Malaysia Airlines: Planning, Organizing, Leadership, Cost Controlling

Malaysia Airlines is the flag carrier of Malaysia and a member of the One World airline alliance. Malaysia Airlines Berhad (MAB) commenced operations as the national carrier on 1 September 2015 when Malaysian Airline System (MAS) was dissolved from Bursa Malaysia in 2014 and subsequently ceased operations on August 31, 2015.

The airline began as Malayan Airways Limited, and flew its first commercial flight in 1947. It was then renamed as Malaysian Airways after the formation of the Federation of Malaysia in 1963. In 1966, the airline was renamed Malaysia Singapore Airlines (MSA) and in 1972 Malaysian Airline System (MAS).

It has an impeccable track record of contributing to national development and has been a talent factory for skilled employees, especially its engineers, pilots and cabin crew. The airline has served as a critical enabler to connect Malaysia to the world, while simultaneously integrating the nation. As a global network, it offers the best way to fly to, from and around Malaysia. Serving more than 50 destinations worldwide and operating over 300 flights a day. Malaysia Airlines offers the best connectivity with seamless journeys to more than 1000 destinations across 150 plus countries and access to over 650 airport lounges worldwide. Malaysia Airlines operates flights from its home base, Kuala Lumpur International Airport, and offers connectivity across the globe, including Europe, the Middle East, Australasia, North and South Asia, and Southeast Asia. Malaysia Airlines is able to so, due to its competitive advantages such as the cost structure of the company, offerings of product, distribution of network as well as customer support. This allows it to be in a competitive position in the airline industry, as it is less expensive than other international airlines. It is a well-maintained modern fleet with excellent in in-flight service, modern airport facilities that provides good on ground services. Furthermore, it has an extension towards a culture of warmth as well as sociability, improved website with better booking engine and competitive promotions. The direct competitors of Malaysia Airlines are Singapore Airlines, Air Asia, Jet Airways and Air India Express. The competitive advantage of Malaysia Airlines is based on differentiation such as in the first and business class; there is fast check-in, extra places of cabin baggage and golden lounge. With all that said, even in economy class there is in-flight entertainment and in-flight shopping.

Planning

Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision makers.

It begins with an environmental scanning which simply means that planners must be aware of the critical exigencies that the organization will face economically, competively, and customer wise. Managers must attempt to project the future conditions. As it is the basis for planning.

Firstly, managers of Malaysia Airlines must set goals, as a statement of what needs to be achieved and when. The manager will then identify alternative courses of action in order to achieve objectives. They must then formulate necessary steps and ensure effective implementation of plans. This is shown in 2018 when Captain Izham Ismail the Group Ceo announce a turnaround plan and corporate restructuring plan.

Secondly, a strategic planning that involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. This is seen in 2007 & 2013 where Malaysia Airlines formed two sister company in the name of Firefly (short-haul flights) and Malindo Air (mid to long haul flights) to counteract against its biggest threat Air Asia and Air Asia X. This resulted in Malaysia Airlines reducing most of its long-haul flights in order to support the implementation of the two sister airlines. Henceforth, we can clearly see Malaysia Airlines planning strategically and operationally in order achieve and sustain itself further.

Organizing

An airline is based on its organization structure. Generally, it will be directed by its Chief Executive Officer (CEO), followed by its Chief Operating Officer (COO), Head of Departments, and their non-managerial employees. Chief Executive Officer (CEO) and Chief Operating Officer (COO) are considered as top managers in an organization. They are responsible for making decisions about the direction of the organization. With that said, they are responsible to decide the path Malaysia Airlines is going to take. The success and the failure of Malaysia Airlines are dependent on them and the team. Furthermore, they are responsible on establishing policies and philosophies that will affect all Malaysia Airlines members. Malaysia Airlines composes of two different bodies; one being the operation of the airport which is handled by a team of professionals that has its own internal organization design that is spearheaded by the airport manager and the other being office operation which also has its own internal organization design that is spearheaded by the numerous head of departments or also known as mid-managers. The two bodies then work alongside to achieve the goals set by the its top managers and to maintain organization sustainability. The head of departments would then translate the set goals to the team members under them who are then sub led by team leaders or assistant managers. The first line managers are equally important as they are the ones who assure; the overall operation runs smoothly from the check-in part, boarding, the departure and till the passengers claim their baggage. In addition, the two main bodies, there is also a sub organization design in every operating flight, which is headed by the captain, co-pilot and the inflight manager.

With all the above said, it is absolutely vital for Malaysia Airlines to be particular in who it is employing to achieve the set goals. It’s well known that airlines have strict requirements. Adequately, Malaysia Airlines has its set of requirements. For instance, to join the team of akin cabin crew; one must have a minimum SPM (Sijil Pelajaran Malaysia) or its equivalent that is recognizes by the Malaysian government with a credit in English and Bahasa Malaysia, applicant age should be 18 years and above and the minimum height required are 157cm (for ladies) and 170cm (for men). There are skills and knowledge needed as well for one to be eligible to be part of the cabin crew; one should have good interpersonal and writing skills. Moreover, applicant must able to read, write, speak and understand English. Apart from it, one must able to understand and follow the policies, rules and regulations set by the airline and aviation authority. As an illustration, a cabin crew is required by law to be examined physically, mentally and academically yearly in order to have one’s license to operate as a cabin crew renewed. Furthermore, a cabin crew is required to master the art of communication as they are the sole source of information and problem solver in the airplane.

Leadership

Here is Malaysia Airlines applying “L/Leading”. In year 2017, Malaysia Airlines hired Captain Izham bin Ismail as Group Chief Executive Officer of the Malaysia Aviation Group and Chief Executive Officer of Malaysia Airlines Berhad. He started his career with Malaysia Airlines as a pilot in 1979, and has accumulate around 40 years of experience and counting in the aviation industry.

Over the years, he has held various management positions such as Executive Vice President of Flight Operations, Director of Operations and Chief Operations Officer (COO) of Malaysia Airlines. He currently also serves as Chairman of the National Aviation Council and Board member of Tourism Malaysia.

This shows that Malaysia Airlines does not simply hire anyone as its leader. In applying and understanding “L/Leading” they ensured that the company is being headed to the right way despite its downfall in these recent decade. It is further seen in the lower ranks, as even from managers to executives are empowered by being able to make quick decision on certain matters without jeopardizing the company or its customers. Meetings are also organized at least once a month, it’s not specific to a department and instead consists of staff from different departments. This means from the CEO, pilots, managers, cabin crew or even the janitors are rostered for the meeting. This gives the company insights to problem that they may not see or notice if the meeting is to be held within a close scope.

Malaysia Airlines practices transactional leadership through normative rules, regulations, strict discipline and systematic control. As such, the company applies four types of transactional leadership methods. Firstly, Contingent Rewards; rewards are given to staff who are able to reach a goal or maintained a certain performance level throughout. Secondly, Active Management by Exception; the leader of the department always oversees the work of the subordinates to ensure there is no deviation from set goals and taking corrective actions to prevent mistakes. Thirdly, Passive Management by Exception; intervention is done by the leader when performance of the subordinate does not meet expectations, punishment may be given accordingly. Lastly, Laissez-faire (empowerment); Staff are given opportunity to make decisions, however the leader may veto it if it is not substantial.

Transactional leadership has its beneficial traits; however, it is not suitable for every company. As we all know it is heavily based on a system of rewards and punishment, as so it has its disadvantages. Starting with, Rewards; has its limitations. The staff should perform their work well in order to be rewarded; this also means a staff will not be rewarded if one does not perform well. Furthermore, loyalty is easily bought over by an organization capable of providing a higher dollar figure which results in high rate of turnover. Additionally, there’s Little Flexibility; staff are to be of almost no will and mind of own or face the consequences of being labelled for insubordination. Occasionally, The Blame Game happens; this is when team members are being blame for the failure of reaching a set goal, more often or not leaders do not provide enough resources to support the task given on hand and then blames the team for not reaching its goals. Ultimately there is, Lack of Initiative; when gaining monetary rewards are replacing the reason for task completion and not the satisfaction of completing a task; money is henceforth compulsory in order to motivate the team members in completing ones task. Such management style puts the leader and team in an adversary relationship.

There is no perfect way of leading, as what style is right for you depends on the project and organization. This is not to say there is no other way, may we introduce “ Transformational Leadership”. A leadership style that is quickly gaining in popularity, as it encourages individual team members to strive to be better and work towards organizational goals by appealing to their values and ideals, rather than merely and strictly due to financial concerns. We highly encourage for organizations to adapt to this new style of leadership.

Cost Controlling

Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. Malaysia Airlines compares actual results with the budgeted expectations and if actual costs are higher than planned, management takes action. As an example, Malaysia airlines obtains bids from other vendors such as “MasAero Services” to provide on-board cleaning services after every flight, this allows Malaysia Airlines to lower its costs. This action that Malaysia Airline has taken is most commonly known as “Outsourcing”. It is usually cheaper to pay a third party than to take on the work within the company. Controlling one’s cost is an important factor that will help maintain and increase profitability growth.

Controlling costs is one way to plan for a target net income, which is calculated using the below formula:

• Total Revenue – fixed costs – variable costs = target net income

Let’s assume, for example, the airline’s overall duty-free sales department wants to earn RM10,000 in net income on RM100,000 in sales for the month. To reach that goal, Malaysia Airline’s management reviews both fixed and variable costs and attempts to reduce the expenses. Here is an example, Malaysia Airlines does inflight sales, as the profits of the sale onboard outweighs the cost of fuel especially on flights that are outbound for China. In addition, the duty-free inventory is a highly variable cost that can be reduced by finding other suppliers to offer a more competitive price.

However, in a lease payment it may take longer to reduced costs because these costs are usually fixed in a contract. Reaching a target net income is particularly important for a public company since investors purchase the issuer’s common stock based on the expectation of earnings growth.

Cost Control and Variance Analysis at Work

• Variance analysis is the act of identifying and explaining the reasons for the difference between a budgeted amount and an actual amount.

A manager of Malaysia Airlines would most definitely do a variance analysis to identify critical areas that need change. Every month, the airline would perform a variance analysis on each revenue and expense account. The management team would then address the largest ringgit amount variances first since those accounts have the biggest impact on company results.

If, for example, the airline has a RM50,000 unfavorable variance in the aircraft maintenance expense account, the airline would then consider obtaining bids from other engineering firms to lower costs and eliminate the variance moving forward. As so the airline analyzes variances and take action on the actual costs that have the largest percentage difference from budgeted costs.

Key Takeaways

• Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process.
• Cost control is an important factor in maintaining and growing profitability.
• Outsourcing is a common method to control costs because many businesses find it cheaper to pay a third party to perform a task than to take on the work within the company.

Conclusion

As a conclusion, Malaysia Airlines has lasted as long as it could for 72 years despite it needing three government bailouts (2001,2004 and 2015) while also suffering from corruption throughout its lifespan. However, it hit an all-time low when the national carrier suffered a massive blow to its image after Flight MH370 disappeared in 2014 with 239 people on board. In July the same year, it lost another plane, MH17, which was shot down over Ukraine. As so, Malaysia Airlines has never recovered from these unfortunate events and is now being put on sale.

In our humble opinion and with all due respect to the poor souls who died innocently, all this could have been prevented by applying “POLC” to its core and strictly adhering to it. Sadly, Malaysia Airlines only ever did applied “P/Planning” part well, and have only simply applied “O,L & C” very poorly. By only applying “P”, Malaysia Airlines has had a long and proud history of a product and brand synonymous with outstanding, warm hospitality. The national flag carrier has won numerous awards from the aviation industry, being crowned ‘The World’s 5-Star Airline’ by Skytrax multiple times (2009, 2012 and 2013), recognition from the World Travel Awards as ‘Asia’s Leading Airline’ (2010, 2011 and 2013) and has also won “World Best Cabin Crew” eight times during the stretch from 2001 to 2012. Yes, there is a big “What If” they did also applied O,L & C. However, its glory days are long gone and it is hanging by a thread. Malaysia Airlines now faces the tremendous pressure from being close to bankruptcy. If it is to survive in these coming years, it will need a total buyout from one who understands “P O L C” well and knows of the becoming if one is to not adhere to it.

With all that said, this has served as a very steep learning curve, to all us; as we now know how vital these four words “POLC” is be it for an organization or even to us in our daily life. We will now leave you the reader with a simple saying that we created “Plan your life like it depends on it, Organize your life as you seem fit, Lead your life to its utmost potential and lastly Control your life as much as you allowed too.