Resurfing from the Crisis: Malaysian Airlines Case Study
Summary
The Malaysia Airline System (MAS) reported a loss of over RM1.3 billion for the Financial Year 2005. It was unacceptable to many parties such as the stakeholders and the government especially the announcement was made at the same time as some of MAS regional competitors reported strong profits in the same year. The airlines was expected to cut up to 5,000 jobs and spend a maximum of 850 million ringgit (US$236 million; euro198 million) in compensation packages as part its plan to return to profitability, making it one of the country's biggest corporate retrenchment exercise. The retrenchement was a measure to reduce cost due to crippling fuel prices and lower load factors. The carrier was also battling a cash shortage, overstaffing and an inefficient and unprofitable route network. According to the Managing Director, Datuk Seri Idris Jala 60% of MAS routes were unprofitable. For instance, the pricing of the KL -Manchester route was so dysfunctional that it had to be 140% full just to break even. Thus, the three-year turnaround plan calls for extensive cost-cutting and axing of unprofitable routes aimed at achieving profits of 500 million ringgit in
2008, which would be an all-time record for the carrier.
the FINANCIAL crisis In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases. (Malaysia Airlines ,wikipedia) On
The Malaysia Airline System (MAS) reported a loss of over RM1.3 billion for the Financial Year 2005. It was unacceptable to many parties such as the stakeholders and the government especially the announcement was made at the same time as some of MAS regional competitors reported strong profits in the same year. The airlines was expected to cut up to 5,000 jobs and spend a maximum of 850 million ringgit (US$236 million; euro198 million) in compensation packages as part its plan to return to profitability, making it one of the country's biggest corporate retrenchment exercise. The retrenchement was a measure to reduce cost due to crippling fuel prices and lower load factors. The carrier was also battling a cash shortage, overstaffing and an inefficient and unprofitable route network. According to the Managing Director, Datuk Seri Idris Jala 60% of MAS routes were unprofitable. For instance, the pricing of the KL -Manchester route was so dysfunctional that it had to be 140% full just to break even. Thus, the three-year turnaround plan calls for extensive cost-cutting and axing of unprofitable routes aimed at achieving profits of 500 million ringgit in
2008, which would be an all-time record for the carrier.
the FINANCIAL crisis In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases. (Malaysia Airlines ,wikipedia) On
References: Malaysia Airlines back in the black with record profit retrieved from; (http://www.channelnewsasia.com) Malaysia Airlines to cut up to 5,000 jobs retrieved from; (http://thestar.com.my/news/story) The Idris Jala way retrieved from; (http://thestar.com.my/lifestyle/story) Idris Jala takes up hot seat at MAS retrieved from; (http://thestar.com.my/news/story.asp?file=/2005/12/2/nation/12757831&sec=nation) Crisis hard on MAS retrieved from; (http://www.asiaone.com/Business/News/Story/A1Story20081031-97536.html)