Malaysian Airlines (MAS) has won many awards for its quality customer service since it began on 1937. Since then MAS has increased its fleet size by providing both cargo and passenger travel. The company had gone through the tough times (2005) and some of its best times (2008, 2009) in the last 10 years. Even though the fuel prices are increasing MAS have reduced some of the costs of maintaining the fleet to be successful in the industry. By providing some of the best services in terms of technology and maintained the quality of the applications and hardware by outsourcing these areas to some of the most well-known companies in the industry. The company is currently implementing the hub-and-spoke network which considers Kuala Lumpur as the hub in the network. The increase in Low-cost carriers (LCC) has led to MAS changing some of its strategies, and in Business Turnaround Plan (BTP) 2 it was clear that the company is targeting to become a Five Star Value Carrier (FSVC).
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Current Business Model and recent Strategies
The main hub of MAS is in Kuala Lumpur while it has recently announced its selection of Kota Kinabalu as its eastern hub. The reason for this is that it is targeting China, Taiwan, North Asia, Indonesia and Australia markets (Karantzavelou, 2010). MAS recovered from the loss in 2005 by cancelling some of the unprofitable routes and furthermore changing its operations from point-to-point services to a hub-and-spoke service. Using hub-and-spoke model it would reduce the number of routes and some of the more complicated tasks could be carried out at the hub rather than each node. Some issues that may need to be addressed may include that delays in the hub may affect the whole network by causing delays.
Figure – Hub-and-spoke network as displayed in BTP2
As displayed in the diagram some of the code share and interline partners of MAS are as follows:
KLM for Northern Europe
Alitalia for Southern Europe
Virgin Blue for Australia
South African Airways for Africa
China Southern Airlines for Chine
MAS were making losses of more than 1 billion on 2002, where the main reason for this was the increase in the fuel prices in 2000. Even though the cargo traffic increased between 2001 and 2002 the profits were not increased due to the rise in the operational cost. Some of the challenges MAS faced includes overcapacity, intense competition with yields and profit margins eroding as well as liberalization of ASEAN skies and rising fuel costs.
The company started focusing on improving the cost and productivity of the company in accordance with BTP. One of the techniques that MAS used was to introduce the performance management system in all the company offices. This improved the staff performance by providing a reward and recognition scheme with motivated the staff by rewarding them on their performance and contribution to the company. It is known that such techniques to improve the decision making skill of all the staff and keep the staff motivated since they would feel as a valuable member of the company.
After achieving the profit targets by 2008, MAS introduced the BTP2 which highlighted the rise of low-cost competition, increasing fuel prices and rise in the public pressure on environmental issues. The purpose of BTP2 was to maintain the growth that MAS has been experiencing after 2003. Hence MAS decided to build an airline that would provide the best services in the industry and has decided to become a FSVC. The way MAS currently works is by providing quality services at reasonable prices which are higher compared to budget-airlines such as Air Asia.
MAS have been trying to renew its fleet by ordering Airbus A330s and A380s. Furthermore for the year 2010 it was identified that the main purpose is to maintain the growth following the last three years using the BTP. With the competition from Air Asia, MAS is trying to focus on the areas that it is good at and trying to co-exist with Air Asia in the market.
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There were delays in the delivery of A380, so compensation for this delay was collected by MAS. There was increase in fuel cost for MAS by almost 42% between 1st Quarter 2009 and 1st Quarter 2010, and it was only possible to reduce other expenditures by only 7% (Yee, 2010). However it was possible for MAS to gain a profit after receiving the compensation for A380. The most important plans currently are the fleet renewal plans. It is understood that by renewing the fleets the maintenance cost could be reduced by disposing the older models of planes which require more maintenance due to operating for a long time. Furthermore MASKargoÂ has been able to support the increase in demand for cargo at the end of 2009.
The online services provided by MAS have been improving with providing online booking services to many additional destinations mainly in Europe. This would enable the customers to easily book their flights and furthermore provide details on prices, dates and other necessary details online. The need for customers to go to the ticketing offices would be significantly reduced and tickets could be bought at any time.
MAS currently implement a frequent flyer program which gives certain benefits to its members such as priority check-in, priority standby and extra baggage allowance. The program is called Enrich frequent flyer program which increase the miles by using MAS services or even using the services of some of the partners of MAS such as airlines, hotels and credit-card companies. By implementing such programs MAS is able to maintain its more frequent travelers by providing quality services and providing them with discounts/ benefits according to the miles that the passenger have travelled.
Current IT/ IS Infrastructure
To reduce cost and increase profitability MAS selected Avaya for its Contact Center Transformation Project (Swamy, 2010). The purpose of the project was to improve the customer service by using Avaya since they already have well-established platforms that provide information in real-time. Avaya already has many systems such as Call Management System and Avaya Aura Workforce Optimization which would assist MAS to improve the workforce and customer services. Avaya was selected because they are a well-known and established company in providing customer services with experience in the area and it would be more beneficial for the company to give Avaya the project rather than having the company (MAS) staff work on the project. Thus, MAS would be able to use its resources (staffs) in other areas of business. These services are supposed to be implemented in mid-April 2011.
Following the BTP2, MAS selected Nortel as the company to provide the communication network. Nortel offers real time communications such as voice, video and other multimedia services with low power consumption using Nortel Ethernet Routing Switch 8600 (Nortel, 2008). This system would improve the communication with a centrally managed network to provide support for the operations/ activities of the business. Since Nortel is experienced in providing these types of system would improve the quality of the services, and MAS need not hire experienced staff to develop it and could focus on other activities. These type of communication systems would help the company to communicate within the company and with the customers.
MAS have a contract with IBM for 10 years to maintain the IT infrastructure, application maintenance and development (Amonk, 2003). IBM would be providing skill transfer to the IT staffs working in MAS such that staffs working in MAS would have the relevant knowledge to maintain the servers and applications. Since IBM is one of the leading IT service provider, MAS signed the contract with IBM such that it would help the company to meet the increasing IT needs of the future. Later MAS selected Tata Consultancy Services (TCS) to maintain the data center and the maintain the IT network.
According to the BTP, a key priority was to improve the Passenger Service System (PSS) such that MAS would have a quality IT system. Hence MAS selected Specialists in Air Transport Communications and IT Solutions (SITA) to improve the ticketing system (SITA, 2008). The introduction of the e-ticketing system, fuel efficiency programmers, rationalization of facilities and customer service would save lots of costs for MAS. The introduction of e-ticking and web check in systems provided customers with the convenience of getting tickets 24/7 and it improved the sales significantly. MAS currently have contracts with SITA and TSC to maintain the network of computers and Applications. It was further identified that MAS uses Symantec security products to reduce IT related risks (Symantic Corp., 2008). The risks of security increased with the development of online services and it reduces the risk of threats on its servers and applications.
Another notable IT solution is the Sabre Movement Manager which was implemented by MAS in 2004 which assist the company in scheduling and monitoring of the flights and this system was later integrated with the other systems such as e-ticketing system (Business Wire, 2004). The company Sabre Airlines Solutions is one of the largest developer of this type of systems, hence this product could be considered very reliable. However, the company would need to be able to integrate this systems with other future systems that may require some of the data generated using this system. Furthermore, to make it easy for customers MAS introduced worldâ€™s first iPad Kiosks and self check-in Kiosks. (slinger, 2010).
MAS have been very successful with the BTP, since the company performed better than what was forecasted in the plan. The company had improved the productivity and reduced the costs for the company. MAS have been successful in attracting businessmen who are frequent flyers with the Enrich frequent flyer program. Furthermore, MAS have implemented the IT solutions by outsourcing the work to companies which are experienced in the area. The company has been improving the IT services especially to the customer with the latest technology such as the latest kiosk and iphone augmented reality application. Hence MAS is already a well-established company with the right IT infrastructure and implementing strategies that are suitable by taking into account the external factors.
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