Malaysia Airlines
Malaysian Airline System (MAS; Malay: Sistem Penerbangan Malaysia) is the flag carrier airline of Malaysia. Malaysia Airlines (MAS) operates flights from its home base, Kuala Lumpur International Airport and with a secondary hub in Kota Kinabalu and Kuching. The airline has its headquarters on the grounds of Sultan Abdul Aziz Shah Airport in Subang, Selangor, in Greater Kuala Lumpur. It is a member of the Oneworld airline alliance.
Malaysia Airlines operates flights in Southeast Asia, North Asia, South Asia, Middle East and on the Kangaroo Route between Europe and Australasia.
Apart from the airline, the group also includes aircraft maintenance, repair and overhaul (MRO),[4] and aircraft handling. Malaysia Airlines has two airline subsidiaries: Firefly and MASwings. Firefly operates scheduled flights from its two home bases Penang International Airport and Subang International Airport. The airline focuses on tertiary cities. MASwings focuses on inter-Borneo flights. Malaysia Airlines has a freighter fleet operated by MASkargo, which manages freighter flights and aircraft cargo-hold capacity for all Malaysia Airlines' passenger flights. MASCharter is another subsidiary of Malaysia Airlines, operating charter flights using Malaysia Airlines' aircraft
History
In 1947, the airline began as Malayan Airways, being renamed Malaysian Airways after Malaysia gained independence. After that, it changed its name once more to Malaysia-Singapore Airlines. MSA ceased operations in 1972, and two airlines were born — Malaysian Airline System (MAS) and Singapore Airlines.
Malay aviation history
Scheduled air passenger and mail services in Malaya commenced in 1937 when Wearne's Air Service (WAS) commenced operating services between Singapore, Kuala Lumpur and Penang. Wearne's Air Service was started by two Australian brothers, Theodore and Charles Wearnes.[5] The service commenced as a thrice weekly flight between Singapore and Penang The first flight, using an 8-seater de Havilland DH.89A Dragon Rapide took place on 28 June 1937[6] This inaugural flight departed Singapore from the then brand-new Kallang Airport which had just opened earlier in the same month on 12 June[7] Later a second D.H.89A enabled the expansion to daily services as well as the addition of Ipoh as a destination. The WAS services ceased with the onset of the World War II Japanese occupation of Malaya and Singapore.Beginnings
With the delivery of an 84-seat Bristol Britannia in 1960, the airline launched its first long-haul international flight, to Hong Kong. When Malaya, Singapore, Sabah and Sarawak formed the Federation of Malaysia in 1963, the airline's name was changed, from "Malayan Airways" to "Malaysian Airways" (though still abbreviated to MAL). MAL also took over Borneo Airways. In 1966, following Singapore's separation from the federation, the airline's name was changed again, to Malaysia-Singapore Airlines (MSA). The next year saw a rapid expansion in the airline's fleet and routes, including the purchase of MSA's first Boeing aircraft: the Boeing 707s, as well as completion of a new high-rise headquarters in Singapore. Boeing 737s were added to the fleet soon afterward.
Incorporation
With the Singapore government determined to develop Singapore Airlines' international routes, it took the entire fleet of seven Boeing 707s and five Boeing 737s, which would allow it to continue servicing its regional and long-haul international routes. Since most of MSA's international routes were flown out of Singapore, the majority of international routes were in the hands of Singapore Airlines. In addition, MSA's headquarters, which was located in Singapore, became the headquarters of that airline.
The initials MSA were well regarded as an airline icon, and both carriers tried to use them. Malaysian went for MAS by just transposing the last two letters and choosing the name Malaysian Airline System, while Singapore originally proposed the name Mercury Singapore Airlines to keep the MSA initials, but changed its mind and went for SIA instead. Acronyms for airline names later became less fashionable, and both carriers then moved on to their descriptive names.
Expansion
Revenue Passenger-Kilometers, in millions
| Year | Traffic |
|---|---|
| 1975 | 1633 |
| 1979 | 2825 |
| 1981 | 4290 |
| 1990 | 11909 |
| 1995 | 22558 |
| 2000 | 37939 |
Source: Air Transport World
In that year MAS operated flights to more than 34 regional destinations and six international services. In 1976, after receiving its DC-10-30 aircraft, MAS scheduled flights reached Europe, with initial flights from Kuala Lumpur to Amsterdam, Paris and Frankfurt.
An economic boom in Malaysia during the 1980s spurred growth at Malaysia Airlines. By the end of the decade MAS was flying to 47 overseas destinations, including eight European destinations, seven Oceania destinations, and United States destinations of Los Angeles and Honolulu. In 1993 Malaysia Airlines reached South America when the airline received its Boeing 747 aircraft. MAS became the first airline in Southeast Asia to serve South America via its flights to Buenos Aires, Argentina. Malaysia Airlines also flew to Mexico City between 1994 and 1998 with fifth-freedom rights to carry passengers between Mexico City and Los Angeles, en route to Kuala Lumpur.
First period of unprofitability
Prior to the Asian Financial Crisis in 1997, the airline suffered losses of as much as RM 260 million after earning a record-breaking RM333 million profit in the financial year 1996/1997. The airline then introduced measures to bring its P&L back into the black. For the financial year 1999/2000, the airline cut its losses from RM700 million in the year 1998/1999 to RM259 million. However, the airline plunged into further losses in the following year, amounting to RM417 million in FY2000/2001 and RM836 million in FY2001/2002. With these losses, the airline cut many unprofitable routes, such as Brussels, Darwin, Madrid, Munich and Vancouver.The airline recovered from its losses in the year 2002/2003. It achieved its then-highest profit in the year 2003/2004, totaling RM461 million.
Second period of unprofitability
The Government of Malaysia appointed Idris Jala as the new CEO on 1 December 2005, to execute changes in operations and corporate culture. Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometre ("ASK") via poor yield management and an inefficient route network. Under the leadership of Idris Jala, Malaysia Airlines launched its Business Turnaround Plan in 2006, developed using the Government-linked company (GLC) Transformation Manual as a guide.
The most substantial factor in the losses was fuel costs. For the period, the total fuel cost was RM3.5 billion, representing a 40.4% increase compared to the same period in 2004. Total fuel cost increases comprised RM977.8 million due to higher fuel prices and another RM157.6[13] million due to additional consumption. In the third quarter, fuel costs were RM1.26 billion, compared to the RM1.01 billion in the corresponding period in 2004, resulting in a 24.6% increase or RM249.3 million.[13]
Another factor for the losses was poor revenue management. MAS substantially lagged its peers on yield. Some of this gap was due to differences in traffic mix,[14] with less business traffic to and from Malaysia than to and from Singapore, but much of it was due to weaknesses in pricing and revenue management, sales and distribution, brand presence in foreign markets, and alliance base. Malaysia Airlines has one of the lowest labour costs per ASK at USD0.41, compared to other airlines such as Cathay Pacific and Singapore Airlines at USD0.59 and USD0.60[14] respectively. However, despite low labour costs, the ratio of ASK revenue to this cost was, at 2.8, much lower than Singapore Airlines, where the ratio is 5.0, and slightly higher than Thai Airways[14]
There are other factors listed in the Business Turnaround Plan of Malaysia Airlines, all leading to the net loss of RM1.3 billion in the year 2005.
Recovery from unprofitability
Under the various initiatives, launched together with the Business Turnaround Plan, Malaysia Airlines switched from losses to profitability between FY2006 and FY2007. When the Business Turnaround Plan came to an end, the airline posted a record profit of RM853 million(USD265 million) in 2007, ending a series of losses since 2005. The result exceeded the target of RM300 Million by 184%.[15]Route rationalizing was one of the major contributors to the airline's return to profitability. Malaysia Airlines pared its domestic routes from 114 to 23, and also cancelled virtually all unprofitable international routes. Apart from that, Malaysia Airlines also rescheduled all of its flight timings and changed its operations model from point to point services to hub and spoke services.
Additionally, the airline started Project Omega and Project Alpha to improve the company's network and revenue management. Emphasis has been placed on six areas: pricing, revenue management, network scheduling, opening storefronts, low season strategy and distribution management.
Malaysia Airlines has been involved in discussions for new aircraft purchases, using its cash surplus of RM5.3 billion to eventually purchase narrow-body aircraft and wide-body aircraft.[16]
Despite these achievements, critics continue to deride the carrier for lagging behind its competitors in the region. This notion is not helped by the fact Malaysia Airlines has not made substantial investments in customer service, especially compared to Thai Airways or Singapore Airlines.
On 22 December 2009, Malaysia Airlines announced the purchase of 15 new Airbus A330 aircraft, with options for another 10. Expected to be delivered between 2011 and 2016, they are intended to operate on medium-haul routes to eastern Asia, Australia, and the Middle East. The airline's plans are to run Airbus A380 planes, which will be introduced into service in 2012, on long-haul routes, A330s on medium-haul routes, and Boeing 737 aircraft on short-haul routes. Under this plan, it is unclear where Boeing wide-bodies currently in the fleet would fall.[17]
Third unprofitability
 | The neutrality of this article is disputed. (July 2014) |
Business Turnaround Plan
On 28 February 2013, Ahmad Jauhari Yahya, Group Chief Executive Officer of Malaysia Airlines, reported a net profit of RM51.4mil for the fourth quarter, reversing the net loss of RM1.3bil a year earlier. MAS' improved financial performance last year was mainly attributable to its route rationalization programme, which saw an overall 8% reduction in available seat kilometre (ASK). This was matched by a marginal 1% reduction in revenue to RM13.76bil in 2012 and seat factor holding at 74.5%. The reduced ASK also helped MAS register a corresponding 14% decrease in expenditure.[18]2014 aircraft losses
Further information: Malaysia Airlines Flight 370 and Malaysia Airlines Flight 17
In 2014, Malaysia Airlines lost two Boeing 777 aircraft with 131 days' separation. Flight 370 disappeared over the South China Sea on 8 March with 239 persons aboard, leaving little evidence behind. On 17 July, Flight 17 crashed in eastern Ukraine, due to a surface-to-air missile strike suspected to have been fired by Pro-Russian or Ukrainian forces, killing 283 passengers and 15 crew.[19]Malaysia Airlines was struggling to cut costs to compete with a wave of new, low-cost carriers in the region when Flight 370 vanished on 8 March 2014 without a distress signal and without any debris. Despite an expansive search effort, no debris from the flight has been recovered as of July 2014. Malaysia Airlines lost RM443.4 million (US$137.4 million) in the first quarter of 2014.[20] In the previous three years, Malaysia Airlines had booked losses of: RM1.17 billion (US$356 million) in 2013, RM433 million in 2012, and RM2.5 billion in 2011.[21] Industry analysts expect Malaysia Airlines to lose further market share and face a challenging environment to stand out from competitors while addressing their financial plight.[21] The company's stock, down as much as 20% following the disappearance of Flight 370, had fallen 80% over the previous five years, which contrasts with a rise in the Malaysian stock market of about 80% over the same period.[22]
A month after the disappearance, Malaysia Airlines' chief executive Ahmad Jauhari Yahya acknowledged that ticket sales had declined but failed to provide specific details. This may partially result from the suspension of the airline's advertisement campaigns following the disappearance. Mr. Ahmad stated in an interview with the Wall Street Journal that the airline's "primary focus...is that we do take care of the families in terms of their emotional needs and also their financial needs. It is important that we provide answers for them. It is important that the world has answers, as well."[21] In further remarks, Mr. Ahmad said he wasn't sure when the airline could start repairing its image, but that the airline was adequately insured to cover the financial loss stemming from Flight 370's disappearance.[20][21] In China, where the majority of passengers were from, bookings on Malaysia Airlines were down 60% in March.[22] On July 17, 2014, MH17 Boeing 777 crashed[23] due to a missile that hit when it crossed rebel-held territory near Russia. The plane, now known to have been carrying 298 people, crashed in rebel-held territory near the Russian border.
Corporate information
Malaysia Airlines is listed on the stock exchange of Bursa Malaysia under the name Malaysian Airline System Berhad. The airline suffered high losses over the years due to poor management and fuel price increases. As a result of financial restructuring (Widespread Asset Unbundling)[13] in 2002, led by BinaFikir, Penerbangan Malaysia Berhad became its parent company, incorporated in 2002, in exchange for assuming the airline's long-term liabilities. On the operational side, the Government of Malaysia appointed Idris Jala as the new CEO on 1 December 2005, to execute changes in operations and corporate culture. Under his leadership, Malaysia Airlines unveiled its Business Turnaround Plan (BTP) in February, 2006, which identified low yield, an inefficient network and low productivity (overstaffing). The airline headquarters building in downtown Kuala Lumpur was sold.[citation needed] The new corporate headquarters is now at the MAS Complex on the grounds of Sultan Abdul Aziz Shah Airport in Subang, Selangor.[24]
Head office
The airline has its headquarters and registered office on the third floor of Administration Building A at Sultan Abdul Aziz Shah Airport in Subang, Selangor, in Greater Kuala Lumpur.[28] The head office is located near Terminal 3 of the airport.[29]Previously the airline headquarters were on the third floor of the MAS Administrative Complex at Subang Airport,[30][31] in Subang.[29] Prior to the construction of the Kuala Lumpur MAS headquarters, the airline rented space in the UMBC headquarters.[32] The airline had a permanent corporate headquarters in the Bangunan MAS,[33] a 34-36 story[29][32] building it owned along Jalan Sultan Ismail,[32] in the Golden Triangle.[29] The airline occupied 20 stories in the building.[29] The building was built for RM88mil. In 2005 The Star said that the building was "reported to be worth between RM300mil and RM350mil".[32] At one time before 2005 the airline chairperson, Raja Tun Mohar, made an oral promise to Tun Abdul Razak of the Government of Malaysia that the airline would not sell its headquarters.[32] The airline had 600 employees in the building.[29]
In 2006,[29] the airline moved its head office from the Kuala Lumpur building to the former headquarters in Subang,[29] in order to reduce inefficiencies and generate cash.[34] Channel News Asia stated that the airline had been "forced" to sell the former headquarters.[35] Idris Jala, the managing director, said that the sale could net RM3bil. In the event it did not, the airline would try to rent out the floors it occupied. The first phase was scheduled to occur from January to March of that year, with the chairperson, executive director, managing director, company secretary, corporate communication officer, and finance communication officer moving to the Subang facility. In June 2006, Phase II was planned as a move for the distribution, marketing, and sales divisions of the company, to Administration Block Three.[29]
Around 2007 Permodalan Nasional Bhd purchased Bangunan MAS from the airline. The new owners planned to remodel the building, by installing a five star hotel apartment block and upgrade the offices to Grade A++.[36]
The airline planned to relocate its headquarters from Sultan Abdul Aziz Shah Airport to Kuala Lumpur International Airport in Sepang, Selangor in Greater Kuala Lumpur in February 2012.[37]
Subsidiaries
Main article: Malaysia Airlines Subsidiaries
Malaysia Airlines has diversified into related industries and sectors, including aircraft ground handling, aircraft leasing, aviation engineering, air catering, and tour operator operations. It has also restructured itself by spinning-off operational units as fully owned subsidiaries to maintain its core business as a passenger airline. In 2013, Malaysia Airlines has 28 subsidiaries, with 25 of them fully owned by Malaysia Airlines.[38]Some of the subsidiaries include:
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