Malaysia Airlines Operations Management Issues: A Detailed Case Study

This case study delves into the significant operational management issues encountered by Malaysian Airlines in recent years, particularly focusing on the period following the tragic loss of two flights in 2014. The airline's reputation suffered severely, exacerbating existing financial difficulties. A RM6 billion restructuring plan, initiated by Khazanah Nasional Bhd, failed to yield the desired turnaround, with the airline experiencing consecutive losses from 2015 to 2017. The study highlights concerns raised by the CEO regarding high operational costs, including substantial salaries for foreign management and the financially draining decision to purchase Airbus 380 aircraft, many of which are now grounded. The case emphasizes the need for greater transparency and accountability, suggesting a review of business operations to ensure responsible spending of restructuring funds and to address questions surrounding the management's capability to navigate the airline's challenges.

Operations Management Issues faced by Malaysian Airlines
Malaysia Airlines had been in the news for all the wrong reasons in the last few years and this
has really brought down the image and reputation of the organisation in the market. In the
year 2014, the organisation had lost two of their flights which carried around 537 people and
this dealt a severe blow to the already financially crippled organisation which raised a lot of
doubts about the future survival of the organisation. With the mystery surrounding the sudden
disappearance of MH370, the airline witnessed its name getting splashed across all the major
global media and news publications. The organisation had been facing increasing financial
pressure which has raised doubts about the future of its 19000 employees that are presently
under its payrolls.
The management at Malaysia Airlines had undertaken a RM6 billion restructuring plan in
order to get the organisation back on its feet but it failed to produce the desired results and
outcomes for the organisation. The restructuring plan was undertaken by the company’s only
shareholder Khazanah Nasional Bhd. According to the Managing Director/CEO of Malaysian
Airline Systems Bhd (MAS), the organisation instead of making any profits had stood
witness to three successive years of losses from the year 2015 to 2017 when the restructuring
plan was in force.
The present issues being faced by Malaysia Airlines has really proved to be a huge cause of
concern for the organisation and this is giving sleepless nights to the management. Experts
have been suggesting that the Malaysian government needs to set up an expert committee that
would review the current business operations at Malaysia Airlines and this would ensure
greater transparency and accountability in their business operations. According to the CEO of
Malaysia Airlines, the funds provided for the purpose of organisational restructuring are
essentially the people’s money which needs to be spent in a responsible manner to address
the business needs and requirements of the organisation. If the organisation is unable to
create the necessary turnaround in their business fortunes then there would be serious doubts
and questions that would be raised regarding the capability of the management and leadership
at Malaysia Airlines to tackle and manage the issues that the organisation had been presently
encountering in their business. The CEO has identified a number of reasons for their present
financial woes and these include the high operational costs of their business. Among other
factors, the high salaries paid to the foreign top management (which includes their CEO,

COO and Commercial Officers) had been partly responsible for increasing the financial
burden on the organisation and this has threatened the immediate future of the organisation.
Another significant factor which contributed to their present financial troubles was the
decision to purchase the Airbus 380 aircraft. It was a bad business decision that resulted in a
huge cash outflow for the organisation which the organisation has not been able to recover so
far. The organisation bought six double-decker Airbus 380 aircrafts and four of them are
already grounded and unfit for flying due to serious malfunctions. Only two Airbus 380
aircrafts are operating on a daily basis and they are unable to provide the desired financial
returns on their investment.
References
Form a group of experts to review Malaysia Airlines' operations, MAS ex-boss - Business
News | The Star Online (2018) Thestar.Com.My, [Online]. Available at
https://www.thestar.com.my/business/business-news/2018/09/24/form-a-group-of-experts-to-
review-malaysia-airlines-operations-mas-ex-boss/ (Accessed 23 October 2018).