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UOB-NUS Case - Malaysia Airlines

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Slides submitted for UOB-NUS 2014 Case competition's semi-finals, based on case question on how to revitalise the ailing giant, Malaysia Airlines.

Published in: Business

UOB-NUS Case - Malaysia Airlines

  1. 1. | Edison Lim Jun Hao | Lim Jun Hao | Ong Jun Hao | Wayne Kaiends Kang | Malaysia Airlines Soaring with the Phoenix J & W Consulting
  2. 2. Executive Summary Where are you now: Questions to consider: Strategy: Where you want to be: Strategies ResultsAnalysis Malaysia Airline has to reverse the impact of high profile aviation disasters on its financial performance How to curb rising operational costs? How to rebuild lost confidence? How to increase revenue stream? How do you balance expectations as a National Carrier? Rising from the Ashes Soaring through the Skies To provide safe and reliable air travel services, underscored by efficiency and transparency Implementation
  3. 3. Strategies ResultsAnalysis Aviation Industry Analysis Implementation Porter’s 5 Forces
  4. 4. Strategies ResultsAnalysis Malaysia Airlines Analysis Implementation 12000 13000 14000 15000 16000 17000 2009 2010 2011 2012 2013 RM‘000 Year Total Revenue Total Expenditure Expenditure CAGR of 6% Revenue CAGR of 5% Source :CompanyAnnual Report
  5. 5. Strategies ResultsAnalysis Malaysia Airlines Analysis Implementation 12000 13000 14000 15000 16000 17000 2009 2010 2011 2012 2013 RM‘000 Year Total Revenue Total Expenditure Expenditure CAGR of 6% Revenue CAGR of 5% Source : Company Annual Report MAS Core Problem: Unit costs have remained persistently higher than unit revenue.
  6. 6. Strategies ResultsAnalysis Malaysian Aviation Industry Analysis Implementation Source: Boeing CMO 2013-2032
  7. 7. National Flagship Carrier Strategies ResultsAnalysis Stakeholder Analysis Implementation Any analysis of Malaysia Airlines will have to juggle Social and Political obligations, yet still provide value for Customers Social Political
  8. 8. Strategies ResultsAnalysis Malaysia Airline’s SWOT Analysis Strengths  5-Star airline accreditation  94 fully-owned fleet  4.5 average aircraft age  OneWorld Alliance  Prestige as national courier  Low labor costs Weaknesses  Poor financial performance over last 3 years  Unionised Workforce  Weak public relations  Almost non-existent Social Media presence Opportunities  Prime geographical location  Center of region primed for exponential growth  Business Related Travel  Medical Tourism Threats  Erosion of international and domestic market share by competitors  Negative public opinion stemming from recent aviation tragedies  Increase in fuel prices Positive Negative Internal Factors External Factors S W O T Summary of Malaysia Airline’s Competitive Positioning Implementation
  9. 9. Positive Negative Strategies ResultsAnalysis Implementation Malaysia Airline’s SWOT Analysis  5-star Accreditation  OneWorld Alliance  Low Labor Costs  Prime Geographical Location  Center of region primed for exponential growth  Business Related Travel  Poor financial performance  Negative public opinion  Erosion of international and domestic market share
  10. 10. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Erosion of international and domestic market share (Low Revenues) Negative public opinion Low Revenue Demand Supply Lower Price Decrease in domestic market share
  11. 11. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Erosion of international and domestic market share (Low Revenues) Negative public opinion Low Revenue
  12. 12. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Negative public opinion Weak social media presence Erosion of international and domestic market share (Low Revenues) High Costs Increase in Fuel Prices Unprofitable Flight Routes 01234567 MnASKsPerEmployee MalaysiaAirlines CathayPacific SingaporeAirlines Unproductive Employees
  13. 13. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Negative public opinion Weak social media presence Erosion of international and domestic market share (Low Revenues) High Costs
  14. 14. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Negative public opinion Weak social media presence Erosion of international and domestic market share (Low Revenues) Unprecedented Aviation Disasters
  15. 15. Negative Strategies ResultsAnalysis Implementation Key Challenges Poor financial performance (High costs) Negative public opinion Weak social media presence Erosion of international and domestic market share (Low Revenues) Poor Social Media Engagement
  16. 16. Positive Strategies ResultsAnalysis Implementation Malaysia Airline’s SWOT Analysis  5-star Accreditation  OneWorld Alliance  Low Labor Costs  Prime Geographical Location  Center of region primed for exponential growth  Business Related Trave Established and Quality Brand
  17. 17. Strategies ResultsAnalysis Implementation Malaysia Airline’s SWOT Analysis  5-star Accreditation  OneWorld Alliance  Low Labor Costs  Prime Geographical Location  Center of region primed for exponential growth  Business Related Trave Positive Prime Geographical Location Potential Exponential Growth Untapped Markets
  18. 18. Strategies ResultsAnalysis Implementation Malaysia Airline’s Aim Curb Rising Operating Cost Increase Revenue Stream Rebuild their brand
  19. 19. Strategies ResultsAnalysis Criteria to Evaluate Strategies Implementation Degree of Complexity High Impact Growth Potential Competition  Simple  Matches well with core competencies  Cost effectiveness  Sales  Impact on Brand  Expertise  Future Potential  Scalability  Cost-benefit Analysis  Similarity to competition  Economies of scale  First-mover’s advantage Simple. Impactful. Sustainable
  20. 20. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  21. 21. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  22. 22. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  23. 23. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  24. 24. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  25. 25. Strategies ResultsAnalysis Evaluating Strategic Options Implementation Degree of Complexity High Impact Growth Potential CompetitionStrategies Internal Restructuring Heavy Marketing Brand Differentiation ReduceCostIncreaseRevenue Consolidation of Flight Routes Source for potential growth locations
  26. 26. Strategies ResultsAnalysis Areas for Growth Implementation Geographical Asia Pacific Middle East South America
  27. 27. Strategies ResultsAnalysis Implementation Low Cost Economy Business Class First Class Relatively less price-sensitive Frequent and Loyal Flyer Aligns with Business Strategy to establish a premium branding Target Customer Profile • Asian Professional • Age 25 – 50 • Flies frequently on business trips Areas for Growth Segmentation
  28. 28. Strategies ResultsAnalysis Profile of Malaysia Airline’s Target Consumer Implementation Who he is  ASEAN Professional  21-50 years old  Above average disposable income What he cares about Why he travels What attracts him  Safety is paramount  Keeping connected even while he flies  Convenience  Comfort  Competitive Pricing  Availability of in-flight WiFi option  Above average disposable income  Business trips around the region  Personal trips
  29. 29. Strategies Implementation Rising from the Ashes Analysis Results Short-term
  30. 30. Strategies Implementation Rising from the Ashes Analysis Results Five-year Initiative 2019Present 1. 2. 3. 4. Customer Base Too diverse, too little volume Profitability 3 straight years of losses, costs far outweigh, many unprofitable routes Government Independence Government-owned and backed Brand Significant misalignment between goal of being premier and operating strategies Customer Base Regional outreach, focus on niche Businessmen market Profitability Year-on-year increase in profitability, regional juggernaut in commercial flights Government Independence Healthy balance sheets and stable independence from grants Brand Long-term realignment to being strong regional Jaggernaut > >
  31. 31. Strategies Implementation Rising from the Ashes Analysis Reduce Cost Increase Revenue Results Rebrand  Repositioning  Regain trust and confidence  Re-haul the public relations team  Focus on social media as an outreach tool  Focus on core competencies  Regional market  Increase productivity  Target labor cost  Increase sources of revenue  Increasing profitable routes  Provide value adding ancillary services
  32. 32. Strategies ImplementationAnalysis Results Rebrand Increase Relevancy To provide safe and reliable air travel services, underscored by efficiency and transparency Brand Repositioning Statement Staying Focused through Repositioning Unprecedented Aviation Disaster Stiffening Industry Competition Declining Profitability
  33. 33. Strategies Implementation Strategies to Substantiate Brand Repositioning Analysis Results Rebranding To provide safe and reliable air travel services, underscored by efficiency and transparency Brand Repositioning Statement Achieved by: Driving Business Results with Analytics Structural Analytics • Customer-centric Public Relations • Greater focus on Social Media platforms
  34. 34. Strategies Implementation MAS must focus on Customer Intimacy to grow Analysis Results CompetitiveAdvantage Customer Engagement key to expanding consumer baseDerivation: Reach out to Customers via Social Media Platforms Action: Rebranding
  35. 35. Strategies ResultsAnalysis Company Social Media Analysis Source: Facebook Implementation Malaysia Airlines Singapore Airlines SIA 1 million likes MAS 1.4 million likes 10k likes, 712 shares 83 likes, 1share MALAYSIA AIRLINES HAS MORE LIKES ON FACEBOOK SINGAPORE AIRLINES HAS MORE CUSTOMER ENGAGEMENT ‘Likes’ Customer Engagement Malaysia Airlines has great market outreach, but is doing badly in customer engagement
  36. 36. Strategies Implementation Growing with the Social Media Analysis Results Rebranding Social Media Strategy Create greater customer engagement via FacebookWhat: How: Dedicated 24/7 Social Media Team Social Media Analytics
  37. 37. Strategies Implementation Using Analytics for Future Growth Analysis Results Rebranding What is Social Media Analytics Technology that enable analytics for social media sentiments over Twitter and Facebook Connect more efficiently with customers
  38. 38. Strategies Implementation Taking Public Relations on Social Media Platforms Analysis Results Rebranding CrisisManagement Response Time Market Outreach Emotional Sensitivity Public Relations Faster Response Time Customer Intimacy Goal Social Media Strategy Better Crisis Management
  39. 39. Strategies Implementation Increasing Productivity Analysis Results Reduce Cost Technical and Service Staff Upper Executive Employee Remuneration Packages  Align remuneration with KPI (Key Performance Indicator)  Replacing portion of salary with stock options  Rewarding Staff for Timeliness of Flights  Flat rate bonus payout
  40. 40. Strategies ImplementationAnalysis Results ncrease Revenue Value-Adding Ancillary Services Steady Increase in Ancillary Revenue Large Growth Potential Source: Ancillaries derived from IdeaWorks 2013 report, IATA forecast
  41. 41. Strategies ImplementationAnalysis Results Value-Adding Ancillary Services In-flight WIFI services ncrease Revenue
  42. 42. Strategies ImplementationAnalysis Results Value-Adding Ancillary Services Ancillary Charges Business Class Fare In-flight WIFI charges Current Prevailing Price + 6 USD 30 Minutes of WIFI Included For additional usage of WIFI: 12 USD / hour of WIFI usage ncrease Revenue
  43. 43. Strategies Implementation Soaring through the Skies Analysis Results Long-term
  44. 44. Strategies Implementation Code Sharing Analysis Results Code Sharing Partners Qatar Airways China Southern Airline Xiamen Airline Goals Market Penetration Market Capture ncrease Revenue
  45. 45. Strategies Implementation Code Sharing Analysis Results MSA with 3% International Capacity Share in Middle East Untapped Market Potential Source: CAPA – Centre for Aviation & OAG 26% 18% 13% 12% 3% 1% 27% MalaysiaAirlinesInternational Capacity Share (%ofASKs) By region:1st Sep 2014 - 7t Western Europe Others Middle East South East Asia SouthAsia North East Asia Southwest Pacific Source:CAPA - Centre for Aviation & O Working with Qatar Airways ncrease Revenue
  46. 46. Strategies Implementation Code Sharing Analysis Results Working with Qatar Airways Limited Codeshare: Only Kuala Lumpur – Doha Middle East - 9.2 % passenger growth to capacity increase of 8.2% Improved offline Access for Qatar to SEA and Australia ncrease Revenue
  47. 47. Strategies Implementation Code Sharing Analysis Results Focusing on Chinese Market 17.6% CAGR Average household income (2007-2012) LARGEST Middle class population in the world and still growing Negative Public Sentiments ncrease Revenue
  48. 48. Strategies Implementation Increase Sources of Revenue through Code Sharin Analysis Results Working with China Southern Airlines and Xiamen Airlines Large Domestic Volume of Air Travel Source: Boeing ncrease Revenue
  49. 49. Strategies Implementation Sourcing For Profitable Routes Analysis Results Countries Identified MyanmarVietnam Key Reasons:  Emerging Markets  Growing air travel demand  Additional Demand for Capacity as the country’s middle class expand ncrease Revenue
  50. 50. Strategies Implementation Sourcing For Profitable Routes Analysis Results Vietnam “Vietnam’s long-haul market is also incredibly underserved, with big prospects for additional capacity from both Vietnam Airlines and other flag carriers.” Source: CAPA – Centre for Aviation and Innovata ; Airline Leader ncrease Revenue
  51. 51. Strategies Implementation Sourcing For Profitable Routes Analysis Results Myanmar “Demand will continue to grow as the Myanmar economy continues to grow rapidly and it will continues its emergence as a major tourist destination” ncrease Revenue
  52. 52. Strategies Implementation Implementation Timeline Analysis Results Strategy 2014 2015 2016 2017 2018 Reduce Cost + Increase Revenue Brand Re- positioning and branding % Revenue Analyze salary structure Wi-Fi Installation Survey potential markets Realign Strategy Source for IT Vendor Train Social Media Team Implement IT System Revamp employee remuneration package Evaluat e Perform ance Increasing Service Standards Evaluate Perform ance Evaluate Perform ance Implemen t new payment scheme Continuously access and improve if possible Continuously access and improve if possible Revamp employee remuneration package 8% CAGR Tie up with authorities in Vietnam and Myanmar Tie up with Airlines in China Tie up with Airlines in Middle East CBA Analysis
  53. 53. Strategies Results Financial Projections Analysis Implementation 12000 13000 14000 15000 16000 17000 18000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 RM‘000 Year Total Revenue Total Expenditure Revenue CAGR of 6%
  54. 54. Maintaining their 5 star rating on Skytrax through conducting regular audits Strategies Implementation Results Risk Mitigation Analysis Customer Industry Long-Term Potential Internal Might feel that MAS is sizing down and loses its “premier” Image Threat of other Airlines Unsustainable growth Mission misalignment Engage in regular stakeholders’ meeting Engage in partnerships to reach out to more markets Monthly reviewing of financial statements to streamline cost coupled with economic of scales to create barrier to entries Risk Group Risk Mitigation
  55. 55. Strategies Results Conclusions Analysis Implementation Rise from the Ashes  Optimize internal structure  Remuneration  Get in the ‘black’ Soar through the Skies  Market creation  Profit from these markets  Strategic Alliance Target  Relisting of MAS  Stabilize Revenue and Costs  Rebuild Image  Sustainability Short Run Long Run Value Proposition To provide safe and reliable air travel services, underscored by efficiency and transparency
  56. 56. Appendix Appendix 1: Income Statement Appendix 1: Income Statement (Part 2) Appendix 3: Statement of Cash Flow Appendix 4: Comparison of Price with Competitors Appendix 5: Air Traffic, RPKs (billion) Appendix 6: China Domestic Frequencies Appendix 7: Major ASEAN Aviation Markets Appendix 8: Vietnam Airline Market Capacity Appendix 9: MAS Group Financial Performance (2013/2014) Appendix 10: Analysis of Malaysia’s Aviation Market Appendix 11: Assessment of MAS in Airline Industry (2013) Appendix 12: MAS Financial Difficulties in the last 14 years Appendix
  57. 57. Appendix 1: Income Statement Appendix
  58. 58. Appendix Appendix 1: Income Statement
  59. 59. Appendix 2: Statement of Cash Flow Appendix
  60. 60. Appendix 3: Comparison of Price with Competitors Appendix Comparing Air Fares with Close Competitors Singapore Airlines $1,888.00 Air Asia $534.10 Malaysia Airlines $267.19 Comparing prices of Malaysia Airlines to its competitors on the following parameters From: Singapore To: Osaka International Airport (Japan) Departure Date: 7 September 2014 Return Date: 11 September 2014 Search Date: 3 September 2014
  61. 61. Appendix 4: Air Traffic, RPKs (billion) Appendix
  62. 62. Appendix 5: China Domestic Frequencies Appendix
  63. 63. Appendix 6: Major ASEAN Aviation Markets Appendix
  64. 64. Appendix 7: Vietnam Airline Market Capacity Appendix
  65. 65. Appendix 8: MAS Group Financial Performance (2013/201 Appendix
  66. 66. Appendix 9: Analysis of Malaysia’s Aviation Market Appendix
  67. 67. Appendix 10: Assessment of MAS in Airline Industry (201 Appendix
  68. 68. Appendix 11: MAS Financial Difficulties in the last 14 year Appendix

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