Assignment Organizational Behavior

Assignment

A case analysis of the Organizational Behavior of Malaysian Airlines (MAS) and its Impact.

1.0 Introduction

Ever since its inception as an independent airline in 1987, Malaysia Airline System Berhad is

doing business as Malaysia Airlines. Proudly running as the national-flag carrier of Malaysia, it

operates flights from its main home base of Kuala Lumpur International Airport (KLIA) with

secondary hubs at Kuching and Kota Kinabalu on the second island of the Malaysian state. With

a concentration of network on both regional as well as international sectors, MAS has come to be

known as a world renowned airline as well as a local favorite along with its subsidiary, MAS

Wings, credit being given to its staff hospitality and its marketing campaigns. After conducting

an analysis on a local and international level it has been understood that there are various issues

and opportunities that are being faced or available by and to MAS. Some of these are an

overstaffing problem involving a workforce of more than twenty-thousand employees all over

the world. Another one, being incurred net losses of RM 479 million by the third quarter of 2011.

By the end of the fourth quarter the airline had incurred a loss of RM 2524 million, indicating a

substantial decrease from a profit of RM 234 million in the previous year. However the airline

had remained profitable in the previous fiscal year of 2010.

This report will analyze the organizational behavior of Malaysia airline which talks about four

parts: business efficiencies, customer relationship and marketing efficiencies, human resource

and knowledge efficiencies, differential efficiencies. It also involves a SWOT analysis on the

airline as well. Finally, MAS has the vision in the next 3-5 years to become a 5-star value carrier

through a strategic medium term plan which has been devised that might prove beneficial for the

airline.

1.1 Company overview and problem occurs in MAS

Malaysia Airlines is letting go of 6,000 of it’s 20,000 employees, only days after admitting that

almost 200 cabin crew members had quit recently. In addition to crew members leaving the

airline, MAS has suffered a $97.6 million loss for the second quarter and $140.8 million loss in

the first quarter following the disappearance of MH370 and crash of MH17.

In a desperate attempt to revive the airline, a major revamp of the system is completely

necessary. This is especially true considering the negative connotations that seems to come along

with it’s name. 

Malaysian airlines have several problems issued arise not only in operating and financial

problems but also they have several issued in management. However, Malaysia Airlines had its

modest start in the golden age of travel. A cooperative plan of the Ocean Steamship Company of

Liverpool, the Straits Steamship of Singapore and Imperial Airways led to a proposal to the

government of the Colonial Straits agreement to run an air service. The outcome was the

integration of Malayan Airways Limited (MAL) on 12 October 1937. On 2 April 1947, MAL

took to the skies with its first marketable flight as the national airline. The existence of BOAC

also facilitated MAL's entry as a member of IATA. After the Independence of Malaya in 1957

and with the contribution of BOAC, QANTAS, the government of the Federation of Malaya,

Singapore and the Territory of North Borneo, MAL was launched as an unrestricted limited

company. Fuelled by a young along with dynamic team of visionaries, the domestic carrier

turned into a global airline in less than a decade. With the creation of Malaysia in 1963, the

airline changed its name to Malaysian Airlines Limited. In 1965, with the severance of Singapore

from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines

(MSA). In 1966, the Governments of Malaysia and Singapore became the majority shareholders

in the national carrier and Malaysia-Singapore Airlines (MSA). In 1971, the partnership

involving Malaysia and Singapore was dissolved, and Malaysia Airlines Berhad was

incorporated. With an authorized capital of RM100 million, the company made a final revision to

its name in November 1971, and Malaysian Airline System Berhad (MAS) was launch in new

name. However, the year 2005 Malaysia Airlines faced one of its most challenging times.

Operating against a challenging global economic climate, increasing competition and rising

operational costs, Malaysia Airlines was forced to broadly restructure operations

(Malaysiaairlines.com 2011). On 27 February 2006, newly appointed Managing Director or CEO

Dato‟ Sri Idris 3 | P a g e Jala, along with a new management team announced a Business

Turnaround Plan (BTP). Since then a number of actions and changes were done to restructure the

business. The company had achieved a significant cost reduction of RM 665 million in financial

year of 2006 and more than 700 million in 2007. However, basically MAS‟s difficulties can be

considered into three key issues which are Financial problems, Operational problems and

Management problems. In 1995, MAS‟s management had launched a strategic initiative to

aggressively scale up its operations and international network. As such, MAS has placed an order

of 25 new Boeings aircraft which are to be delivered in five years‟ time. The purchases of the

aircraft were made in US Dollar and no hedging method was used at that time because of the

stable currency between Ringgit Malaysia against U.S Dollar. Unfortunately in 1997, Asian

countries including Malaysia incurred economic down turned which, has resulted the devaluation

of Ringgit Malaysia and an increased of interest rate. Consequently, MAS‟ cost of purchase

increased tremendously. Due to the above scenario, MAS was reported to incur 5 consecutive

losses for the past 5 years. In 2001, MAS‟ after tax loss was reported to be RM1.3 billion. There

have another problem occurred in poor customer service and management system which put this

airlines in great losses. Many of customers complain about their e-ticketing service which is not

handling by the management very strictly. The reason is, customer database is not monitoring

effectively by the management though there have a massive investment in Information System.

Organization in decision making delays the solution which they need to be delivered as soon as

possible to the customer. However, this problems are not stop here, in further management are

not concerning regarding about customers complain and neither given any prompt ticket refund

nor resolving e-ticketing problems. Nevertheless, Malaysian airline struggling with several

problems and getting bad feedback from the customers not only for poor management but also

external interaction of government and political issues and so on.

2.0 Strategic Organizational Architecture of MAS

In order to understand and analyze the current scenario of Malaysia Airlines and provide future

strategies the Efficiency Model has been used. Under the Efficiency Model MAS will be keenly

studied on 4 efficiency areas which are – Business Strategy, Customer Strategy, HR Strategy and

Innovation Strategy.

2.1 Business Efficiencies

2.1.1 Finance Management

The Airline industry, more so than other industries is vulnerable to ‘demand shocks’ created by

macroeconomic events. In 2011, there were two such shocks with the earthquake and tsunami in

Japan and the floods in Thailand. Furthermore, the possibility of a global recession caused by

Europe’s sovereign debt crisis and a continued high cost of jet fuel must be prepared for.

Malaysian airlines must unveil a new business and finance strategy aiming to restore

profitability.

2.1.1.1 Net loss

The Malaysian flag carrier, which turned a profit in 2010, incurred net losses of RM 479 million

by the third quarter of 2011. By the end of the fourth quarter the airline had incurred a loss of

RM 2524 million, indicating a substantial decrease from a profit of RM 234 million in the

previous year.

2.1.1.2 Fuel & Non-fuel Expenditures

Further more fuel costs had gone up 25% by the end of Q4 in 2011 to RM 305 million. Non fuel

costs had increased by 50% accounting for additional provision including redelivery of aircraft

among others. The provisions made in Q4, 2011 had totaled to RM 1.09 billion. Although the

fuel costs recovery rate had and continued to improve from the previous quarter, fuel price still

remains highly volatile affecting the airline’s revenue performance.

In order the restore profitability the airline carried out a new business plan seeking to cut

capacity and increase focus on the premium sector.

2.1.2 Strategic Revenue Management

Over the past decade Malaysia Airlines has lost focus on its ‘full service’ portion of the market

on which it had been increasingly dependent. Instead they had diverted resources to the low cost

segment of the market, operating one of the oldest fleets in the region and under-investing in the

customer experience that is key for success in the ‘full service’ business. This decline in relative

product quality and customer loyalty combined with excess capacity had weakened substantial

yield increases. In 2011 the airline had lost 40% of passengers flying a ‘full service’ competitor

airline to a city served by Malaysian Airlines.

2.1.2.1 Revenue & Cost levels

The airline had seen an increase of group revenue of 2% from the previous year. However, the

unit revenue levels were still 15-25% below regional peers as can be seen in the chart below.

Furthermore, the airline’s cost position was not sufficiently lower than competitors resulting in

loss.

2.1.2.2 Increase in Yield & RASKs

The airline’s lower load factor brought with it improved yields by the end of 2011. The RASK

(Revenue per available seat kilometer) had also increased by 2% as can be observed the figure

below. Although there had been a modest growth in revenue, yield and RASKs by the end of

2011 it was insufficient to offset higher fuel costs.

2.1.2.3 Revenue & Profitability Recovery

Without taking drastic measures the airline is forecasted to be bankrupt by the end of 2012. One

possible step to recover from the losses incurred in 2011 is to cut back on several loss-making

routes including the long haul routes to South Africa and Argentina. The airline acknowledges

that 40% of its routes are unprofitable, and although it only operates five weekly flights to South

America and Argentina it accounts for over 5% of total international capacity per ASKs. This

cutback will allow Malaysia Airlines to increase capacity within Southeast Asia by adding

frequencies to core markets in the region.

The airline has a full service cost base but its revenues are closer to those of low cost carriers

such as AirAsia rather than full service carriers such as Cathay Pacific. A crucial step to recovery

includes investing in order to win back the loyalty of premium passengers by operating modern

wide body aircraft and improving other aspects of product quality which is necessary for the

success of such a premium ‘full service’ carrier.

2.1.3 Network Strategy

Malaysian Airline operates flights from its home base, Kuala Lumpur International Airport and

with a secondary hub at Kuching. It operates flights in Southeast Asia, East Asia, South

Asia, Middle East and on the Kangaroo Route between Europe and Australasia. It also operates

transpacific flights from Kuala Lumpur to Los Angeles, via Tokyo. Malaysia Airlines consists of

two airline subsidiaries: Firefly and MASwings. Firefly operates scheduled flights from its two

home bases Penang International Airport and Subang International Airport. The airline mainly

focuses on tertiary cities. On the other hand, 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.

As it has been mentioned in the report earlier the Malaysian flag carrier, which turned a profit in

2010, incurred net losses of RM 479 million by the third quarter of 2011 and by the end of the

fourth quarter the airline had incurred a loss of RM 2524 million, indicating a substantial

decrease from a profit of RM 234 million in the previous year.

The initial recovery plan would result in the termination of MAS’ highly unprofitable routes to

South Africa and Argentina and its only destination in Latin America. Other long-haul routes

will also be eliminated but have not yet been mentioned by MAS.

Malaysian Airline recognizes that over 40% of its current routes are unprofitable. While

numerous long-haul routes will be dropped, MAS plans to surge its capacity within Southeast

Asia by adding frequencies to the main markets in the region. MAS hopes to produce sufficient

cash on the expected doubling of passenger demand in the Southeast Asian market by 2020.

According to CAPA, MAS operates only five weekly flights to South Africa and Argentina

(including two on a Kuala Lumpur-Cape Town-Buenos Aires routing and three between Kuala

Lumpur and Johannesburg), they account for over 5% of MAS’ total international ASKs

(Available Seat Kilometers). MAS also need to work on reducing about 25% of its European

capacity in order to achieve the goal of a 12% system-wide capacity reduction. 

MAS now serves five destinations in Australia and Auckland in New Zealand but it is doubtful

they would eliminate these flights as MAS seeks to forge a close partnership with Qantas, which

is sponsoring MAS’ entry into oneworld alliance. 

Australia and New Zealand hold 22% of MAS’ international ASKs, while Europe accounts for

29%. A minor increase in capacity in expected from Asia which accounts for 39% of total

international ASKs.

The network changes have a great chance to improve the carrier’s structure by MYR220 million

(USD69 million) to MYR302 million (USD95 million) annually, starting from 2012. With its

smaller long-haul network MAS will focus mainly on the premium segment, leaving Malaysian

long-haul low-cost carrier AirAsia X to focus only on the budget sector.

MAS plans to win or gain back its premium long-haul passengers, mostly through changing its

carriers. A phase-out of MAS’ ageing widebody will be pursued and simultaneously new

passenger facilities will be introduced. By the end of next year the carrier will be operating only

three types of modern widebody aircraft – A330-300s, B777-200ERs and A380s. A330-200s and

B747-400s will be lashed out by the end of 2012. MAS assumes the average age of its fleet will

decline over the next four years from 13 years to only five years, giving it a younger fleet than

Asian leaders AirAsia, Cathay Pacific and Singapore Airlines (SIA).

A set of additional A330-300s and MAS’ first batch of A380s will be delivered in 2012. The new

business plan which was conducted by Malaysian Airlines confirmed that their first A380

aircraft will be positioned on the Kuala Lumpur-London route. MAS mentions that the A380 will

have exceptional in-flight services which will help determine improvements in its yield and load

factor. MAS’ London route, which served with double daily B747-400s, suffered months from

low load factors and yields. The A380 will bring in more change and result in extra capacity at a

time. MAS is also pursues a connection with oneworld member British Airways (BA), which did

not serve Kuala Lumpur back in 2011, leading to a potential joint venture in the UK-Malaysia

market and beyond. Qantas, which already operates A380s to London and has an existing joint

venture with BA on the UK-Australia route, could also end up in this partnership.

MAS begin to transfer all of its B737-800s to its new regional premium carrier. The new carrier

plans to operate regional international routes within four hours of Kuala Lumpur, including to

destinations in Southeast Asia, the Indian subcontinent and China. A preliminary initial route

map for the new carrier includes six ASEAN destination which

include Singapore, Jakarta, Manila, Hanoi, Ho Chi Minh City and Bangkok – as well as the east

Malaysian domestic destinations of Kuching and Kota Kinabalu. But MAS declares that the

domestic routes will continue to operate with B737-400s which is expected to be phased out by

2015.

The use of B737-800s will allow MAS to significantly increase frequency on its regional

international routes because MAS now uses widebodies on these routes alongside B737s. MAS

says the switch to B737-800s will also result in cost improvements because the B737-800 is 26%

more efficient on a fuel cost per ASK basis than the A330-200 and 23% more fuel efficient on a

fuel cost per ASK basis than the B737-400.CAPA data shows MAS operates 14 B737-800s with

40 more of the type which has been placed on order. Several additional B737-800s will be

delivered next year as MAS now plans to take delivery of a total of 23 aircraft in 2012 which

would be a mix of B737-800s, ATR 72s, A330-300s and A380s.

MAS are confident that the new regional carrier, with its modern fleet and high product

standards, will better meet the needs of Asia’s regional premium passenger. MAS expects this

"win back customers" portion of its new business plan to generate a profit impact of MYR394

million (USD124 million) to MYR477 million (USD150 million) annually. This will be achieved

by improving yields by 19% in 2012 while unit costs are expected to remain flat. In addition to,

the new partnership with AirAsia is also expected to have a big impact on the revenue side as

MAS begins to use AirAsia to improve its network connectivity. MAS reveals in its business

plan that a connection service will be launched on non-overlapping routes. The new connection

product with AirAsia will allow MAS to gain access to over 24 cities which MAS did not serve

back in 2011, resulting in additional feed to MAS’ long-haul network.

However, Firefly was a major component of MAS’ previous strategy of having an additional

budget to help the group compete against AirAsia in the domestic and regional international

markets. But while Firefly’s turboprop operation, which was launched in 2007 and followed a

hybrid regional low-cost airline model with some frills, was profitable, the newer jet operation

was tormenting up big losses until it was shut in September. MAS’ new management team

says the previous strategy of focussing on Firefly was a mistake because it diverted resources

away from its premium business. Firefly, which was growing fast and had been allocated 30

B737-800s from MAS’ order book, left MAS mainline with one of the oldest fleets in Asia.

MAS claim the result was its mainline product languished, leading to lower yields and a decline

in customer loyalty.

To end with, Malaysian Airlines new business plan represents a major change and an

improvement in their network strategy. The Malaysian flag carrier, while always striving to offer

a top notch product, has struggled over the years to compete with Asia’s leading carriers for

premium business. MAS are finally now committed to investing in the products needed to

compete with the likes of SIA and Cathay.

2.2 Customer Relationships and Marketing Efficiencies

2.2.1 Communication and Marketing

Since MAS have incurred a net loss of RM 1.2 Billion in the first 3 quarters of 2011 alone,

maintaining its brand and customer experience has become a vital concern for this airline. In

order to gain back their position and customer loyalty it requires MAS to focus on building its

brand and adopting various innovative strategies and develop approached to stimulate demand.

2.2.1.1 Innovation

In 2010 MAS renewed their emphasis on providing world class products and services to enhance

customer experience thereby increasing sales. They upgraded their Passenger Service System

which has enhanced their offerings today. The system includes the MHmobile service where

passengers can book tickets, check-in, track their baggage as well as check on their flight status

and Enrich points via their phones.

Also in 2010 MAS came up with a new strategy. It became the first airline in the world to offer a

comprehensive booking and checking-in application on the iPad. The first MHkiosk which

utilises this iPad application was also launched in June 2010 at Malaysia Airlines’ Kuala Lumpur

Ticketing Office at KL Sentral, followed by Kota Kinabalu and Kuching in July.

During this process MAS carried a refresh of their internet website basically a makeover to

further enhance its ease of use and to offer anew products. This process was carried out to

provide better service as well to respond to feedback from customers in order to maintain their

loyalty and customer experience.

2.2.1.2 Stimulating Demand

Since MAS has been facing problems in it growth face, it embarked on a more aggressive

campaign to improve sales by introducing MHdeals. It is an application based on the augmented

reality concept on the iPhone, with the dual purpose of enhancing customer experience and

increasing demand. MHdeals enables the iPhone to display information about certain tourist

attractions, as well as deals that are currently on offer by Malaysia Airlines to cities situated in

the general direction detected by the phone. The Company had collaborated with Sabah Tourism

to implement the service in Kota Kinabalu, and will work to add more content and destinations

to the application.

Other campaigns that were carried out in 2010 to stimulate demand included a partnership with

Australia Tourism called “Only in OZ Holidays” that was launched with its supporting website

MAStraveller.com, the “Saya Nak Cuti” reality television show was used to promote Malaysia

Airlines as a national carrier, the threeday Merdeka sales, the MAS Everyday Value Fare

promotion, as well as the appointment of the popular Chef Wan as a Travel Icon.

2.2.1.3 Promotion

In MAS website special promotional deals are offered for those members as well as non

members. Though being a member holds more advantage than a non member. Passengers get to

purchase air ticket with discount price and enjoy exclusive member only fares. There are various

deals offered such as deals of the day, MHcoupon, MH deals and MASholidays. Deals of the day

allow customers to enjoy big savings which include exciting destinations at a fantastic pries.

MHcoupons is where customers get to enjoy exclusive saving on MAS flights. This online

coupon comes in the form code. MHdeals is a free application that use iphone GPS sensor to

locate airport around you and display the best MAS deals. Lastly, MASholidays is a deal that

provides holiday package that suit a variety of budget. It includes holiday package within

Malaysia or outside of Malaysia at an attractive price.

Other than the deals offered MAS sponsors The White Jersey. The organization of Le Tour de

Langkawi, recognized by the International Cycling Union (UCI) with an ‘Excellent Level of

Organization’, has led Malaysia’s Leading Airline to continue its support for the 17th edition of

the race. MAS have been a long running corporate partner of the race. Once again in 2012 MAS

sponsored The White Jersey of the best Asian rider classification.

In 2011, Queens Park Rangers have announced a multi million pound shirt sponsorship deal with

MAS for the next 2 years. The sponsorship of jerseys for Queen Park Rangers (QPR) enabled

Malaysia Airline System (MAS) to reinforce its global full-service presence and premium

franchise via football fans globally.

As a part of their promotional strategy, recently on 14th Jan 2012 passengers arriving at Kuala

Lumpur International Airport were greeted with a flash mob of around 100 dancers and singers

into a spontaneous entertainment as a part of MAS special event to welcome the New Year with

a bang, it was carried out by MAS advertising and promotion team and their advertising agency

involving not just professional choreographers but also MAS staff and cabin crew in their

uniform. It kick started with MAS’s theme song “We Fly” followed by other Bollywood and

Hollywood songs. Ever since, the flash mob trend has been growing worldwide into marketing

schemes, involving a sizeable group of people who out of the blue break into a dance act at a

public place, MAS took this opportunity to promote and help the airline gain strong online

presence on social media.

On 24 April 2012 Malaysia airlines and firefly were big winners at the Putra brand awards 2012.

The Putra Brand Awards are the largest consumer-based sampling of its kind in Malaysia,

measuring brands through four key attributes: growth, relevance, confidence and differentiation

where Malaysian consumers themselves are the judges. Malaysia airlines was rewarded Gold for

its transportation and travel and tourism category while its subsidiary Firefly was the recipient of

the most promising brand. MAS group VEO Ahmad Jauhari considered this recognition as a

fitting testimony that consumers continue to value Malaysia Airlines branded customer

experience in spite of all the problems faced.

2.2.2 Customer Loyalty Programs

Malaysia Airlines introduced its enhanced Enrich frequent flyer program on 12 June 2006. The

program is now known as Enrich by MAS. It aims to recognize and reward frequent flyers with

free travel and special benefits. Usually a FFP is introduced by an airline to maintain its

customer’s loyalty in the long run, and MAS holds the same purpose. Under this program there

are four levels of Enrich memberships- Blue, Silver, Gold and Platinum. Each level has different

privileges to offer. To name few priority check-in, priority standby and extra baggage allowance,

amongst others. The most basic features of FFP miles can be accrued by the Enrich members on

qualifying Malaysia Airlines services as well through partners, including airlines, hotels, car

rental agencies and credit card companies. The miles earned by the members allow for

redemption for free travel, free upgrade and other complimentary services. Members of Enrich

are able to accrue miles on qualifying though Enrich Airline Partners such as Air France,

Alitalia, All Nippon Airways, Delta Airlines, Etihad, Jet Airways, KLM, SriLankan Airlines,

Virgin Atlantic and many more. Malaysia Airlines also includes a frequent flyer program for

students above 12 years old which is knows as GRADS. It offers discounted airfares, great

packages and other special deals.

2.2.3 CRM –Customer Interface

CRM basically means continuous interaction with customers in order to enhance relationship and

to develop long term loyalty thereby earning profit. MAS have adopted many methods to keep

their customers satisfied. MAS’s customers are their top priority. There are various channels

which include call centers, sales offices, agents, airports counters and town center kiosk for the

convenience of walk-in customers.

Malaysia Airlines internet booking system was launched in august 2004. The internet booking

system not only enhanced customer relationship and experience but also allowed MAS to reduce

airlines distribution cost significantly over the years. The website allows customer faster access

to information to their travelling needs and to look through its products and services offered.

Also the use of this internet booking allows customer access to MAS inventory worldwide with

ease.

2.2.3.1 CRM in Social Media

One of the most comprehensive testaments of MAS innovation in social media is the

introduction of MHbuddy to Malaysia Airlines Facebook page in March 2011, it is an

application that allows users to book and check-in for flight, and share details of their trip with

their Facebook friends. This application is considered to be the most comprehensive for an

airline on the Facebook platform. This innovative strategy developed by MAS is an interesting

approach to leverage Facebook to book a flight.

MAS have a key presence on both Twitter and Facebook as mentioned earlier. Separate “tweets”

and pages for specific markets such as students, the expatriate community and several foreign

localities in their native language have been formed in order to make it easy for customers to

access and use. An approach to develop customer relationship management. These channels

complement Malaysia Airlines’ existing consumer platforms, such as the sales offices and call

centers, and allow the Company to interact with a different segment of the market and to engage

them in a different way.

As analyzed from the above information we can come to a conclusion that MAS’s current

marketing efforts have been predominantly focused on tactical sales promotion rather than brand

building. In spite of this approach they have been able to generate low yields insufficient to cover

an increasingly uncompetitive cost structure. In order to win back its customers MAS should

improve customer satisfaction at every touch point which is pre flight, in-flight and post flight. It

should focus on building its brand making sure it delivers on its brand promise consistently.

Measures MAS needs to focus on are to refresh Enrich Loyalty Programme, competitive product

roll out, enhanced advertising and promotion development and finally to focus on branding

revamp. The below figure depicts Malaysia Airlines recovery plan for Branded Customer

Experience.

3.0 Reccomendation

3.1 Literature Reviews

Following the appointment of a new CEO, Malaysia Airlines (MAS) has announced initiatives to track and boost performance of employees.

In a quarterly progress update, the airline reported “sustained progress amidst a backdrop of external macro-economic fluctuations.”

Group chief executive officer of Malaysia Airlines, Christoph Mueller said “We have seen a challenging quarter but I am pleased to see continued progress made in all key areas such as on-time performance and costs. Malaysia Airlines has been operating for six months now and although we have a long way to go and areas for improvement, we are making steady progress in the restructuring.”

“We are focused on building momentum with our restructuring in 2016. Diligent execution on efficiency and tighter cost controls has already produced results which have seen us emerging leaner and more focused. There is still plenty to be done but the group is working hard to ensure that Malaysia Airlines succeeds and prospers for the years to come,” added Mueller.

Part of these initiatives to boost profits involve strengthening the firm’s talent pipeline and enhancing skills of employees.

MAS emphasised people development and succession planning remained an integral part for the organisation’s sustained success, remains a key focus in 2016.

To this end, the quarter saw the introduction of the revamped performance management system, which aims to boost productivity by providing clear targets as well as a clearer path for career progression.

“The system will enable us to spot skills gaps and escalate retraining programmes,” MAS stated.

To address skills gaps, the airline will also be exploring joint ventures with established international organisations to provide training and specific skillsets.

Whilst being beneficial for the airline, the firm added this venture is also very much in line with the Government’s Economic Transformation Programme.

“The airline has been working hard in closing the skills gap via the Malaysia Airlines Academy which will be based in KLIA, providing a centre of aviation skills for Malaysia. The newly revamped academy will ensure future generations of leaders for the airline will be groomed entirely from within,” the report stated.

To this end, MAS confirmed it has successfully recruited 20 management trainees towards building a talent pipeline as well as growing the aviation skillsets in Malaysia.

The trainees will be assigned and rotated across the various divisions in Malaysia Airlines to ensure exposure across all functions of the organisation and to inspire passion for the industry.

“The quarter saw further strengthening of the leadership team with the announcement of a new Head of Revenue Management and Head of Engineering. The new team is an important strategy of having world class and diverse talent to reflect the company’s global business and operations,” the report concluded.

3.2 Organization Leadership Theories

Leadership, as explained by successful businessman Alan Keith, is "ultimately about creating a

way for people to contribute to making something extraordinary happen." Good leaders move

their followers to action and help them realize their potential to accomplish a greater objective.

While larger companies actively mine the work force for great leaders, for small businesses,

owners often need to fill this role themselves. Understanding the theories of organizational

leadership helps you grow and develop leadership skills and identify potential leaders during the

hiring process.

Trait Theory

The idea that great leadership derives from a person's individual characteristics or traits is known

as trait theory. Research identifies six personal traits that strongly relate to leadership:

intelligence, adjustment, extraversion, conscientiousness, openness to new experiences and self-

efficacy. According to trait theory, individuals with these characteristics emerge as leaders

regardless of the situation.

Behavioral & Style Theory

This theory describes leadership not as a set of traits but a set of behaviors and styles. Theorists

studied three main leadership styles: authoritarian, where the leader dictates what followers must

do; democratic, where the leader presides over a collective decision process; and laissez-faire,

where the leader does not participate in the decision process. The results of the studies indicate

that followers preferred the democratic approach to leadership and that performance increased

when leaders used positive reinforcement.

Functional Theory

Functional theory argues that leaders' primary responsibility is to assess what their followers

need and ensure that those needs are met. A range of studies indicate that leaders must perform

five primary functions: monitor the environment, organize subordinate activities, train and coach

subordinates, motivate followers, and participate in the group's work.

Transactional Theory

Transactional theory argues that leadership arises from an individual's ability to reward or punish

subordinates based on their performance. Leaders must be given a goal, must possess the ability

to train and evaluate subordinate's performance towards that goal and must be given the authority

to reward subordinates when goals are met.

Transformational Theory

Transformational leaders focus on the big picture and use communication to motivate followers

to effectively and efficiently execute their vision. Transformational leadership theory calls for

leaders to be visible and accessible, and to actively seek out new ideas to realize objectives.

Environmental Theory

The environmental theory of leadership argues that leaders use psychology and self-awareness to

foster self-sustaining environments where group members bring out the best in one another. The

leader creates a culture that motivates and excites members to complete required tasks not

because they are required to but for the benefit of the group. Instead of carrying the group,

environmental leaders create a setting in which group members want to carry one another and are

empowered to do so.

Situational & Contingency Theories

These theories argue that the desired traits and behaviors exhibited by a leader depend largely on

the situation, and that there is no best way to lead. Based on this theory, the authoritarian

leadership style is effective during times of crisis but not for everyday operations, the democratic

leadership style is more effective when a consensus needs to be built, and the laissez-faire

leadership style is effective when subordinates are trained and experienced individuals who

appreciate the freedom it provides.

Malaysia Airlines Acquired By Khazanah

Malaysia Airlines will be owned completely by the Malaysian government from now on. Or

more specifically, the state investment company Khazanah Nasional, which used to own 69%

stake will now be taking 100% ownership by buying out other shareholders.

Khazanah’s Managing Director, Tan Sri Azman Mokhtar stated that Khazanah will be buying

out the remaining equity from the shareholders at 27 sen a share. The airline will also be delisted

and a new company will be established to take over the airline’s business. MAS is to be

completely delisted from Bursa Malaysia by the end of this year.

Malaysia Airlines will also restructure it’s routes, which does not come as a surprise to many,

considering the high numbers of empty seats on many of its planes. In fact, Malaysia Airlines has

not made any annual profit since 2010. According to the MAS Recovery Plan, “it has seen

RM8.4 billion in cumulative net losses from 2001 to June 2013.”

In addition, Khazanah is investing RM6 billion into the new company. Azman is hopeful for the

possibility of relisting the new company in three years time. While some would question the

insistence to keep MAS afloat, Prime Minister Dato’ Sri Mohd Najid bin Tun Abdul Razak

shared his sentiments on the matter in the MAS Recovery Plan released on 29th August 2014.

“MAS is a part of Malaysia’s history,” Dato’ Tun Abdul Razak stated. “It is a symbol of national

pride, of our ambitions and our place in the world. In short, it is more than just a company to us.

As we turn out minds to celebrating our independence, I ask that each of you consider how you

can support this national effort.”

MAS will be appointing a new chief executive by July 1st, 2015. Ahman Jauhari will continue to

lead MAS airlines until next year while Khazanah searches for a suitable replacement, which is

expected to be decided by the end of 2014.

3.3 Strategic plan to handle on Manpower Excessive issues

3.3.1 Job design Theories

Job design follows job analysis i.e. it is the next step after job analysis. It aims at outlining and

organising tasks, duties and responsibilities into a single unit of work for the achievement of

certain objectives. It also outlines the methods and relationships that are essential for the success

of a certain job. In simpler terms it refers to the what, how much, how many and the order of the

tasks for a job/s.

Job design essentially involves integrating job responsibilities or content and certain

qualifications that are required to perform the same. It outlines the job responsibilities very

clearly and also helps in attracting the right candidates to the right job. Further it also makes the

job look interesting and specialised.

There are various steps involved in job design that follow a logical sequence, those that

were mentioned earlier on. The sequence is as follows:

1. What tasks are required to e done or what tasks is part of the job?

2. How are the tasks performed?

3. What amount are tasks are required to be done?

4. What is the sequence of performing these tasks?

All these questions are aimed at arriving upon a clear definition of a specific job and thereby

make it less risky for the one performing the same. A well defined job encourages feeling of

achievement among the employees and a sense of high self esteem.

The whole process of job design is aimed to address various problems within the organisational

setup, those that pertain to ones description of a job and the associated relationships. More

specifically the following areas are fine tuned:

Checking the work overload.

Checking upon the work under load.

Ensuring tasks are not repetitive in nature.

Ensuring that employees don not remain isolated.

Defining working hours clearly.

Defining the work processes clearly.

The above mentioned are factors that if not taken care of result into building stress within the

employees.

Benefits of Job Design

The following are the benefits of a good job design:

1. Employee Input: A good job design enables a good job feedback. Employees have the

option to vary tasks as per their personal and social needs, habits and circumstances in the

workplace.

2. Employee Training: Training is an integral part of job design. Contrary to the

philosophy of “leave them alone’ job design lays due emphasis on training people so that

are well aware of what their job demands and how it is to be done.

3. Work / Rest Schedules: Job design offers good work and rest schedule by clearly

defining the number of hours an individual has to spend in his/her job.

4. Adjustments: A good job designs allows for adjustments for physically demanding jobs

by minimising the energy spent doing the job and by aligning the manpower

requirements for the same.

Job design is a continuous and ever evolving process that is aimed at helping employees make

adjustments with the changes in the workplace. The end goal is reducing dissatisfaction,

enhancing motivation and employee engagement at the workplace

3.3.2 Job Characteristic Model

Hackman and Oldham job characteristics model

The job characteristics model, designed by Hackman and Oldham, is based on the idea that the

task itself is key to employee motivation. Specifically, a boring and monotonous job stifles

motivation to perform well, whereas a challenging job enhances motivation. Variety, autonomy

and decision authority are three ways of adding challenge to a job. Job enrichment and job

rotation are the two ways of adding variety and challenge.

It states that there are five core job characteristics (skill variety, task identity, task significance,

autonomy, and feedback) which impact three critical psychological states (experienced

meaningfulness, experienced responsibility for outcomes, and knowledge of the actual results),

in turn influencing work outcomes (job satisfaction, absenteeism, work motivation, etc.). The

five core job characteristics can be combined to form a motivating potential score (MPS) for a

job, which can be used as an index of how likely a job is to affect an employee's attitudes and

behaviors.

Hackman and Oldham’s job characteristics theory proposes that high motivation is related to

experiencing three psychological states whilst working:

1. Meaningfulness of work

That labour has meaning to you, something that you can relate to, and does not occur just

as a set of movements to be repeated. This is fundamental to intrinsic motivation, i.e. that

work is motivating in an of itself (as opposed to motivating only as a means to an end).

2. Responsibility

That you have been given the opportunity to be a success or failure at your job because

sufficient freedom of action has given you. This would include the ability to make

changes and incorporate the learning you gain whilst doing the job.

3. Knowledge of outcomes

This is important for two reasons. Firstly to provide the person knowledge on how

successful their work has been, which in turn enables them to learn from mistakes. The

second is to connect them emotionally to the customer of their outputs, thus giving

further purpose to the work (e.g. I may only work on a production line, but I know that

the food rations I produce are used to help people in disaster areas, saving many lives).

In turn, each of these critical states are derived from certain characteristics of the job:

1. Meaningfulness of work

The work must be experienced as meaningful (his/her contribution significantly affects

the overall effectiveness of the organization). This is derived from:

o Skill variety

Using an appropriate variety of your skills and talents: too many might be

overwhelming, too few, boring.

o Task Identity

Being able to identify with the work at hand as more whole and complete, and

hence enabling more pride to be taken in the outcome of that work (e.g. if you just

add one nut to one bolt in the same spot every time a washing machine goes past

it is much less motivating than being the person responsible for the drum

attachment and associated work area (even as part of a group).

o Task Significance

Being able to identify the task as contributing to something wider, to society or a

group over and beyond the self. For example, the theory suggests that I will be

more motivated if I am contributing to the whole firm’s bonus this year, looking

after someone or making something that will benefit someone else. Conversely I

will be less motivated if I am only making a faceless owner wealthier, or am

making some pointless item (e.g. corporate give-away gifts).

2. Responsibility

Responsibility is derived from autonomy, as in the job provides substantial freedom,

independence and discretion to the individual in scheduling the work and in determining

the procedures to be used in carrying it out)

3. Knowledge of outcomes

This comes from feedback. It implies an employee awareness of how effective he/she is

converting his/her effort into performance. This can be anything from production figures

through to customer satisfaction scores. The point is that the feedback offers information

that once you know, you can use to do things differently if you wish. Feedback can come

from other people or the job itself.

Knowing these critical job characteristics, the theory goes, it is then possible to derive the key

components of the design of a job and redesign it:

1. Varying work to enable skill variety

2. Assigning work to groups to increase the wholeness of the product produced and give a

group to enhance significance

3. Delegate tasks to their lowest possible level to create autonomy and hence responsibility

4. Connect people to the outcomes of their work and the customers that receive them so as

to provide feedback for learning

Reccomendation for decision making approach and solutions

Proposed decision making approach and solution:

After reviewing several problems from various angles it is clearly seen that MAS managements

are delaying to delivers their decision which have taken or somehow management taking wrong

approaches to take appropriate decision for the organization. However, in decision making

process there have two ways to make decision which is may the management of MAS can take

Logical approach or Magical Approach. However, for a big organization like Malaysian airlines

should be implement logical approaches rather than magical approaches. The problems which

arise in MAS management organizations need to be analyze their internal as well as external

factors very carefully. Through logical approach identify the problems in systemic ways and take

necessary action step-by-step. Once accomplish one problem than would be taking another step

for next. Moreover, management must be acknowledging that, each stage fully covered through

intelligence and care. ASK SIR L model, which is one of the most effective component in logical

approach decision making model.

Through this model organization will be identify the most important problems which is exist in.

For example, from the scenario of MAS customer service problem which state, customers trying

to change their flight through online service and getting trouble to fixed it. After that, they called

to administrator and did not get any feedback, later on send an email but no response at all.

However, again they called to the service department and explain overall scenario to the

management over the phone and get replied back “I am not the one responsible for this and I not

in charge to resolve this issue and there is no one else to talk to this issue”. However, this issue

gave a negative indication of MAS customer service.

What decision can take MAS organization through ASK SIR L model? Firstly, they need to find

out what are the causes existing thus the problem arise. Once specify next step will be find out a

possible solution to overcome from this. However, before implement the possible solution which

decision taken by the groups than forward it to the top management to review the decision. Once,

top management appreciates overall decision then will start to work for implementation.

Decision making through STEP analysis: As earlier mention, problem-solving frequently contains of decision-making, and decision-

making is specifically vital role for management and leadership. There are procedures and

methods to recover decision-making and the quality of pronouncements. After reviewing the

overall problems of Malaysia airline management can be take further decision through STEP

analysis to overcome from their existing problems.

Sociocultural

Malaysia is self-possessed of three main races where Islam is the official religion. Its fruitfulness

in cultural variety and could be used as the attracting factor for the tourists to travel to Malaysia,

and indirectly helped MAS to progress its operation to contain more foreign destinations.

Economic

The Asian economic crisis in the late 90s which has affected the South East Asian region was

also a causative factor that caused MAS to suffer 5 consecutive losses. These circumstances got

degenerates as the Malaysian Ringgit currency was undervalued, which in turn led to high

interest on foreign trade. Investments made by MAS to expand its business by purchasing more

aircraft were highly affected by this. The devaluation of RM had also led to low spending power,

which caused lesser people to travel by air. The tragedy of September 11 has also contributed to

the reported losses by MAS. Since then, the world economy was on its downturn and the world

masses were getting „phobia‟ to travel by air. MAS have to bear the losses as its main operation

is based on the international network.

Politics and Legal

Due to the actual bad economic recession, Malaysian Government through Bank Negara had to

reread the foreign and monetary policies. As such, Ringgit Malaysia (RM) was attached to RM

3.80 to 1 US dollar. The Government had to impose stricter and tighter policies for Malaysian to

travel abroad to avoid currency outflow, which indirectly caused low rates of travelers for MAS.

The situation worsens, when the regional economic recession was coupled with the instability in

the political arena in Malaysia in 1998. As a result, the investors lost their confidence, being

more cautious and prefer the attitude of „look and see‟ and some of them have ceased their

operations in Malaysia, resulting in more layoffs.

Technology

MAS has also invested in IT and telecommunications advancement to increase the efficiency of

its operation. More people can have access to the MAS services just through the Internet where

people can book and buy their ticket online. Besides that, more promotions and advertisements

can be done through the Internet, which can attract more and more people to travel with MAS.

The growing demand in cargo services has resulted in more airlines opting to convert their

passenger aircraft into cargo aircraft. This new trend provides an alternative for MAS to reduce

some money on purchasing new cargo aircraft and perhaps enter into other possible profitable

operations.

CONCLUSION

Malaysian airline still holding their reputation in aviation industry. Hence, there have several

factors which they need to be overcome to reduce their further loss in nearest future. However,

management should take decision to improve their internal factors through implement logical

decision approach rather than magical approach. The companies like aviation industry, by made

a decision management require thinking analytically to resolve their problem. However,

management need to reflect some decisions and challenges which are difficult because probably

they don‟t have the necessary knowledge or experience, in which case they need first to decide if

the decision which made by them or challenge is actually suitable and necessary for at this stage.

There have few decisions which have to be made whether managements are ready or not, others

might not be as pressing as they imagine. Moreover, it also wouldn‟t be considerable to change-

based decision if having considered the implications carefully to decide that it is not the best

thing to do. Management should take decision in right way as in right time so they can be

avoiding their nearest problem.

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