Mini Case Study: Malaysia Airlines
Shahnaz Ashrafia
Faculty of Science
University of Amsterdam
Abstract. For the past years, Malaysia Airlines experienced fluctuations in the
finances and company image due to several market challenges and tragedies. This case
study aims to evaluate the situation of Malaysia Airlines by applying the concept of
adaptive cycle of resilience.
Keywords. mini case study, Malaysia Airlines, adaptive cycle of resilience
Introduction
The airlines industry could be one of the most profitable industries as well as the most
challenging one. International Air Transport Association (IATA) mentioned 3 major
challenges in aviation; which are safety, convenience and sustainability [4].
In the perspective of Adaptive Cycle [2], it can be understood that changes
and crisis in ecosystems are inevitable. Airlines industry along with the government
understands that efforts are required to compete in the airlines industry through their
services and to ensure that flying is safe with the implementation of technology [4].
However, accidents do happen. Malaysia Airlines is one of the airlines experiencing
financial and image crisis in 2014. The shifts in the airlines and its relation to adaptive
cycle will be further discussed.
1.
Company Background
Founded in 1947, Malaysia Airlines is the major airline of Malaysia. Currently,
Malaysia Airlines or known as MAS (Malaysian Airlines Systems) fly to more than
100 destinations worldwide and 35 domestic destinations. Moreover, MAS also
provides other transportation related services such as cargo and mail transport services
[12]. In the past decade, they have received some notable awards in the aviation
industry such as 5-star Airline from Skytrax (2005-7, 2009, 2012–13) and World’s
Leading Airline in Asia and to Asia (2010–11, 2013) [9].
2.
Challenges
Throughout the years, Malaysia Airlines has experienced rises and falls. In the early
years of 1950s to late 1990s, the airline expanded rapidly by receiving technical
assistance from British Commonwealth Airlines, joining IATA and extending their
routes domestically and internationally.
However, Malaysia Airlines had to face their first fall in early 2000 due to
financial crisis. The loss reached approximately RM 800 million making them to cut
out several unprofitable routes. The company managed to recover in 2004 but faced
another crisis in 2005 due to escalating fuel costs and poor management. A new CEO
was appointed develop changes in operations and corporate culture and a Business
Turnaround Plan and Business Transformation Plan was launched [10].
Nevertheless, MAS had to struggle again in 2011 because of rising fuel costs
and mismanagement issues. They chose another CEO as well as launched the second
Business Turnaround Plan. MAS then improved their performance in 2013 by
executing a route rationalization programme and investing in search engine marketing
strategy [13]. MAS’s commercial director also expected that Malaysia Airlines would
be profitable by the end of 2014 with the new plan [6].
Unfortunately, Malaysia Airlines encountered another crisis situation with the
loss of 2 flights in March and July 2014. The company which have not recovered from
its financial loss had to gain more losses due to the impact of the plane tragedies [4]
[11]. The state of Malaysia Airlines instability from 2005 to November 2014 can be
seen in the stock review displayed in Figure 1.
Figure 1. MAS Stock Chart 2005-2014.
Retrieved from Yahoo! Finance, 15 November 2014
3.
Discussion
The adaptive cycle of resilience shown in Figure 2 represents a flow within four
quadrants or phases, namely: entrepreneurship, crisis, new combinations and
equilibrium. It is developed from the adaptive cycle pictured in Figure 3. The
discussion on the adaptive cycle of resilience will focus on MAS’s crisis in 2005.
Figure 2. Adaptive cycle of resilience
Figure 3. Adaptive Cycle
3.1. Mapping MAS’s 2005 Crisis in Adaptive Cycle of Resilience
3.1.1.
Equilibrium
In 2004, Malaysia Airlines was in the equilibrium phase after recovering from
their first crisis. The company had potentials for future development to extend
their services. However, in the following year, a financial and management
issues occurred, leading to Malaysia Airlines’s second crisis.
3.1.2.
Crisis
In this crisis situation, the company had to replace the CEO and deal with
plummeting stocks. The reality of the situation was exactly as mentioned by
Holling & Gunderson (2002) in the adaptive cycle (Figure 3) when explaining
the shift of conservation to release, quoting “Workers are fired in efforts to
reduce costs, and CEOs are fired to set the stage for restructuring.”
3.1.3.
New Combinations
According to the adaptive cycle, a crisis can be explained as a trigger for a
change even though it is uncertain on what will happen to the company’s
future [1]. In hope to solve the crisis, Malaysia Airlines proposed a Business
Transformation Plan which implemented a new revenue management, cost
reduction, network route improvements and productivity improvements
(reducing some man power) [3].
3.1.4.
Entrepreneurship
In early 2008, Malaysia Airlines was in their entrepreneurship phase. It is
reported that they managed to cover the financial losses in 2005 and achieved
profits which exceeded their target [10]. In addition, the company purchased
new aircrafts to expand their service to new destinations.
3.2. Dealing with Present Crisis
Currently, with the financial and image impact from the tragedies, Malaysia
Airlines is still on their way to achieve sustainability. Referring to the adaptive
cycle, the current state of MAS is in the release phase; dealing with change and
executing a Business Recovery Plan which intends to rebrand, restructure the
business model, reducing the workforce and improve communication with
stakeholders [8].
Conclusion
Changes and crisis happens could happen unexpectedly. The adaptive cycle is used to
define the situation of Malaysia Airlines going through the series of challenges.
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