Malaysia Airlines Change Management - Strategic Goals, Analysis & Way Forward

This study analyzes the change management strategies of Malaysia Airlines, including their operational overview, strategic goals, and analysis. It focuses on performance and product improvements, fleet optimization, and cost savings through IT enabler. The study provides insights into the way forward for Malaysia Airlines.

MALAYSIA AIRLINES - CHANGE MANAGEMENT
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Table of Contents
1.0 Background of the Company...................................................................................3
1.1 Operational Overview..........................................................................................3
1.2 Strategic Goals.....................................................................................................5
1.2.1Performance and product improvements.......................................................5
1.2.2 Fleet optimisation..........................................................................................5
1.2.3 Cost savings& IT enabler..............................................................................6
2.0 Strategic Analysis....................................................................................................8
2.1 On-Time Performance..........................................................................................8
2.2 Fleet optimisation.................................................................................................9
2.3 Cost savings & IT enabler..................................................................................10
3.0 Way forward strategic............................................................................................12
3.1 Fuel Efficiency:..................................................................................................12
3.2 Smart Maintenance............................................................................................13
3.3 Customer sales...................................................................................................13
4.0 Conclusion.............................................................................................................14
References:...................................................................................................................15
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1.0 Background of the Company
1.1 Operational Overview
Malaysia Airlines is the national air carrier of Malaysia that started operations as the
flagship brand of the country 1st September 2015. The company officially known as
Malaysia Airline Berhad (MAB) came into existence when the previous airline group
called the Malaysian Airline System (MAS) was dissolved. The government of
Malaysia acquired the ownership from the remaining shareholders and transformed
the company assets to the public. Through this process, the government renationalized
the group. The company is a part of the Malaysia Aviation Group (MAG) which was
formed to maintain better transparency and operational management for the
subsidiaries owned by the group. This group has contributed to the setting and
operations of the different service segments of Malaysia Airlines namely Firefly and
MASwings that serves the national and international passengers. The MABKargo
manages the freight, passenger, express and special cargo requirements of the airline
company and also overseen by MAG (Malaysiaairlines.com, 2018). The MAB flights
are operated from Kuala Lumpur International Airport and connect destinations
including Europe, the Middle East, Australasia, and several cities in around Asia.
The airline company has significantly contributed towards the national development
by hiring talents from around the country as skilled employees, engineers, pilots,
cabin and ground crew. Not only did the organization enabled the connectivity of
Malaysia with the world, but it had also aided in the integration of the nation too by
offering the best services to fly in and around the country. MAB tend to embody the
astonishing diversity of Malaysian traditions and cuisines. The uniform of the flight
attendants is the traditional sarong with elements of local culture.
Measures of safety are an integral part of Malaysia Airlines' service delivery model.
The company enforces strict compliance under stringent regulations and obligations.
The airlines also substantially invest in training facilities which include company-
owned simulator centre, the academy for flight crew training, computer based training
for crew and engineers and training for dangerous goods handling as per the mandated
by IATA. To maintain the customer loyalty, the company provides privileges,
preferential treatment, and redeemable credit points to frequent fliers.
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However, despite all the efforts put in by Malaysian Airlines, the company has faced
hardships in maintaining the cost of operations as a result of competition due to the
growth of the low-cost carriers. To meet the end, the company has suspended flight
services to popular but unprofitable and long route destinations around America and
South Africa. The company also intends to sell some of the units like the training
facilities and has undergone internal restructuring. The present study attempts to
analyse the current operating strategies of the company and identify some potential
flaws. This study also attempts to provide some innovative approach to change
management for the company to reduce cost and increase profitability.
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1.2 Strategic Goals
With the appointment of new CEO Peter Bellow in 2016 Malaysian airlines had
revised their strategies to suit the new change management with 9 strategic goals.
 Leveraging alliance and strategic partnerships
 Malaysian Flavour to customer-centric product
 Performance and Product improvement
 Consolidation at KLIA Main Terminal Building
 Fleet Optimisation
 Cost Savings
 IT tools
 Enhancing corporate governance
 Investing in the talent pipeline
For higher impact on change management, the study would focus on three key aspects
which are performance and Product improvement, Fleet Optimisation and
combination of IT enables for cost savings. According to Nasir et al. (2017) for the
change management process to succeed, these three strategic goals need to be
fulfilled.
1.2.1 Performance and product improvements
Based on the route optimization exercise conducted earlier by the airline company,
the revenue has improved by 10% against each available seat kilometre scale. The
load factor also has increased with more than 350,000 passengers availing the
services. However, the sudden disappearance of MH370 had posed a negative impact
on the performance and safety of the MAB brand. On-time performance and constant
improvement of punctuality are among the core goal of the airline team. To render
world class customer service, the benchmark is decided by the company board to give
a competitive edge to Malaysian Airlines. Due to many recent initiatives, 68%
sustainability is expected to occur in the coming years for the company (Khan &
Dominic, 2017).
1.2.2 Fleet optimisation
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The Malaysia Airlines has partnered with the Emirate Airlines to consolidate the fleet
and retire B777-200s. The partnership can improve the maintenance, engineering and
flight operations of the organization. The company’s A380 series of aircraft are out of
service due to maintenance activity to improve upon the performance. This is a
regular activity on the company’s schedule, especially for the aircraft of long-haul
destinations (Gudmundsson, 2015). The company also reinstates into service some
former flagship carriers to optimize the operations and the aircraft fleet.
With the arrival of some new Airbus A350-900s, the company is planning to deliver a
greater performance while operating continuously from the home base at Kuala
Lumpur to London and rest of Asia. The optimization of the seat layout and technical,
the cost of maintenance decrease and the efficiency increases. The company is also
evaluating the options of adding a number of A350s to attain a critical fleet size. This
would allow standby aircraft for the occasion of scheduled maintenance or future
expansion. As a part of the corporate strategy, the company actively assess novice
service offerings and route opportunities. The airlines also evaluate new destinations
and the requirement of new equipment.
1.2.3 Cost savings& IT enabler
Cost management is a key component to meet the projections of the business plan
approved by the board of any company (Roman, 2011). One of the key performance
indicators for the Malaysia Airlines is the focus on reducing cost by managing the
budget and procurement. After a successful contract renewal with the most of the
operating lessors, the revised lease rates are found cost effective terms with the
expectation of the firm. These revised rates are consistent with the business plan
devised by the Malaysia Airlines. It had allowed the company to provide the letter of
intent to the lessor to go ahead with the aircraft. The entire review and negotiations of
contract with the suppliers and vendors are crucial for the organization. It would set
the company’s strategies towards the right path in order to recover from the losses in
the past and to induce sustainable profitability and performance in the coming years.
The company has undergone a software upgrade program in recent times including an
advanced collaborative platform for staffs to operate in a much more coordinated
manner. These upgrades are part of the planned overhaul of the technical architecture
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and framework followed by the company. The company has transformed the data
centre to secure and pay per use cloud facility. This can provide the company with
agility, remove unwanted complexity and increasing seamlessness of operations
(Rosnan & Mahmood, 2012).
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2.0 Strategic Analysis
Strategic analysis can aid in the understanding of the internal and external
environment working on the Malaysia Airlines. This is required to maximize the
potential and capability of the company to interact between the environments. A
strategy based on the previously narrated goals may be discussed in this section.
2.1 On-Time Performance
While MAB has maintained quarter to quarter of 68% OTP the current plan has not
increase above 75% to allow healthy competition with Singapore Airlines which
operates at 85% OTP and AirAsia at 72% OTP. MAB needs to put clear objective to
their network planning team to achieve higher impact as it breaks away from the
status quo. Poor holistic engagement on all area which has impact Network Planning
is reason the OTP status quo since the current provider only concentrated to one area
which is network planning (See & Rashid, 2016). 2 key area MAB can pursue in
order to achieve 75% target with the recent trend of big data analytics. Aggressivepartner for data analytics.
Current provider for MAB is a network solution provider, they are not
able to provide a comprehensive planning for OTP impact. Having a
partner outside the comfort zone would allow more details analysis
which would help to give holistic insight that would help the network
planning to carry out improvement.
New provider able to carry out an independent analysis of the
robustness of the network and aircraft availability which links
maintenance activity, which the airline needs to look into
implementation with the incremental revenue planning.
 Management alignment
The biggest challenge in any company on allowing data analytics is the
adoption of new insights and the input derived from its own data. To
this, the company needs to set up a vertical team to look into big data
across the business without sacrificing current performance (Alashty,
2015).
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This vertical alignment needs direct support from the management
with a strong mandate to ensure a successful move to increase
digitization effects to improve the OTP.
2.2 Fleet optimisation
The airline company has leased six second-hand A330-200s and eight new 787-9s
after completing the initial phase of fleet plan post the restructuring of the company in
recent times. The company has commitments of 45 new aircraft to be delivered over
the next 5 years
The majority of the aircraft would be used as replacements while Malaysia Airlines
moves the A380s out for maintenances. The aircraft A380s has an average age of 6.0
years, the A330-300s average age of 7.3 years and 737-800s with 6 years. The six
A330-200s that the company is supposed to receive in 2018 will replace six 737-800s
while enabling the company to upgrade many regional routes inside Asia.
MAB need re-assume European expansion quickly with going all A350 vs the A380
for two main reasons:
 A380 seat fill rate vs A350 is 42% more and likely you will not fill all seat for
in the European sector as to the strong competition from British Airways and
Qatar Airways. So far only emirates airlines have maintained a higher seat fill
rate since Emirates as using it for a hub and spoke model vs point to point
system like MAB. Using two of the A350-900s in mid-2018 and acceleration
either 787-9s or A350-XWB in early 2019 will allow gradual expansion as the
A380 fleet put out of service. Malaysia Airlines must acquire an additional 20
new generation wide-bodied aircraft. The company is considering additional
787-9s or A330-900a which would enable the group to pursue the phase-out of
the A380 fleet, thereby reducing the number of wide-body variants to a
sensible number.
 Aircraft of the scale of the A380 could only be conceived with four large
engines. When oil was comfortingly below $20 a barrel, fitting four engines
on each wing was in trend and appreciated by passengers. Today with the fuel
hovering at $50, just about every other aviation entrepreneur is quite happy
with two engines. The fuel burn per seat on the A350/B787 is lower than the
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A380, while capital and maintenance costs are commensurately reduced. The
maintenance cost comprised of the direct labour and spares parts’ cost.
Contrary to capital cost, these costs are incurred through the lifetime of any
aircraft. Thus, by reducing the number of engines by half the amount, would
effectively reduce the maintenance cost by the same amount (Escobari, 2012).
Furthermore, the reliability of a twin-engine aircraft considering just the
engines and all other things being equal would be .99 x .99 = .9801 (98.01%
reliable) for 99% reliable engines. For four engines with the same 99%
reliability each, the overall system reliability would be .99 x .99 x .99 x .99
= .9606 (96.06% reliable) Therefore, as an aircraft is not allowed to
commence a journey without all of its engines fully operational, we can see
that 98 times out of 100 we would be able to carry out flights with a twin-
engine aircraft but only 96 times out of 100 for a four-engine aircraft.
2.3 Cost savings & IT enabler
MAB needs to look beyond cost savings and IT just for enabling with the current
wave of big data as the airline companies are swamped with data. Gigabytes of data
are produced by modern day aircraft daily including operational parameters, technical
indicators, logs, and reports. According to Liau & Tan (2014), the annual data
generation could reach 98 billion gigabytes. It is estimated that the future models of
aircraft would produce somewhere between five and eight terabytes for each flight,
which is almost 80 times what planes today generate.
Merceronet al. (2015) said that implementing the Big Data Analytics would allow the
company to know the conditions of all the aircraft at a given time. The company can
plan their operations in a better way. With predictive modelling, the risks associated
can reduce significantly and improve on the flight safety, pricing models, and provide
a reliable and robust planning mechanism. In the aviation industry, a tiny change in
the numbers can have a significant impact on the overall performance. The aircraft
manufacturers put a substantial effort to improve fuel efficiency and maintenance by
1-2%. However, including data analytics to cover the commerce and operations, a
wide array of opportunities can arise to improve the efficiency which would be much
higher than the target pursued by the manufacturer as well as the company.
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Big Data is a disruptive technology that affects the airline commerce. In the past, the
airline companies segmented the passenger market based on the categories of travel
goals that can be further segregated as the business, leisure, trip to relatives,
pilgrimage and so on. With the present data analytics framework, airline Malaysia
airlines can collect a large volume of information regarding their customers.
Analysing the information would allow the company not only to better segment the
passengers, but also provide a unique and personalized experience to each customer
(Yu, 2017). With the one-on-one relationship, Malaysia Airlines can significantly
improve the customer satisfaction and gain loyalty towards their brand.
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3.0 Way forward strategic
In order to change Malaysia Airlines to become a respected airline again in Southeast
Asia, Malaysia Airlines need to be innovated how they approach to change in the 3
key areas, On-Time Performance, Fleet Optimization and Cost Saving with IT enable.
The common approach that must be taken by the company for the above is Big Data
Analytics. It is important for Malaysia airlines to find the right digital partner to tackle
Big Data analytics on the following key areas:
3.1 Fuel Efficiency:
Apart from the cost of the labour, fuel is the second-highest expense for the chosen
airline company, thereby proving it critical to the company performance metric. Use
of the data analytics can render better efficiency in the fuel usage by the flights of the
company. The use of visualisation tools coupled with Big Data can allow the
company to gather massive data and represent them in a useful way to analyse the fuel
consumption of each trip. The company can collect data from the sensors embedded
in the aircraft regarding temperature, wind speed, net plane weight, flap condition,
thrust etc (Gladovic, 2012). A data analytics engine can then combine these values
with other operational data on passenger, fuel, cargo weight and weather can search
patterns of trips that can yield profitability for Malaysian Airlines.
The data mining process can produce actionable and intelligent decisions for the
airline company related to including or avoiding routes, adjusting fuel loads for
individual aircraft, tariff restructuring, and performance-based navigation. Data
analytics can provide pilots with live and detailed analysis related to the necessary
adjustment when a flight may stick in turbulence or fuel combustion and the
associated cost of flying at a certain altitude. Some of the rival companies of Malaysia
Airlines have already started using big data to enable similar decision support systems
with own pilots. Thus, it would definitely be a crucial step for the company.
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3.2 Smart Maintenance
The insights from the aircraft sensors can be used for insights beyond fuel efficiency
for the Malaysia Airlines. Boeing, One of the biggest supplier of aircraft to the
company, use data analytics to survey more than a million conditions every day across
4000 aeroplanes under the Airplane Health Management (AHM) system. This data
including the mechanic log, in-flight measurement, and shop findings aid the Boeing
to plan the maintenance of equipment causing minimal flight schedule disturbance. In
one such instance, data analytics had predicted the possibility of failure of an
integrated drive generator. When investigated and rectified before posing a serious
threat saved up to $300,000 in service delays and repair costs for a twin-engine
aircraft and the cost-saving double for 4 engines aircraft. Having a clear view of
maintenance creates a similar view on the aircraft availability which has a direct
correlation to On Time performance (Bae & Kim, 2014).
3.3 Customer sales
Although the focus of the data collected from by the airline company lies much
around the external and internal conditions of the aircraft there can be useful
outcomes on the customer relationship and sales. The Malaysia Airlines must divert
the focus from an aggregated view of the customer to more segment and individual
profiles. Instead of identifying the most successful products, the company can use big
data and attempt to explore the buying habits of customers. Liau& Tan (2014) said
that, by analysing about 150 different variables about each customer, an analytical
engine can predict the possible customer actions and dynamically suggest
personalized offers for them.
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4.0 Conclusion
The discussed approach towards the strategic change management for the Malaysian
Airlines could bring a substantial increase in its performance and profitability. The
company can gain many insights on the various aspects of the operations and
passengers by the use of data analytics. The inclusion of Big Data concepts in aviation
can steer the company towards a sustainable future. Therefore, it is crucial that MAB
take a company-wide change to embed Big Data analytics with the Digital
transformation as part of the change management. To evolve with this change
management, the company must form a dedicated IT group to monitor and implement
the technological framework across the verticals.
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