Malaysia Airlines Report: Technological Changes and Profitability

This report comprehensively investigates the factors influencing Malaysia Airlines' profitability, particularly in the aftermath of the 2014 air disasters. It examines the impact of technological advancements, changing customer expectations, globalization of markets, and job design on the airline's financial performance. The report delves into the implications of the Internet of Things, drones, and the rise of low-cost carriers. It also analyzes the importance of quality management systems and the need for the airline to adapt to customer preferences, including in-flight entertainment and seat design. Furthermore, the report explores the influence of automation on job design and the importance of aligning with aerospace quality management standards. It concludes with recommendations for Malaysia Airlines to regain public confidence, optimize its supply chain, and focus on revenue-generating routes in a competitive global market. The report emphasizes the need for proactive strategies to navigate the challenges and capitalize on opportunities within the aviation industry.

Malaysia Airlines 1
MALAYSIA AIRLINES
By Name
Course
Instructor
Institution
Location
Date

Malaysia Airlines 2
1.0 EXECUTIVE SUMMARY
The purpose of this report is to investigate the impact of technological changes, job design and
the changing customer expectations on the profitability of Malaysia Airlines after the 2014 air
disasters. It also seeks to analyze how changes in globalization of markets and job design
impacts on the performance of the airline.Keeping in mind that the main objectives of the airline
are to become financially stable, the report delved into historical researches and information
contained online to understand how these factors influenced the profitability model. The
methodology of the research entailed analyzing how individual factor impacts on the financial
viability of Malaysia Airline. The report highlights the direct relationship between profitability
and the firm’s application of emerging technologies, customer preferences and proper quality
management systems. It recommends the inclusion of all employees in making important
decisions affecting passengers. The report further underlines the need to cut down on
unprofitable career routes and focus on the more revenue generating. Lastly, the media should
play an important role to inform the public of positive changes taking place in a bid to shore up
public confidence in the airline.

Malaysia Airlines 3
TABLE OF CONTENTS
1.0 EXECUTIVE SUMMARY.......................................................................................................2
2.0 INTRODUCTION.....................................................................................................................4
3.0 DISCUSSION A........................................................................................................................5
3.1 Changing Technology............................................................................................................5
3.2 Continued globalization of markets including entrants by 1st and 2nd entrants...................6
3.3 Changing Customer Expectations..........................................................................................7
3.4 Changing Job Designs............................................................................................................7
3.5 Quality Management..............................................................................................................8
3.6 Global Manufacturing..........................................................................................................10
4.0 DISCUSSION B......................................................................................................................10
4.1 Supply Chain Design...........................................................................................................10
4.1.1 Buyers............................................................................................................................11
4.1.2 Supplier.........................................................................................................................11
4.1.3 Substitutes.....................................................................................................................12
4.1.4 Threats...........................................................................................................................12
4.2 Resource Management.........................................................................................................12
4.3 Goods and Service Design...................................................................................................13
5.0 CONCLUSION........................................................................................................................14
6.0 RECOMMENDATIONS.........................................................................................................15
7.0 BIBLIOGRAPHY....................................................................................................................16

Malaysia Airlines 4
2.0 INTRODUCTION
Malaysia airlines Limited has grown remarkably to achieve its current market share. The
company was born on 12th October 1937 operating as Malayan Airways Limited, ten years later
the company took to the skies with the first commercial flight as a national airline. With the
formation of Malaysia the company duly changed its name to Malaysia Airlines Limited. The
company would later change its name to Malaysia-Singapore Airlines in 1965 when Singapore
divorced from Malaysia. In 1972, the founding partners of the airways parted ways consequently
necessitating change of name. The company achieved a milestone in 2012 when it acquired its
first airbus A380-800 scheduling its route for London with the new airbus A380. A year later the
airline became a fully paid up member of the prestigious One World Alliance. The airline is now
connected to over 850 destinations in 150 countries across the world. The company also boasts
of lengthy record of excellence, amassing in its ranks over 100 global awards in the last one
decade.
In 2014 the already financially stricken airline suffered double tragedy when flight MH370
on way from Kuala Lumpur to Beijing disappeared with 239 passengers and crew onboard.
Only a few fragments have washed up, off Africa’s coast. Barely four months later, flight
MH17 exploded mid-air killing all 298 people aboard. The two disasters consigned the
airline to possible bankruptcy. Customers deserted the national carrier with poor public
confidence levels affecting its profitability potential. The experienced a massive 60% drop
in its Chinese market, a key component of its profitability model left the career on the brink
of collapse(Hussain, 2015). The government stepped in to rescue the company, pumping
billions of dollars to keep it afloat. The company continues to emerge from the shackles of
these disasters to chart its recovery.

Malaysia Airlines 5
3.0 DISCUSSION A
The sustainability of Malaysian Airline depends on a number of factors that provide a critical
role in ensuring it returns to profitability. This is more notable after the disappearance of flight
MH370 that dented public confidence in the airlines. Consequently, the already struggling
company lost revenues and accrued major expenses that negatively affected it
survivability(Razali& Vrontis 2010). The following factors were singled out as having great
influence on the efforts to reverse its declining fortunes.
3.1 Changing Technology
The aviation industry has continues to embrace technology. The implications of the ever
changing technologies mean that keeping abreast with the latest technology will go a long way to
influence the market position of Malaysia airlines. Some of the more notable technological
changes in the aviation industry include the emergence of the internet of things (IoT). Essentially
this technology allows various electronic devices that are fitted in a plane or any other system to
communicate with each other without any help of a host computer(Vrontis et al 2010). The
industry has been active in gathering data related to this kind of technology long before airlines
decided what to do with the emerging technology. Today this technology is used in the
maintenance and repair of the plane. MROs are in a position to communicate with sensors using
tablets allowing them to scan the aircraft systems easily and to notice the components that may
require repair or replacement. The technology can also communicate with suppliers allowing
them to identify parts whose life is nearing expiry (Fu et al 2010). This has led to improved
efficiency.
Drones have also come into extensive use. Due to embedded sensors in almost all areas of the
aircraft the drones are used by MROs to pinpoint components or systems immediately. They can

Malaysia Airlines 6
visually identify areas in need of replacement. They are now being used to check for lightning
damages to commercial planes.
3.2 Continued globalization of markets including entrants by 1st and 2nd entrants
State-controlled Malaysia Airlines is one of the oldest carriers in Asia. Like its major rivals
Singapore Airlines and the Cathay Pacific, the airlines are battling intense competition from the
latest generation of low-cost airlines in the region(Lau& Tong 2008). The increase in low cost
carriers such as Air Asia and Lion Air has put pressure on the profitability margins of Malaysia
airlines pushing revenue per passenger low. This in part is due to overcapacity in theregion
unlike what is forecasted in the global industry. Two weeks after a twin disaster of flight MH370
and Boeing 777 in Ukraine struck the company has overcome the real risk of bankruptcy.
However the strategy of scaling back by cutting down on unprofitable orlow income routes has
exposed the airline vulnerable to tough competition from the budget carriers. In a broader sense,
the emerging power of the Chinese aviation industry is likely to eat further into the traditional
routes dominated by Malaysia airlines(Chesbrough 2007). China continues to modernize and
increase its fleet of commercial airlines, tapping into the booming, travel-hungry middle income.
Aviation industry has become a top priority for Chinese authorities seeking to stump their
increasing global influence supported by a strong economy. Furthermore, the company recently
unveiled a strategic alliance with the emirates airlines allowing Malaysia carrier to piggyback
onto approximately ninety of the Emirates ‘global routes.
3.3 Changing Customer Expectations
Airline industry remains a highly competitive industry and customers form the most important
factor of the traveling process. Besides improving the quality of service and the safety aspect,
customer satisfaction ranks highest on priority list(Tolpa 2012). The change in taste can take the
form of personnel interaction with customers or simply the kind of seat a customer is allocated

Malaysia Airlines 7
on the flight. While business class passengers have become accustomed to full-flat beds,
passengers in the economy class have had few innovations to cheer about(Beh 2010). The
improvement in the in-flight entertainment such as on-board Wi-Fi has gone a little way
providing a welcome distraction. The seat continues to dominate discussions about the economy
class. Several initiatives have been attempted to increase the comfort of the dreaded middle seat.
A few airlines such as Bombardier’s C series aircraft feature a 3-2 configuration of seats with the
middle seat being expanded slightly. The airline has reported positive feedback from passengers
using seat(Lazzarini 2015). A better design of themiddle seat will be an important change in
pursuit of customer satisfaction. Other companies have come up with a whole new idea designed
to speed up boarding and increase legroom in the economy class. The isle seat can slide over the
middle seat to increaseaisle space. The overall effect is that all passengers have an arm rest while
at the same time adding a few inches of width to the middle seat.
3.4 Changing Job Designs
Information technology revolution has had direct influence on the aviation industry job and labor
market. Most jobs that were done manually have been automated rendering some employees
redundant (Hodgsonet al 2015). New technologies complement employ sensors that complement
non-routine and social tasks which improves productivity. These changes mean that low skill
jobs have stagnated and shrunk in numbers while high skill jobs have become more rewarding
which has gone to increase the gap between wage equality. The advances in artificial intelligence
have further compounded computerization of jobs as they can now perform cognitive functions.
The worry is that in future even the high skill jobs are likely to be overtaken by machines.
Considering the fact that aviation industry is one of the most proactive sectors in absorption of
technology, it means that the effect of technology in influencing management decision is critical.
Studies in the US and Europe suggest that most jobs are at risk of digitization(Bowen 2016).

Malaysia Airlines 8
Airlines management must factor the need for automation in the design of jobs. However,
research also shows that only 9% of jobs across the twenty oneOECD countries are automatable.
This implies that the threat of automation on jobs is a bit overestimated(Lonbani et al 2016). Job
design in the aviation industry continues to be influenced by the ever-changing technologies and
more specifically automation.
3.5 Quality Management
The ability of an organization to provide quality products and service will directly affect its
success in the increasingly competitive industry of aerospace. These products must meet
customers changing tastes and preferences. The Aerospace Quality Management System
Standards have been developed to serve as the basis upon which industry standards are
measured. Any airline that strives to achieve the highest standards must ensure it complies with
the latest guidelines(Santos& Alvarez 2007). The AS 9100, AS 9110 and AS 9120 stipulates
generally accepted international best practices while addressing manufacturer’s unique needs.
AS9100 for instance focuses on key areas of safety, product conformity, and airworthiness and
reliability in the airspace. The AS 9110 on the other hand, covers control of air repair schemes,
skills and qualifications of MROs and configuration management. The AS 9120 was designed to
cover distributors of aerospace items. It seeks to addresses such aspects as chain of custody,
control and availability of records(Saunila et al 2014). The general implications of these
standards are to ensure safety in the aviation industry, promote interoperability of parts and
support profitability in the industry. Malaysia airline has to adopt the latest standards in order to
gain public confidence(Osman 2009). This is more critical for Malaysia airline considering the
recent mid- air disasters of the recent past that have grossly dented public confidence in its safety
standards.

Malaysia Airlines 9
3.6 Global Manufacturing
Global manufacturing in the aerospace industry has seen marked expansion. The new trend of
high production levels of over one thousand aircraft per year is likely to continue into the near
future. This is informed in part due to the rapid growth and expansion of the Chinese aviation
industry (Yu et al 2016). Boeing for instance warns a tender in 2017 to supply 140 planes to
China alone. This demonstrates the industries high demand for new aircraft. This in effect
translates to increased global production to meet this demand. Asia in particular continues to
experience rapid growth in the aviation industry effectively putting pressure on manufacturers of
planes such as Boeing and airbus to increase their production levels. However, in spite of their
best effort production has not been able to meet the surge in demand for aircraft. The best-placed
airlines are those who manage their supply chain effectively placing their orders early enough to
avoid undercapacity when the aging fleet inevitably is retired from service (Krishnan et al 2016).
Globalization has had a positive impact on the production of parts for planes. It means that parts
can now be manufactured virtually everywhere at a lower cost unlike in the past where most
parts were centralized in the US and Europe. The entry of china as a major player in the industry
has had a positive impact on manufacturing of aircraft parts.
4.0 DISCUSSION B
4.1 Supply Chain Design
The concept of supply chain management (SCM) integrates economic, social and environmental
factors that directly affect the operations of a company (Tseng& Geng 2012). Broadly speaking
these factors can be categorized as buyers, competitors, suppliers, substitutes and threats within
the aviation industry.In the case of Malaysia Airline, environmental factors will include it entails
control of raw materials from the point of origin to where such materials will be consumed. A

Malaysia Airlines 10
well-managed supply chain will ensure that Malaysia Airlines offers smooth operations to its
customers and plays a significant role in the overall achievement of stated company goals. For a
company to evolve, it must have astrong supply chain system that has its roots in the market
identifying the kind of products and services that customers prefer(Brandenburg et al 2014).It is
important to examine the airline’s SCM in light of Porters five factors that have direct influence
on its ability to sustain profitability
4.1.1 Buyers
The number of passengers using Malaysia airlines dropped significantly after the sad events of
flight MH370 on the 8th march 2014 when the plane disappeared from the skies. The company
recorded a net loss of approximately $138m in the first quarter compared to $78m the previous
year. Buyers or passengers in this matter shied away from boarding the career’s planes in fear of
possible disaster. As if predestined by fate, the company suffered a second crash four months
later compounding the already scared passenger outlook(Tseng& Chiu 2015). The company
therefore lost most of its buyers. A low number of buyers have direct bearing on the rate of
buying and selling in the market. To sustain itself, the company resorted to cutting down on the
number of its workforce. In addition to that, the airline launched price offers and promotion in a
bid to retain and attract new customers.
4.1.2 Supplier
With shrinking numbers post 2014 disasters, the supply side only focused on the need to keep the
existing fleet in the operation. There was no motivation in buying new aircraft since the
passengers had greatly deserted the company. Attention lay on the supply of key components to
keep the company running. Jet fuel in this case formed the supply side of the equation. However

Malaysia Airlines 11
the pricing model for jet fuel is set by the government and the airline nor other suppliers of fuel
have much influence.
4.1.3 Substitutes
As the ailing national career continues in restructuring its processes, the available substitutes
include railway system, waterways and the road network. Because of speed vis-à-vis cost, air
transport continues to attract most interest and remains the preferred mode of transport(Pearson
et al 2015). There is little or no pressure at all on the air sector from the potential substitutes. In
effect, substitutes have no power to influence the airline industry.
4.1.4 Threats
The main threats facing Malaysia come from regional low-cost careers operating similar routes
along with the national career. Malaysia’s Air Asia, Indonesia’s Lion Air and Singapore’s Tiger
Air offer a direct threat to the sustainability model of the national career. These new entrants
leverage on their lower operating costs as compared with Malaysia airline. The reaction of the
flag career to dwindling passenger numbers was to cut its global seat capacity by 18%. This has
given the competitors penetration point.
4.2 Resource Management
Following the mysterious disappearance of flight MH370, the company was battered with a lot
of negative publicity. Consequently the company lost its main revenue channels(Bamber et al
2013). The market value of the company dropped by around 36% as at July 2014 compared with
the previous year forcing the company to pull out of the stock market. Passengers simply walked
away from the career after many negative reporting regarding the cause of the disaster. In the
months after the accidents, the company appointed a new chief executive officer, Mr. Mueller to
guide in the restructuring process. The new CEO has a history of turning around ailing firms
toward profitability having successfully guided Aer Lingus from possible collapse.

Malaysia Airlines 12
The first line of focus by the new boss was to downsize the working force by third. The idea was
informed by the need to reduce the overall expenses of the company(Parasuraman 2017).
Furthermore, the management cut down on the number of routes that were economically not
viable. The new CEO has changed the top management of the company bringing in fresh ideas to
drive the restructuring process. In the recent past, the airline has started selling off certain assets
as part of re-organization steered toward raising its working capital. To address the apparent skill
gap, the airlines has lined up ventures with established international organisations aimed at
providing necessary training and specific skillset. The company recently announced the
appointment of new Head of Revenue Management and Head of Engineering. All these are
geared toward changing the fortunes of the airline not only from the point of view of employee
performance but also the public perception(Sengpoh 2015). In addition to these appointments,
the company also announced the launch of management trainee system to create a pool of talent
which will take over future leadership of the company. The trainees would be assigned and
rotated in the various departments of the airline to offer them practical exposure to the various
functional processes of the company and to inspire passion.
4.3 Goods and Service Design
Malaysia airlines operate commercial flights across six continents. It has a well-designed service
system tailor made to meet the different layers of its target market. The Golden lounge refers to
the airlines most prestigious airport lounge designed to cater for its First Class, Business class,
and Enrich Platinum and Enrich Gold passengers (Doganis 2009). These lounges have been
constructed around the world in a bid to attract high end customers. They also serve as a platform
to offer exciting and quality services that exceeds customer expectations. The lounges offer
multiple services such as acting as business centers, food catering children care points and

Malaysia Airlines 13
extended slumber rooms(Doganis 2009). Besides its own lounges qualified passengers have been
offered privileges at lounges operated by Malaysia airline’s business partners elsewhere in the
world. The national career launched its regional lounge in 2008 at Kuala Lumpur International
Airport with a focal view on the front-end passengers.
The airline received the World’s Best Cabin Crew award for 2012, claiming the prestigious
service delivery award for the eighth time since 2001. Besides the high end lounges for first class
and the business class, Malaysia airlines also operate economy class on all its aircraft. It is only
on the Airbus A380 that first class services are offered.
On the airbus A380, the airline prides itself in offering the widest fully first class type of seat
among the world’s commercial planes. It also comes with semi-enclosed suites with a 23-inch
flat screen TV (See & Rashid 2016). The business class comes with configured seats in a 2-2-2
layout fitted with heating power and a USB port. There is also a television set and in the case of
the Boeing 737-800 the seats have a reclining ability. Lately the company provides seats
designed by Thompson Aero, equipped with fully lie-flat capability. The seats in the economy
class feature a 33-34 inches and generally smaller width compared to business and first class
(See & Rashid 2016). They have no personal TV although the overhead TV can serve all
passengers on board. The company received the Best Economy Class award in 2010. The airline
also offers in-flight entertainment across all its classes.
5.0 CONCLUSION
Malaysia airlines profitability model is greatly influence by the ever-changing technology in the
aviation industry. The rise of low-cost regional careers such as Lion Air and Air Asia pose a
serious challenge in its bid to recover from the consequences of 2014 air disasters. Customer

Malaysia Airlines 14
perception index of the airline suffered post-2014 and this had a negative bearing on the
economic viability of the flag career. The restructuring of the company and its success will
depend on a number of factors that may be beyond its control. All efforts should be made to
recover the lost important routes especially in the China markets.
6.0 RECOMMENDATIONS
The reorganization of processes at the airlines demands proper understanding of all stakeholders
in terms of their role in achieving turnaround objective. Therefore the airlines must organize
future and regular meetings to communicate new strategies. Employees will also give new ideas
that will help in turning round the airline. Employees who come into contact with passengers are
best placed to understand customer expectations. Their ideas will go a long way in helping the
top management draft appropriate policies. Furthermore, the company should continue to
suspend such routes that may not be economically viable and concentrate on the more profitable
routes. The new management should consider engaging the media in to inform the public on
positive changes that are taking root in the company. This will help change the negative public
perception that arose following the 2014 air crash of its two flights.

Malaysia Airlines 15
7.0 BIBLIOGRAPHY
Bamber, G.J., Gittell, J.H., Kochan, T.A. and Von Nordenflycht, A., 2013. Up in the air: How
airlines can improve performance by engaging their employees. Cornell University Press.
Beh, L.S., 2010. Development and Distortion of Malaysian Public‐Private Partnerships–
Patronage, Privatised Profits and Pitfalls. Australian Journal of Public
Administration, 69(s1).
Bititci, U.S., Suwignjo, P. and Carrie, A.S., 2001. Strategy management through quantitative
modelling of performance measurement systems. International Journal of production
economics, 69(1), pp.15-22.
Bowen, J.T., 2016. “Now everyone can fly”? Scheduled airline services to secondary cities in
Southeast Asia. Journal of Air Transport Management, 53, pp.94-104.
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for
sustainable supply chain management: Developments and directions. European Journal
of Operational Research, 233(2), pp.299-312.
Chesbrough, H., 2007. Business model innovation: it's not just about technology
anymore. Strategy & leadership, 35(6), pp.12-17.
Doganis, R., 2009. Flying Off Course IV: Airline Economics and Marketing. Routledge.
Fu, X., Oum, T.H. and Zhang, A., 2010. Air transport liberalization and its impacts on airline
competition and air passenger traffic. Transportation Journal, pp.24-41.
Hodgson, S., Al Haddad, M., Al Zaabi, S. and Abdulrahim, S., 2015. MH17: Did safety come
first?. Middle East Journal of Business, 10(1), pp.27-38.
Hussain, R., Al Nasser, A. and Hussain, Y.K., 2015. Service quality and customer satisfaction of
a UAE-based airline: An empirical investigation. Journal of Air Transport
Management, 42, pp.167-175.
Krishnan, R., Geyskens, I. and Steenkamp, J.B.E., 2016. The effectiveness of contractual and
trust‐based governance in strategic alliances under behavioral and environmental
uncertainty. Strategic Management Journal, 37(12), pp.2521-2542.

Malaysia Airlines 16
Lau, Y.W. and Tong, C.Q., 2008. Are Malaysian government-linked companies (GLCs) creating
value. International Applied Economics and Management Letters, 1(1), pp.9-12.
Lazzarini, S.G., 2015. Strategizing by the government: Can industrial policy create firm‐level
competitive advantage?. Strategic Management Journal, 36(1), pp.97-112.
Lin, Y., Zhao, S. and Li, N., 2014. A study of network-building HR practices for TMT, strategic
flexibility and firm performance: The moderating role of environmental
uncertainty. Nankai Business Review International, 5(1), pp.95-114.
Lonbani, M., Sofian, S. and Baroto, M.B., 2016. Balanced scorecard implementation in SMEs:
Addressing the moderating role of environmental uncertainty. Global Business and
Organizational Excellence, 35(3), pp.58-66.
Mun, K., 2011. Branding satisfaction in the airline industry: A comparative study of Malaysia
Airlines and Air Asia. African Journal of Business Management, 5(8), p.3410.
Osman, I., Ali, H., Zainuddin, A., Rashid, W.E.W. and Jusoff, K., 2009. Customers satisfaction
in Malaysian Islamic banking. International Journal of Economics and Finance, 1(1),
p.197.
Parasuraman, B., 2007. An examination of employee participation in the private sector:
Malaysian case studies.
Pearson, J., O'Connell, J.F., Pitfield, D. and Ryley, T., 2015. The strategic capability of Asian
network airlines to compete with low-cost carriers. Journal of Air Transport
Management, 47, pp.1-10.
Razali, M.Z. and Vrontis, D., 2010. The reactions of employees toward the implementation of
human resources information systems (HRIS) as a planned change program: A case study
in Malaysia. Journal of Transnational Management, 15(3), pp.229-245.
Santos-Vijande, M.L. and Álvarez-González, L.I., 2007. Innovativeness and organizational
innovation in total quality oriented firms: The moderating role of market
turbulence. Technovation, 27(9), pp.514-532.

Malaysia Airlines 17
Saunila, M., Pekkola, S. and Ukko, J., 2014. The relationship between innovation capability and
performance: The moderating effect of measurement. International Journal of
Productivity and Performance Management, 63(2), pp.234-249.
See, K.F. and Rashid, A.A., 2016. Total factor productivity analysis of Malaysia Airlines:
Lessons from the past and directions for the future. Research in Transportation
Economics, 56, pp.42-49.
Sengpoh, L., 2015. The Competitive Pricing Behaviour of Low Cost Airlines in the Perspective
of Sun Tzu Art of War. Procedia-Social and Behavioral Sciences, 172, pp.741-748.
Tan, J., 2007. Privatization in Malaysia: Regulation, rent-seeking and policy failure. Routledge.
Tolpa, E., 2012. Measuring customer expectations of service quality: Case airline industry.
Tseng, M.L. and Chiu, A.S., 2013. Evaluating firm's green supply chain management in
linguistic preferences. Journal of cleaner production, 40, pp.22-31.
Tseng, M.L. and Geng, Y., 2012. Evaluating the green supply chain management using life cycle
assessment approach in uncertainty. management, 44, p.39.
Vrontis, D., Thrassou, A. and Zin, R.M., 2010. Internal marketing as an agent of change–
implementing a new human resource information system for Malaysian Airlines. Journal
of General Management, 36(1), pp.21-41.
Yu, C.L., Wang, F. and Brouthers, K.D., 2016. Competitor identification, perceived
environmental uncertainty, and firm performance. Canadian Journal of Administrative
Sciences/Revue Canadienne des Sciences de l'Administration, 33(1), pp.21-35.