Backgroud of Malaysia Airlines

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a. Introduction 1.0 Background Of Malaysia Airlines Malaysia Airlines System Berhad is also known as MAS in short. MAS is founded in 1947 as Malayan Airways, but it has change its name as Malaysian Airline System in 1 October 1972. MAS is the flag carrier which is own by government of Malaysia. MAS headquarters is situated at Sultan Abdul Aziz Shah Airport in Subang, Selangor. MAS operates flights at its first base in Kuala Lumpur International Airport, and secondary base in Kota Kinabalu. Malaysian Airlines System Berhad is the holding company for Malaysia‟s national airlines carrier, one of the fastest growing airlines in Asia. Malaysia Airlines has two airline subsidiaries, which is Firefly MASwings. Firefly operates scheduled flights from its two home bases Penang International Airport and Subang International Airport. The airlines focuses on tertiary cities although has recently launched services to Borneo from Kuala Lumpur International Airport. MASwings focuses or inter-Borneo flights. Malaysia Airlines has a freighter fleet operated by MASKargo, which managers freighter flights and aircraft cargo-hold capacity for all Malaysia Airlines‟ passenger flights. MAS are using this type of craft Airbus A330-200 and A330-300. Boeing 737400, 800 and 400/400. Malaysia Airlines operates a fleet of aircraft with two cabin configurations. Malaysia Airlines B777-200ER fleet has a two configuration which is Golden Club Class and Economy Class. Its B747-400 fleet has a three-cabin configuration, also including First Class. Malaysia Airlines premium cabins and Economy Class have been giving numerous awards for excellence in product and service delivery. From a small air service, Malaysia airlines have grown to become awardwinning airline with more than 1000 aircraft, servicing more than 110 destinations across six continents. The slogan for Malaysia Airlines is “Going Beyond Expectations”.

On 25

January 2007, Malaysia Airlines launched MH Campaign which means Malaysian Hospitality.

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Malaysia Airlines also practiced the online booking and buying to make their reservation or purchasing way easier for passenger. With this online purchasing, the passengers need to fulfil their details like the destination they want to go and the departure place they want. The payment will settling via the online banking. Internet user can book their air ticket, hotel , and train ticket and rent car via Malaysia Airlines Website. MAS is a type brick and click company. This is MAS offer both offline and online ticket booking systems. MAS allows customers to order air ticket and other services online, and other services also provided. MAS also have its ticketing counter and office in big city in selected state. The main products offer by Malaysia Airlines web-site is flight tickets. Besides, it also provides car rental, hotel booking, booking railway ticket and holiday packages. 1.1 History of Malaysia Airlines A joint initiative 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 Settlement to run an air service between Penang and Singapore, resulting in the incorporation of Malayan Airways Limited (MAL), on the 12th of October, 1937. The 1960s was a significant decade; as the country that known as Malaysia was formed in 1963 (incorporating Malaya, Singapore, Sabah and Sarawak. Malaysian Airlines Limited not long after, welcomed Borneo Airways Limited into its family. There are changes a couple of years later, it is

due to the split-up of

Singapore from Malaysia, but the airline continued to service in both countries as a bi-national airline, and renamed Malaysia-Singapore Airlines (MSA). As the airline continued to grow, with the contribution

of both countries‟ governments (which

acquired joint majority of the airline in 1966), more international routes were expanded . In 1970, the defining moment of the airlines as we know it today. In the early decade – 1971 to be exact – both the Malaysia and Singapore governments agreed to set up separate airlines. Malaysians Airways Limited was formed. One year later, 2

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MAS became Malaysian Airline System (MAS). MAS were officially launched on 30 September 1972, the airline took to the skies as truly Malaysia‟s very own national carrier on 31 September– three months ahead of schedule. Great things were beckoning MAS in the 80s and logistical innovations ensured that the airline was on the right track. In February 1980, we implemented a computerised cargo retrieval system and a year later, MAS RM2.6million maintenance hangar was officially opened. The most significant moment for the airlines – and one that help build our future success – was the 1985 privatization of the airline, the first Malaysian government agency to do so. In November that same year, the now-private entity MAS was listed on the Kuala Lumpur Stock Exchange. In 1987, we shortened our name to Malaysia Airlines. In 1991, the airline received the 1990 Asian Institute of Management/World Executive‟s Digest Management Award in the General Management category. That same year, we accepted the TDC 1990 Tourism Gold Award and one year later, our fourth Boeing award for dispatch reliability of our B737 fleet. Throughout the 90s, we consistently came out tops in several airline surveys conducted by such renowned organizations as In-flight Research Services (IRS), UK. Skytrak UK first awarded us World‟s Best Cabin Crew in 2001 and to date – the most recent award just a few months ago – we have won this coveted title 6 times. Skytrax also ranked us a 5-star airline in 2005, a prestige we have continued to uphold. The new millennium saw MAS achieving their dream of being an internationally recognised and respected airline by the 21st century. Besides the numerous awards (over 100 in the last decade alone), we continued to be a dominant force in the Asian and global airline industry. In December 2005, Dato‟ Sri Idris Jala joined Malaysian Airlines as our Managing Director/Chief Executive Officer. Dato‟ Seri Idris introduced the airlines‟ three-year Business Turnaround Plan in 2006, which restructuring of domestic andinternational flight routes. These moves would prove successful; in just two years,

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Dato‟ Seri Idris turned the airline around from a nine-month loss of RM1.3bil in 2005 to a RM851million net profit in 2007. 1.2 Vision, Mission and Objective Vision i.

An airline uniquely renowned for its personal touch, warmth and efficiency.

ii.

To be the World‟s five star value carrier(FSVC).

iii.

To be the airline of excellence

iv.

Going beyond expectations Mission

i.

To provide air travel and transport service that rank among the best in terms of safety, comfort and punctuality.

ii.

Make Malaysia Airlines one of the leading standard bearers for the airline industry in term of safety, efficiency and quality of service.

iii.

To be a profitable airline List of Objectives

i.

Highest level of safety

ii.

Satisfy legal requirements

iii.

Operations are conducted in the most efficient manner

iv.

Drive structural cost management

v.

Ability to map efficiency in each area of operations

vi.

Position as benchmark in the aviation industry

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1.3 Organisational Structure

Figure 1.0: Malaysia Airline System Organizational Structure

Senior Management of Malaysia Airlines

1. Tengku Dato‟ Azmil Zahruddin bin Raja Abdul Aziz

9. Effendi bin Abdul Rahman Senior General Manager, Human Resources

Managing Director / Chief Executive Officer 2. Mohd. Azha bin Abdul Jalil Chief Executive Officer 3. Captain Mohamed Azharuddin bin Osman

10.. Muzzaffar bin Othman Senior General Manager, MD‟s Office 11. Shahari bin Sulaiman Managing Director, MASkargo

Director of Operations 4. Dato‟ Captain Mohd Nawawi bin Awang

12. Dato‟ Eddy Leong Chin Tung Managing Director, Firefly

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Senior General Manager, External Relations 5. Indira Nair

13. Dato‟ Mohd Salleh bin Ahmad Tabrani

Senior General Manager,

Managing Director - MASwings

Communications

General Manager – Transition Management

6. Dr Amin Khan

14. Captain Dr Ooi Teong Siew

Senior General Manager, Network

General Manager, Corporate Safety, Security,

& Revenue Management

Health and Environment

7. Dato‟ Bernard Francis Senior General Manager, Sales &

15. Shahjanaz binti Kamaruddin Company Secretary

Marketing 8. Mohd Roslan bin Ismail Senior General Manager,

16. Esther Yap Siew Yen Chief Internal Auditor

Engineering & Maintenance Managing Director, MAS Aerospace Engineering

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b. The Organisation and Internal Workings i.

Website Walk-through

Figure 1.1: Malaysia Airlines Homepage The above picture showed the homepage of Malaysia airlines. The web page is easy to use and have simple interface, so it is user friendly and interactive. The web page don‟t just have two types of colour that is blue and red. Although Malaysia airlines use only a few of colour , but it looks interesting and nice interface.

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To register as a user for Malaysia Airlines

Figure 1.1: Register as a user for Malaysia Airlines (Step 1)

Step 1: To register as a user for Malaysia Airlines, you should find the sign up button at the top of the screen. If you are a user of Malaysia Airlines, then you should click login. Step 2: After click the sign-up button, the web browser will direct me to a register page. Then you will have to fill in your logon details, personal details and address details.

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Figure 1.2: Register as a user for Malaysia Airlines (Step 2)

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Step 2: At the logon details section, you will have to fill in my username and password. This information is required every time you log in to this web-page. If you want my computer to remember the username of your account, then you should tick on “Remember me on this computer After you fill in the logon details. Next, it is to fill in personal details of youself. At the personal details section, you will have to fill in my salutation (if have), title, first name, last name, Date of birth, gender, email, and telephone number. After fill in all the personal details, you will have to tick “I have read the terms and conditions and the privacy statement”. If you want to receive notification from MAS Airlines, you should to tick “I am happy to receive mailings from time to time”. If you want to fly with best deal, then you should tick “sign up for get the deal”. After you fill in the personal details. Next, it is to fill in address details of myself. At the address details section, you will have to fill in my address, city, state, country and postcode.

Figure 1.3: Register as a user for Malaysia Airlines (Step 3)

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Step 3: After you make sure fill in the all the logon details, personal details and address details. Next, you click register button at the bottom of the register page. Then, it will direct you to the next page.

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Figure 1.5: Register as a user for Malaysia Airlines (Step 5) Step 5: When successful register, the above page will show. It will show the logon details, personal details and address details you fill in earlier. If got any changes, you can change the information by click the edit button in each section of the details.

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To booking flight ticket via Malaysia Airlines

Figure 2.0: Booking flight ticket via Malaysia Airlines (Step 1) Step 1: Before Book flight ticket, you should find the login button at the top of the screen. Move your cursor to the login button, then a drop down login box will appear. To login, you should fill in your username and password which you register earlier.

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Figure 2.1: Booking flight ticket via Malaysia Airlines (Step 2) Step 2: After login, the web browser will direct me to the book a flight page shown above. You can choose return, one way or flexi return ticket. You must choose your flight depart and arrival place and date. Besides, a person can book more than 1 ticket that is adult orinfant(baby which is under 2 years old). Customer can choose types of classes airlines such as first, business and economy. Besides, customers can choose types of currency display. After select all the ticketing detail, you can click continue to the next page.

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Figure 2.2: Booking flight ticket via Malaysia Airlines (Step 3) Step 4: this page will show the detail of the flight depart. This page will show the depart and arrival place and date and price of the ticket. Click continue if don‟t have any changes.

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Figure 2.3: Booking flight ticket via Malaysia Airlines (Step 4) Step 4: this page will show the detail and term and condition of the airlines services. It include discount level, advance purchase, payment, Baggage allowance, advance seat selection, enrich miles, change of booking, upgrade, stand by airport, and cancelation after departure. You can click continue to the next page if every details is correct. If any changes, click the button back to change the details of your ticket.

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Figure 2.4: Booking flight ticket via Malaysia Airlines (Step 5) Step 4: this page will show the detail of the consumer. It will show the name, title, enrich card number, contact details and e-mail address. This part is automatically fill in if you already login as user. If all the details is correct , click continue to the next page.

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Figure 2.4: Booking flight ticket via Malaysia Airlines (Step 5)

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Step 5: This page will show the trip summary such as price, departure date and time. The first part will show seat preference such as the name of the passenger and the flight seat number. The second part is travel insurance, tick yes if want the services of insurance. If you don‟t want to purchase the travel insurance , you can click no, thanks. In the third part, consumer can choose to rent a car using this web-service. It include the age and country of residence. In the fourth part, you can choose time and date to pick-up and drop off the rental of vehicle. At the last part, you can choose to rent or not using the car rental services. If all the details is correct , click continue to the next page.

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Figure 2.5: Booking flight ticket via Malaysia Airlines (Step 6) 20

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Step 5: In this page will show the details of the flight such as flight number, depart and arrival of place and time, class, type of aircraft, and the fares term and condition. After you finished check all the details, customer must fill in the details of payment such as cardtype, name of the card, credit card number, expiry date, issuance country, security number,and billing address. If the card holder are travel with this flight, tick “yes, the cardholder is travelling with this trip. You must tick which you are agreed with the agreement before you can confirm the payment. Lastly, you are done with the purchasing of flight ticket online.

ii. PPPP Description

In order to achieve marketing objective, Malaysia Airlines need to have strategy must have different elements in the marketing mix. Marketing mix is the combination of tools that are used by Malaysia Airlines to satisfy customer need and achieve company objective and goal. The 4P‟s in the marketing mix strategy are refer to product, price, place and promotion. The goal is to decide the 4P on the customers in the target market in order to create perceived value and generate positive feedback. 21

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Product The term “product” refers to tangible, physical products as well as service. It also means defining the characteristic of product or service to meet the customer needs.

Services Malaysia Airlines cabin which have three class which is first class, business class and economy class. The seats and services are different between each classes. Each class has its own entertainment devices. For first class it used select 3000i as its inflight entertainment system, business class used

select 3000i as its

entertainment devices and economy class used retractable LCD screen as its entertainment. Besides, in Malaysia website, it also provide car rental, hotel booking, booking railway ticket and holiday packages.

Nationwide call centre Customer can use English, Malay, Mandarin and Tamil when they call Malaysia Airlines call centre. Call centre service is available from 8am to 10pm on weekdays and from 9 am to 6pm on weekends. The call centre number is 1300-88-3000 and it handle calls from Malaysia, Singapore and brunei. For those who are living outside Malaysia, you can call 603 7843 3000.

e-Ticket An e-Ticket is an electronic ticket. With an e-ticket, customer no longer need to collect paper tickets. With e-ticket, customer no need worry about ticket lost or being stolen when traveling. After booking has been confirmed, an e-ticket reference and detail will be sent to your e-mail when registration. If you have booking reference, e-ticket and photo identification, then you are ready to travel. To purchased ticket online, customer need a valid credit card.

Easy Payment To book ticket and purchase online, customer need to have a valid credit card. Currently, MAS online booking only accepts a valid Visa or MasterCard. 22

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Price Price means the value or the worth of a product that a buyer are willing to pay for it or exchange the product value for money.

Everyday Low Fares Malaysia Airlines have launched its Everyday Low Fares programme on 6 May 2008. Everyday Low Fares offers 1.3 million RM 0 for all domestic routes operate by Malaysia Airlines and Firefly. The Everyday Low Fares programme offers a maximum of 30% of the total seats on every flight which are unsold factor of 70% on each flight. Therefore, Malaysia Airlines is make earnings from fuel surcharge, administrative fee and airport tax. Since the launched of this programme till 14 may 2008, Malaysia Airlines has sold more than 150,000 seats. Malaysia Airlines the programmes to all ASEAN routes operated by Malaysia Airlines. This programmes has been strongly opposed by Air Asia which claim that directly business model with Malaysia Airlines and not allow budget carrier compete with national airlines.

Place Distribution is getting the products to the customer, looking at a location where a service is delivered.

Internet booking Malaysia Airlines internet booking system is launched in august 2004. To strengthen is online booking service, Malaysia Airlines is planning a major expansionon its booking facility by the end of 2005. Using the internet booking system, its allow MAS to reduce airlines distribution cost significantly. MAS is partnership with GRSNetwork to reduce its distribution cost and to simplify the ticketing process. MAS web-site allow customer faster access to information to their traveling needs and use Malaysia Airlines products and other services. MAS is expected to cut distribution costs by more than 50% when it adopt an Internet-based distribution network. The use of internet allow customer access to MAS inventory worldwide. 23

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Sales Offices These are available at airports counter and town centers kiosk for the convenience of walk-in customers.

Improve Customer service The Customer service operations use to cope with the higher passenger load and additional flights. With the expansion of customer service, it will increase the operational budget. The increase of operation cost is due to higher staff costs, hire and maintenance of equipment, passenger layover and delay costs, passenger sales expenses and other expenses.

Promotion Promotion

means

the

various

aspects

of

marketing

communication.

The

communication of the product with the goal will generating a positive customer response.

Malaysia Airlines Travel Fair (MATF) Malaysia Airlines Travel Fair is to offer attractive air fares and holiday packages. During 22-24 February 2011 at the fair, there will a 70% discount off from current market. Besides, there are also deal offered is „buy 1 get 1 free‟ promotion on business class for airlines to Asean cities such as Xiamen, Kunming, Macau and discounted golden holiday packages for domestic and international travel. The company plan to use this travel fair to raise the Malaysia brand awareness and stimulate demand. The company will get to explore opportunities of businesses of organise travel fair in selected international markets. 24

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Deals In Malaysia Airlines web-site, there are special promotion for member and nonmember. There are more advantages if become a member. If register as member, you are able to purchase air ticket with discount price and enjoy exclusive member only fares. In Malaysia Airlines web-site, there are special deals such as deals of the day, balik kampong, MHcoupon, MHdeals, and MASholidays. Deals of the day allow customers enjoy big saving on your next. this deals include exciting destinations at a fantastic prices. Balik kampong deal is for those who always feel homesick. This promotion offer amazing low prices and all balik kampong bargain. MHcoupon is a new way allow customer to enjoy exclusive saving on Malaysia Airlines flight. The online coupon comes in the form code, it does not required printing or cutting necessary. Redeeming coupon is easy, just key in the coupon code when booking for flight ticket.

MHdeals is a free application that use iphone GPS sensor to locate airport around you and display the best Malaysia Airlines deals. Besides, with the use of the application, customer of MAS will get latest tourist information to explore the tradition and natural beauty of Malaysian holiday destination in borneo. MASholidays is a deal that provide holiday package that suit a variety of budget. It include holiday package within Malaysia and outside of Malaysia at an attractive price.

c. Competitors and External Environment i.

PEST analysis

1. Political factors Political factors are vital to ensure the growth of the airlines industry in Malaysia. With the peaceful and harmony environment, Malaysia become one of the popular and famous place with attractive travel destinations. 25

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Besides, Malaysia are consists of diversity composition ethnic of the population and have different cultural and tradition that will attract more tourists. Fairtrade decisions, antitrust laws, tax programs, minimum wage legislation, pollution and pricing policies, and many other actions is exists to protect employees, customers, the general public and the environment are constraints to political factors.

2. Economic factors Despite stiff competition in the airlines industry, Malaysia Airlines launched its Everyday Low Fares promotion. MAS offers a maximum of 30% of the total seats on every flight which are unsold factor of 70% on each flight with zero cost (excluding fuel surcharge, administrative fee and airport tax) to attract more customers in the region. Increase income and economic growth will lead more people to board on aircraft. Global economic recovery will increase growth in load factors. In the fourth quarter of 2009, MAS returned to operating profitability with RM 3.8 million profit. When the global facing a downturn, more people will prefer to enjoy flight with low costs.

3. Social factors The social factors are element such as beliefs, value, attitudes, opinions and lifestyles

of a person will affect a firm external environment such as cultural,

ecological, demographic, religious, educational and ethnic. Government carried out campaign will help boost tourism and airlines industry. People are prefer to travel by air is because it is more convenience. The changing of Malaysia lifestyle will help the growth of the airlines industry in Malaysia. With the increase of gross national income per capital, Malaysia are become more affordable to travel by air.

4. Technology factors Malaysia Airlines provides online service for booking air ticket with hotel booking, car hire, purchase train ticket, and travel insurance. in 2009 ,MAS implemented passenger services system (PSS). PSS is to ensure faster service delivery, quicker online purchase, miles redemption options online and new services. MAS have introduced MASholiday, the online promotion is for customers to book holiday packages online. MAS upgrade its in-flight entertainment system with Matsushita 26

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System 3000i on Boeing 747 and Boeing 777, the system have digitized on-demand audio and video media include new games, sms and interactive flight information on all classes.

ii.

Market analysis

a. Market segmentation 1. Media segmentation Media is a mean possibility of medium that tend to reach the audiences. Media such as television advertisement, advertisement board, magazine advertisement and etc. media segmentation is often being used by companies to promote its products or services using that media. MAS always used magazine advertisement as a medium to promote its services and help the growth MAS in the airlines industry. It is a best decision for MAS to advertise in magazine advertisement in travel magazine and business magazine, It is because travel and business magazine reader are from businessman or traveller. If traveller and businessman who are attract to the advertisement in the magazine, they would choose the airlines because it give passenger a general of the airlines services.

2. Demography segmentation Element such as gender, age, income, and education level are common demographic variables. Airlines services is focus to those who like to travel, business purpose and etc. example, MAS have split its airlines in to three different classes that is executive, business and economy class. Executive class usually are most luxurious class in airlines services and it is the most expensive compare with business and economy class. Major of Airlines Company has removed first class because it is highest service in airlines service. For business class airlines are medium class services and it is more expensive but cost less than executive class. Many airlines use business as the highest level of service Economy class also known as coach class and it is the cheapest compare with executive and business class airlines services.

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3. Lifestyle purpose segmentation Lifestyle segmentation investigates the consumer attitudes, values, behavious, emotions, perception and interests. Lifestyle segmentation is to segment a market, MAS can identify the segmentation variable from lifestyle statement, words, pictures and etc. Qualitative research provides the insight, the conceptual knowledge and the consumer‟s language to design the questionnaire about consumers lifestyle. To design a market segmentation questionnaire for airline, MAS must conduct depth interviews to create questionnaire. The questionnaire will include a behaviour section such as frequency of flying, how to purchase tickets, who travel with, income, occupation, purpose of travel by airlines, money spend on airlines tickets and etc. In person interview and internetbased interview are frequently use by airlines industry. In person interview produce more accurate answers. The internet is valuable for segmentation studies, respondent can paying full attention and take time choose their own opinion.

4. Price segmentation Price segmentation is common and widely practise by airlines industry. The different in household income allow MAS to generate segmentation for price dimension. If consumer incomes range from low to high, then MAS should offer low-priced, medium-priced and expensive services. Example, Executive class is airlines service for those are higher income passenger and for business purpose such as CEO or director of a company, Business class airlines are usually for the medium income group such as traveller and business purpose for businessman, Economy class airlines is focus for low income group.

b. Market Strategy Malaysia Airlines strategy is to transform its airlines in to Five Star Value Carrier (FSVC). There are 5 Strategy which is:

i.

5 Star MAS must improve its products and services to develop it become high quality products and services. 28

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ii.

Lower Costs MAS should reduce its structural and operational costs. So it will able MAS to offer lower fares to being competitive in the airlines market.

iii.

Competitive Fares If MAS has lower costs structure, it will be able for MAS to offer low and competitive fares to consumer. It will give MAS competitive advantages to compete in the airlines market and make profit.

iv.

Increase customers and revenue With high quality services and products at low fares, it will attract more consumers choose to fly with Malaysia Airlines. This will generate more revenue and help in MAS growth.

v.

Grow network and build capacity With more revenue, MAS invest in growing its network and building its capacity. By invest in growing its network, MAS will open up more routes and purchase

iii.

Other competitor analysis Porter Five Force of industry analysis model (Malaysia airlines)

Threat of new entrant

a. International Entrants i.

International entrant The international competitor are airline such as Singapore International Airways, Thai International Airways, Cathay Pacific Airways and Garuda Indonesian Airways. Exists of competition is due to outdated regulatory system. Government tend to increase usage of KLIA as the main hub in Malaysia, international airline have to sign MOU to allow landing on KLIA. Government which sign agreement with international airlines will gives threat to Malaysia airlines such as Air Asia and MAS.

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ii.

Local entrant The exists of Air Asia which is low cost and budget airlines are competitor for Malaysia Airlines. Air Asia is trying hard to compete with MAS through promotion and advertisement to attract many local passengers to use Air Asia to travel within Malaysia.

b. Bargaining power of Buyer Price, quality of service, convenient and comfort are concern to customers. With a lots of airlines company in the market, customer are able to choose which airlines that suit their need. In the international market, SIA and UAE are providing better quality services to compete with each other to attract more customers to travel with their airlines. In the local market, Air Asia compete with MAS by providing low cost services to its customer.

c. Bargaining power of Supplier The main supplier of MAS aircrafts and accessories is boeing. Boeing are major supplier of all aircrafts and services, but Airbus put a lots of effort again and again to enter the supplier market. MAS have been using boeing aircraft and part since its established. Besides, MAS mechanic are more familiar with boeing aircrafts. Therefore, MAS is hard to change to another supplier. With limited of MAS can choose from, Boeing can increase its price in aircraft and parts.

d. Substitutes Where time is matter in long distance travel, air travel almost can‟t replace with other alternative. Sea and land journey can be replace with other mode of transportation. in long distance travel, other mode of transportation are not convenience, timeefficient, and comfortable if compare with travel by air. So MAS don‟t have to worry about threat or exist of other mode of transportation to air travel especially longdistance travel. But for short distance journey, customer prefer would to use on land transport such as car and bus. For short distance travel, MAS is one of the option that customer can choose from. e.

Competitive Rivalry

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In the regional market, Singapore Airlines is a big and strong competitor that is well known for its services that will give negative impact to Malaysia Airlines. In the international market, there are a lot of airlines company that compete in the market lead to competitive price and quality of services. For example, US and European airlines merged to form a large airlines group in order to compete in the large competitive market. d. SWOT Analysis STRENGTH Malaysia Airlines has its own abilities of strength of their fundamental business use to compare itself with other service company based on value, price and services. I have studied and analysed the strength of MAS, there are points can show the strength in Malaysia Airlines. Highly recognizable brand name Malaysia airlines is one of the service companies that established for more than 70 years being the oldest airlines company in Malaysia and its brand image has been highly recognized. Malaysia Airlines put a lot of effort on their branding and advertising and major around flight crew. Malaysia Airlines have their own branding strategy involve its stewardess to promote its airline. Malaysia Airlines decided to use the “going beyond expectation” as their slogan to market itself internationally and promote its excellence of quality service. Using branding strategy will help MAS to establish strong brand image internationally and locally. MAS airlines has built a strong name in the airlines service industry. Increase in yield Increase in yield mean revenue per passenger kilometre. Implement a highly competitive and dynamic pricing, Malaysia Airlines are able to maximise yields on peak flights and expand market share on non-peak flights. The increasing in yields is due to strong load factor to leverage on. Additional capacity of aircraft will influence yield and yield recovery maybe slower than expected.

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Diversified revenue stream Malaysia airlines generates revenue from various services such as flight operation and Aircraft cargo. MAS has diversified into related industries such as aircraft ground handling, aircraft leasing, aviation engineering, air catering and tour operations. Besides, MAS have revenues coming from non-aeronautical areas such as maintenance, repair, overhaul and aircraft handling. Low labour costs When MAS carried out staff reduction or downsizing, this is due to MAS was overstaffed. Its staff size reduces by 3,000 or 15%. Reduce of labour will allow MAS to save on labour cost and increase effectiveness. A blanket recruitment and training was established to save operating cost. MAS has the labour cost compare with other airlines. Low labour cost structures and high productivity have more competitive advantages over company with labour costs. Awards and Recognition MAS has won various awards from international body and is recognized by the IOSA for safety practices. In the year 2009, MAS won the 5 star Airline award for the fifth consecutive year as well as regained the position of world‟s best cabin staff. Besides, MAS also recognised as Asia‟s Leading Airlines the World travel Awards and Best Airlines in southeast Asia by the Global Traveller magazine. These awards showed that MAS continue to deliver better products and services, not only to satisfy passengers, but also MAS business customers. Well-trained employees To improve service level of customer service agents, training was conducted to calculate good habits and service quality the front line ground staff. To enhance flight safety, training is arm together with flight safety department introduced to evaluate training footprints for the entire fleet consistent with the latest in the industry. Its flight attendants undergo extensive training. MAS airlines use their flight attendants to promote the airline. MAS branding strategy is to provide hospitable and friendly service to represent good image to the public.

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WEAKNESSES Weaknesses is the things that MAS does not do well or other airlines company are doing better. From assessment, MAS still have some weaknesses as other airlines company have. Low margin Although MAS has a strong revenue growth, its operating margins are below the industry average. This is due to the airlines growth plans and MAS competitive disadvantages. MAS found it is difficult to achieve operating profit margin at sufficient level finance such as capital expenditure, and other financing. Weak cash flow The airlines reporting negative inflow cash from its operations. Several weaknesses were due to the RM 1.36 million loss which was caused by the increasing fuel prices. Weak cash flow is due to impairment losses. The amount loss can be recognise in income statement. Weak cash flow means that spending is more than earning. The amount of loss is measured is difference between the asset carrying amount and the present value o estimated future cash flows. Unprofitable routes In 2000, the airline suffered further losses lead to mas airlines suspend its flight to unprofitable routes such as Brussels, Darwin, Honolulu, Madrid, Munich and Vancouver. Some routes have been discontinue due to insufficient passenger demand. MAS claimed that it was losing passengers to other carriers on this route because of insufficient capacity. High costs Costs include staff costs, handling and landing fees, aircraft maintenance and overhaul charges. The rising cost of fuel will lead to high cost of operation. Sometimes, higher costs is because of security and environment policies.

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Low Productivity Marketing skills are inefficient and are only focused on expanding to fast. Ineffective utilization of resources and partnerships. Low productivity is because MAS was overstaffed. Besides, Low productivity were due to poor management and poor technology. OPPORTUNITIES Opportunities are the chances in the industry which could utilized by the company to make it more positive respond in the market. Launch of firefly and MASwings Firefly and MASwings are subsidiaries of Malaysia Airlines. Firefly is Malaysia‟s first communities airline. It is expected to gain a potential customer base of 100 million in the Indonesia-malaysia-thailand area. MAS airlines set up firefly for test-bed to manage low cost operation. Firefly first flight was on 3 april 2007 at penang. It‟s headquarter are at Sultan Abdul Shah Airport in Subang. MASwings first flight was on 1 October 2007. It‟s headquarter are at Jalan Airport in Miri, Sarawak. Its Firefly and MASwings have recently completed their fleet renewal exercise, both operating 7 and 10 ATR72-500 aircraft accordingly. Expanding passenger traffic MAS airlines covers several destination in Asia such as japan, china, india and the middle east. Asia country demand for travel is high.more than 15% of MAS revenue comes from the Asian region. In February 2010, international passenger demand up by 9.5% year-on-year. In asia pacific, passenger traffic grew by 13.5%. Increasing cargo traffic There has been an incease in cargo traffic in south east Asian countries. This is due to growth of export related industries. Hence, MAS airlines benefits from the increase in demand for air cargo services. In February 2010, cargo traffic improved by 26.5%. In asia pacific, cargo traffic posted a significant growth of 34.5%. 34

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Changes in customer preferences Customers have different needs and desires in term of purchasing. The changes of customer preferences are because of factors like demographic, psychographic, and geographic factor. Malaysian Airlines should introduce new concept, it is because human beings can easily having a change in their life. Based on the survey and research have been done by MAS, MAS should introducing hot meal boxes in response to customer preferences. MAS has more menu options available for customer to choose from. There are Asian and Western meal to suit all customer needs and desires. A total of 37 menus are available over 8 week cycle rotation to ensure frequent travellers will be able to enjoy different kinds of meals. THREATS Threat are factor from external environment of the MAS company which could negative influence the company. Increasing fuel prices The dramatic increase of fuel prices affect most airlines. It is one that influence operating expenditure for MAS airlines. The increase in fuel price will lead to increase operation costs, this will lead to losses or lower profit. With increase of fuel price, some airlines gone bankrupt because airlines financially weak airlines are expected to follow suit. Besides, the poor performance of economic and market will lead to increase of fuel prices. The weakening of foreign exchange will possibililty increase fuel prices. High competition MAS faces strong competition from other airlines. Its airlines faced major competition internationally from established airlines and new start-up operations. MAS has to deal with local airlines in the same field is AirAsia. AirAsia is airlines that provide low cost to customers. MAS have direct competitor that are Singapore International Airways, Thai International Airways, Cathay Pacific Airways and Garuda Indonesian Airways if compete intenationally.

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Foreign currency fluctuation MAS revenue is from different foreign currencies which result in the fluctuations of foreign exchange rate. The airlines uses foreign currency as strategy to manage risk the risk of foreign fluctuation. Undertaking this risk will lead to decline in growth. MAS treasury unit in the finance division handle cash and fund management such as credit management and foreign exchange. MAS inefficient foreign exchange management could make the company more than $10 million a month. MAS needed more US dollars to balance its foreign exchange requirement. Terrorism and Health scare Terrorism is leading factor of decrease tourism and airlines business. Terrorism might happen in many ways in certain country or it might happen inside the place such as plane being hijack. MAS airline serves more than one hundred destinations worldwide. If terrorism happen in area of southeast Asia, MAS will have to stop all their operation and flight to the southeast Asia for a period of time. This will lead to decrease of confidence in the airlines. The H1N1 pandemic and swine flu will lead to weaker demand of airline flight. The outbreak of disease will affect the airlines industry significantly. There are passenger with H1N1 boarding with Malaysia Airlines will lead to decrease of customer to fly with MAS. Economy Changes in economy will directly influence business positively or negatively in many aspects. In global economic downturn, it will affect all the business worldwide. As one of the airlines company, Malaysia airlines have lot of collaboration with other company throughout the world. It‟s will give a big impact to the company if the big changes in the economy level. When the European economy is lagging, it will lead to slow growth in demand for air travel.

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e. Conclusion

Malaysia Airlines objective is to transform into a Five Star Value Carrier (FSVC) in the future. To become a Five Star Value Carrier, MAS must these have step such as 5-Star, lower costs, competitive fares, generate more customer and revenue, and grow its network. To overcome Malaysia Airlines weakness, a studied is carried out to identify routes which are unprofitable for MAS and discontinuing flight to the destination to minimize its losses and focus on high profitable route. MAS should providing frequent flight at high profitable route. Malaysia Airlines should maintain its relationship with other airlines company. It is important because its allow MAS to landing in other destination internationally, and it also allow to expand its flights and services at the same time. To become a profitable airlines, MAS should reduce on its high operation costs by manage and structure its costs and budgeting. MAS should train or employ staff which can multi-tasking, so it would minimize the problem overstaffing. Malaysia Airlines should use marketing mix technique to employ sales employee who are good in promote and have ideas to improve marketing Malaysia airlines services. Besides, MAS also should give training to its manager in order to improve its management.

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REFERENCE 1. Wikipedia, 2011, “Core business of Berjaya Group”. Retrieved March 28, 2011, from http://www.berjaya.com/businesse.html. 2. MAS history,2009. Retrieved March 09, 2011, from http://www.malaysiaairlinesblog.com/pt/themes/default/images/MAS%20historyAugust09.pdf 3. Mohaini, Mizwan, Nizam, Zainal, and firithal B sahari.Malaysia Airlines System Berhad. Berjaya Group Information. Retrieved March 27, 2011, from http://uia2k.tripod.com/MAS.htm 4. Geoffrey Thomas, 2007, Transforming Malaysia Airlines, Retrieved April 3, 2011, from http://www.scribd.com/doc/42811566/Malaysia-Airlines 5. Captain Mohamed Azharuddin bin Osman, 2010, Delivering Operational Excellencetoour Customers, Retrieved April 1, 2011, from http://malaysiaairlines.listedcompany.com/misc/DeliveringOperationalExcellencetoou rCustomers.pdf 6. Bernard Francis, 2010, Investing for the future, Retrieved April 12, 2011, from http://64.78.36.53/PAM10/Malaysia_%20Airlines_Bernard.ppt 6. Jerry W. Thomas, 2007, Market Segmentation, Retrieved April 12, 2011, from http://www.decisionanalyst.com/Downloads/MarketSegm.pdf 7. “Business Transformation plan”, 2008, Retrieved April 12, 2011, from http://www.malaysiaairlines.com/content/dam/mas/master/en/pdf/corporateinfo/Business%20Transformation%20Plan%20(BTP%202).pdf

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