to ensure the new CEO and additional
high level staff are adequately informed before taking leadership in the coming
months

Payoff Matrix
Low Payoff Alternative #2
High Payoff Alternative #3 Alternative #1
Easy to Implement Tough to Implement
- You can evaluate an effective solution through the Payoff matrix, it helps to
categorize solutions in terms of their potential impact and conceivability
Alternative
A new CEO adopts a different management style, one which better acknowledges
the needs of the employees
Recognizing the company needs employees who fit under the description of Theory
Y and manages accordingly
Need to give employees reason to self motivate themselves
Job enrichment, reward hard work instead of seniority
More thorough communication between management and workers; open and
transparent
Can open communication up by implementing weekly or bi-weekly meetings for
example
This type of management will build a team oriented environment, with an emphasis
on consensus building, participation and conflict resolution; and the effectiveness of
the company will come from commitment and cohesion of employees and
management

Malaysia Airlines remains a publicly owned company


Employee Unions remain as is:
Meaning the desired downsizing by management isnt possible
Job Security is kept for those employees protected by unions
To better accommodate the company financially in keeping the unions,
management reduces the number of hours each employee will be scheduled to
work
This will limit the services the company is able to provide

Alternative
Alternative
Malaysia Airlines privatizes the company
Sells off shares to help with the current financial downfalls
Employee Unions are eliminated
Downsizing is helping with financial costs but comes at the cost of thousands of jobs
With the financial benefits, the company is able to update their equipment and
technology
Management is better able to focus on those who remain, building this working
relationship
Create training opportunities and job enrichment (i.e. Mental health resources to
help with aftermath of crashes)
Emerging competition from low cost or budget airlines represents 60% of South-East
Asian travel market
To date cumulative losses of $1.7 Billion since 2011
Union Issues
MAEU holds a large voting block for the government
Since the government owns the airline, both parties have conflicting views about
potential privatization of the company
Khazanah Nasional wants to reduce the current 20,000 employee workforce by 30%
This would be in effort to return the airline to profitable status
Current Union regulations does not allow for such a large employee downsize
MAS Mismanagement
Precarious forms of employment such as:
Short term contracts
The use of the "contractor for labour" system
Hiring 3rd party contracts
ex. Outside cleaning company
Employee feedback:
Better communication with low level employees to have a greater understanding of
relevant issue's
Employee's feel loyalty towards the company for a generous benefits plan
Presently the company is following theory x style of management, where unions are
frowned upon and managers are seen in a generally bad light.
MAS has been talking about privatizing, which shows the distaste for unions.
Employee issues and the disconnect between upper management and base level
staff is clearly stated in employee surveys.
Also issues of poor talent management and lack of advancement opportunities
This does not reflect well on employers
Management style should move towards theory Y
Compassion for employees, motivation through self direction and innovation will
improve labour union relations
Theory X and Y
Power-Distance Theory
In this theory, distance is created between different levels of power in certain
cultures and it is less acceptable to present issues to higher levels of staff if your
position is lower than theirs.
Problems with equipment have repeatedly gone unreported due to this problem, as
this has been shown to apply to Malaysian Muslim cultural values.
Equity Theory
Job inputs are very low (ex. training, opportunities for advancement such as
promotions) and in return, employees have been responding with a similar amount
of effort (falling asleep at air traffic control, resignations, complaints, etc)
Employees do not feel their concerns are being heard. This has resulted in
equipment malfunction and can continuously increase risks for accidents.
When employees are cut after privatization, more inputs will be able to be put into
the work environment for remaining employees, which will cause them to respond
with higher levels of productivity.
Kolb, D., Osland, J., Rubin, I., & Turner, M. (2007). <i>Organizational behavior: An
experiential approach</i> (8th ed.). Englewood Cliffs, NJ: Prentice Hall.
http://www.malaysiaairlines.com/content/dam/malaysia-airlines/mas/PDF/Malaysia
%20Airlines%20Business%20Plan.pdf
http://www.glassdoor.com/Reviews/Malaysia-Airlines-Reviews-E7529.htm
CNN: http://money.cnn.com/2014/07/31/news/malaysia-airlines/
http://mario.gsia.cmu.edu/micro_2007/readings/Huseman_A%20new
%20perspective.pdf
BBC News: http://www.bbc.com/news/business-17216510
The New York Times:
http://www.nytimes.com/2014/08/30/business/international/malaysia-airlines-to-cut-
30-of-work-force.html

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