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Review of Malaysia Airlines System

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Introduction

Organisational structure is the blue print of an organization that will shape the workflow of organisation. An organization cannot just hire an employee and expect them to work without any flaws. Initially your employees would need guidance and supervision to understand what the organization expects from them, as they can perform better. Management is all about the, planning, paperwork, procedures, regulation, and consistency, while leadership is associated with-risk taking, dynamics, creativity, change, and vision. Leaders are though to do the right things, whereas managers are thought to do things right.

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In this assignment, an organisation in Malaysia need to be chosen in order to analyze the top management and the organisational structure, following by examining the crucial issues faced by the organisation and what strategies taken to solve down the issues. Thus, the organization target for this assignment is Malaysia Airlines System Berhad (MAS). Malaysia Airlines System Berhad which is known as MAS, is the flag carrier owned by government of Malaysia. MAS’ headquarter is situation at Sultan Abdul Azizi Shah Airport in Subang, Selangor. Before, it is known as Malayan Airways which has been founded in 1947, then change its name to Malaysian Airline System in 1 October 1972.

Nowadays, Malaysia Airlines is a Skytrax-certified Five Star Airline serving regions of Asia, Kangaroo Route between Europe and Australasia as well as transpacific flights from Kuala Lumpur to Los Angeles via Tokyo. Malaysia Airlines has been granted a loan by IATA via the IATA Operational Safety Audit for the implementation of operations. Malaysia Airlines has a slogan that emphasizes more on the airline as part of journey experience and not mere commodity: “Journeys are made by the People You Travel With”. It owns the full-status membership of Oneworld which is one of the world’s top 3 alliances.

We can observe there are lots of achievements have been experienced by MAS due to its outstanding and remarkable services in the airline Industry. MAS had consistently growth to become one of the multinational companies in Airline Industry, which came from a small private-owned company since its establishment. This had shown that the services provided to its prospects had been well-accepted and recognized. In addition, due to the high numbers of competitors such as AirAsia, Singapore Airlines, Malindo Airlines and so forth, MAS has continuously introduced its turnaround plan and its marketing strategy as to stay competitive in the Industry. With the well projected plan and initiatives, MAS has successfully captured the South East Asia countries market with its great reputation.

Malaysia Airlines currently has two airline subsidiaries to serve different market segments. The first one is MASwings a wholly owned subsidiary that focuses on rural areas in East Malaysia as well as the BIMP-EAGA areas. The second is Firefly, a low budget regional airline that focus on cheap flight tickets also wholly owned by Malaysia Airlines but with separate management by FlyFirefly Sdn.Bhd. Firefly focuses on tertiary cities although has recently launched services to Borneo from Kuala Lumpur International Airport, while MASwings focuses on inter-Borneo flights.

Malaysia Airlines’ visions are:

  • An airline uniquely renowned for its personal touch, warmth and efficiency;
  • To be the world’s five star value carrier;
  • To be the airline of excellence, and;
  • Going beyond expectations

Meanwhile, the missions of Malaysia Airlines are:

  1. To provide air travel and transport service that rank among the best in terms of safety, comfort and punctuality;
  2. Make Malaysia Airlines one of the leading standard bearers for the airline industry in term of safety, efficiency and quality of service, and;
  3. To be a profitable airline.

Organisational Structure of Mas

Based on the organisational structure, we can see that this pyramidal structure led by the board of directors which is the highest level of authority and the chain of command goes through different departments and its employees. MAS has a tall organizational structure, that indicate the equal status and authority of personnel. The managing director has a large span of control where all the departments are under his control. However, the board of directors are higher than the managing director where the board of directors have more delegation to pass down authority and instructions through the entire organisational structure.

Due to its bureaucratic structure, the leaders of each department have the majority decisions that are primarily instructed by the board of directors and the managing directors. The senior managers will take decisions in regards to the whole business and not just individual divisions, based on fixed rules and procedures. Policies will be consistent throughout the business and would avoid conflicts between departments.

Top Management of Mas

Strategic management is a process that needed to control the business as well as the industries which involving an organisation, to evaluate the competitors, sets goals and strategies to achieve, then reeevaluates the strategies to determine the implementation of the strategies and to evaluate whether it was successful or need replacement.

It is a way to make and implement decisions about future direction of an organization. It helps the organisation to identify the direction in which an organization is moving. The management team of MAS had been work out on their strategies or plan, referred as Business Plan to make more profit for the time being. The strategies are as follow:

Smaller Yet Profitable Network

MAS aim to go forward; in terms of their network, as they should include the routes where their premium travellers want to go, and where they can win in terms of competitive position as well as home advantage. MAS are shrinking to grow, if this strategies can make them get back on firm financial footing, they may move forward to expand their network to cover the world’s major economic regions and hubs. As they understand that they may not generate profit on all the routes that they are currently flying, thus they may suspend the services by selecting the routes that is not profitable, and focus more on the core ASEAN region.

Win Back Customers

MAS aim to win back the loyalty of customers, especially Malaysian by convincing them with the superior value of their enhanced services. They decided to take delivery of 23 new aircraft and phase out the A330-200 and B747-400 fleets, and MAS will continue that effort over the next few years. The new aircraft will be equipped with best-in-class hardware an they may upgrade their meal services by make a significant investment.

Relentless Cost Focus

In this strategy, they aim to lower the cost by lowering the fuel bills and the reduction of maintenance expenses. The maintenance costs will decrease as MAS operate a newer fleet with lower maintenance requirements. They must also focus on keeping overhead and discretionary expenditure to a minimum.

Keep It Simple

MAS aim to keep their business simple, as their current business structure has become too complex with a number of ancillary activities becoming very large. Therefore, in order to give some ancillary business more freedom to grow and achieve their full potential, they intend to ‘spin-off’ these units. Additional infrastructure savings will be achieved once existing operation bases are consolidated to fewer locations. Besides, they aim to make a cost saving through joint procurement and sharing services such as ground handling with AirAsia. They intend to start with joint ventures in training and ground handling with AirAsia that will result in capex avoidance and lower costs through enhanced asset utilisation, scale and sharing of best practices.

Critical Issues Faced by Mas

The worldwide well-known issue of Malaysia Airlines have take away the confidence of costumers which affecting of biggest profit lost. The viral photos of empty planes on social media, the leaving of cabin crew has make the people wondering the ability of MAS to survive. The disappearance of flight MH370 in March 2014 with 239 people on board, and the flight MH17 that was shot down over Ukraine in July 2014 brought MAS a mass of criticism over how it responded. The impact of this two incidents was too significant. MAS was put under pressure from the Chinese victims’ relatives which makes the sales from China plummeted 60%, as well as the company’s share price that lost 21% since August 2013. The losses was getting worse until the Khazanah Nasional announced plans to buy the remaining 31% of the shares to suspend trading, getting rid of 6,000 staff and appointing a new chief executive.

Other than that, the announcement of part of MAS’ restructuring programme by laying off some 6,000 of its staff is very shocking to the nation. Even though the top management declared that all of them were paid compensation, most believed their services were terminated without proper procedures being followed, while many were unhappy with the compensation given. There is also rumors about MAS decision to lay off five of their veteran cabin crews on Sept 14 for “being overweight”, which can be described as harassment and discriminatory practice.

Recovery Plan to Overcome Issues

Leveraging Alliance and Strategic Partnerships

Malaysia Airlines and Emirates Airlines began their global aviation partnership agreement, with both carriers agree to place its codes on the Kuala Lumpur-Dubai route, as well as other routes. In order to focuses on getting customer connected globally, MAS implement the codeshare as their future network plan as it opening up a host of new destinations for customers by providing unprecedented access to Emirates’ network. In this plan, MAS aim to have access to over 30 destinations in Europe, Middle East, Canada, and Africa.

As it opens up new destinations to the customer, as well as attract new customer into Malaysia and ASEAN, this plan believed that the codeshare is an important element of Malaysia Airlines. In the future, MAS may looking to make more leverage other partnerships and collaborations more, in order to provide our customers access to other region whilst further encouraging passengers from outside to experience Malaysia.

Malaysian Flavour to Customer-centric Products

MAS plan to introduce more new menus which showcasing Malaysia’s divere and unique flavours. Other than that, MAS introduce the ‘dine-on-demand’ concept service, where guest can have their meals at their convenience.

Hot meals were also introduced for short haul economy passengers, which have already gained positive responses from customers. Moving forward, MAS will make a collaboration with top- ranked hotels and culinary personalities in order to have a 5-star meal in flight. MAS not only focus on their in flight services, but also at their lounges. The introduction of Malaysian dishes with a brand new ‘Laksa’ bar reflects their aspiration to be the ambassador of Malaysia to the world.

Consolidation at KLIA Main Terminal Building

Malaysia Airlines plann a move to concentrate most of its operations in KL International Airport’s (KLIA) main terminal in order to ensure the convenience and improved connectivity for passengers. The plan will mean quicker connections for ASEAN passengers between international and domestic flights. MAS is working closely with Malaysia Airport Holdings Berhad in order to improve their flight connection times, more faster and reliable baggage transfer to ensure the better customer satisfaction.

Cost Savings

Cost management is also one of the crucial plan on their business plan. A key performance indicator for the entire organization is now centered around cost management with a focus on managing to budget and improving procurement. The quarter saw the successful renegotiation of contracts with a majority of operating lessors with revised lease rates that are significantly lower and on economically feasible terms. The revised lease rate has enabled the airline to enter into Letters of Intent with lessors to take on the underlying aircraft. The overall review and renegotiation of supply contracts with key vendors, crucial towards setting the airline on the right path to recovery and sustained profitability, also continued in the quarter. Next, MAS also aim to invest in new ground service equipment, that may improve their on-time performances and turnaround times.

Conclusion

The purpose of this assignment is to examine the impact of effective management on the overall success of an organisation. This study focused on the organisation structure of the company and their top management as well as their strategies to grow the company and to overcome the crucial issues that they have faced. In this assignment, Malaysia Airlines System Berhad has been chosen as they are one of the top orgnisation in Malayia.

The organisational structure of MAS shows a pyramidal structured, where it led by the board of directors which is the highest level of authority and the chain of command goes through different departments and its employees. MAS has a tall organizational structure, that indicate the equal status and authority of personnel. The managing director has a large span of control where all the departments are under his control. Due to its bureaucratic structure, the leaders of each department have the majority decisions that are primarily instructed by the board of directors and the managing directors.

A strategic management, which is done by the management team of MAS referred as Business Planaim to make more profit for the time being. The strategies are including ‘Smaller yet profitable network’, ‘Win back customers’, ‘Relentless cost focus’ and ‘Keep it simple’. These strategic management is needed as MAS faces a challenging situation since 2013 as low-cost carrier competition intensifies in the Southeast Asian market. MAS operates in a highly competitive home market, with other competitors; AirAsia and Malindo Air.

Moreover, the crucial issues faced by Malaysia Airlines have take away the confidence of costumers which affecting of biggest profit lost. The disappearance of flight MH370 in March 2014 with 239 people on board, and the flight MH17 that was shot down. The losses was getting worse until the Khazanah Nasional announced plans to buy the remaining 31% of the shares to suspend trading, getting rid of 6,000 staff and appointing a new chief executive.The lay off of 6,000 of MAS staff is a shocking news to the nation as most believed their services were terminated without proper procedures being followed, while many were unhappy with the compensation given.

Hence, in over to overcome these worse situation that had pull down the financial revenue, MAS decided to make a leveraging alliance and strategic partnership with Emirates Airlines to opens up new destinations to the customer, as well as attract new customer from outside into Malaysia and ASEAN. MAS also focuses on their meals, under the plan ‘Malaysian flavour to customer-centric products’. MAS plan to introduce more new menus which showcasing Malaysia’s divere and unique flavours. MAS will make a collaboration with top- ranked hotels and culinary personalities in order to have a 5-star meal in flight.

Besides, Malaysia Airlines plann a move to concentrate most of its operations in KL International Airport’s (KLIA) main terminal in order to ensure the convenience and improved connectivity for passengers. MAS is working closely with Malaysia Airport Holdings Berhad in order to improve their flight connection times, more faster and reliable baggage transfer to ensure the better customer satisfaction. Last but not least, MAS focuses more on cost saving, as a key performance indicator for the entire organization is now centered around cost management with a focus on managing to budget and improving procurement.

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