Competitor Analysis of Air Asia- Malaysia

Airlines

Malaysia Airlines began in 1937 as Malayan Airways, but it changed to Malaysian

Airlines after the formation of Malaysia in 1963. Later, in 1965, after the
separation of Singapore, the airline became a bi-national carrier and operated
under the name of Malaysia-Singapore Airlines. The airlines separated eight
years later and Malaysia launched Malaysian Airline, headquartered at the Sultan
Abdul Aziz Shah Airport in Subang, Selangor. Malaysia Airlines parent company,
Malaysian Airline System Berhad is listed on the stock exchange of Bursa
Malaysia, and trades under the symbol: 3786. Except for the period from the
mid 1990 to early 2001, the airline was owned primarily by the government.
The airline holds a lengthy record of excellence, having received more than 100
awards in the last decade.
Among all, the most notable ones are listed below:
Awarded by Skytrax UK
World's Best Cabin Crew (20012004, 2007, 2009, 2012)
5-star Airline (20052007, 2009, 2012)
Best Airline Signature Dish (2012)
Worlds Best Economy Class Award (2010)
Staff Service Excellence for Asia Award (2010)

Awarded by World Travel Awards

Worlds Leading Airline to Asia (2010, 2011)
Asias Leading Airline (2010, 2011)
Asias Leading Business Class Airline (2010)

SWOT Analysis

SWOT Analysis
Strengths
Strong Brand Image
Improvement in yield
Diversified Revenue Stream

Strengths
Malaysia Airlines have highly recognizable brand name and established a strong
brand image domestically as well as the international market. Malaysia airlines
Malaysia Airline has consistently established high standards of service across its
business segments. The group has joined the most exclusive group of world
airlines, being ranked as a 5-Star airline by the aviation rating organization,
Skytrax, with just four other airlines in the world. The group has been leveraging
its strong brand image to win the loyalty of consumers to grow its market share.

Malaysia Airlines have an improvement in yield and increase in yield which is

defined as revenue per passenger kilometer or RRPK. Malaysia Airlines has
improved its yield by18% from 20.5 cent (in 2005) to 24.2 cent (in 2006).
Revenue per Available Seat Kilometre (RASK) has also increased by 14%, which is
clearly showed that although a slight reduction in load factors, the yield
improvement more than satisfied for this load factor reduction. As a result of this
yield improvement, there was a strong revenue growth on the Malaysia airlines in
2006. This increase in RRPK indicates improvement in efficiency of the company.
MAS Airlines generates revenues from different areas, such as, which deal with
freighter flights and aircraft cargo hold. It has also diversified into related
industries such as aircraft ground handling, aircraft leasing, aviation engineering,
and flight catering and tour operations. MAS have revenues coming from nonaeronautical areas such as maintenance, repair, overhaul and aircraft handing.

Weakness
Even though MAS has a strong revenue growth, its operating margins are well
below the industry average. This brings the impact to the airlines growth plans
and puts it at a competitive disadvantage.
In 2000, MAS has suffered further losses due to the unprofitable routes.
Therefore lead to MAS Airlines to discontinue flights which are unprofitable routes
such as Brussels, Darwin, Honolulu, Madrid, Munich and Vancouver.
For 5 consecutive years since 1997, MAS has suffered losses due to inefficient
and incompetence of management. Poor revenue management and expansion
decision lead to the negative return of the business. This gives bad impression to
our national carrier. MAS has ineffective utilization of resources and partnerships.
The government has interfered much in the MAS management. This also
contribute to the incompetence on part of the management to freely manage the
business.
Economic recession that started in 1997 had given dramatic impact to MAS,
when as at that time MAS was in the process of expanding its operation. The
company has ordered 25 new aircrafts from Boeing and set up several overseas
freight centers. Sudden market downturn, which in effect leads to unfavorable
exchange rate immediately, increase MAS debts burden. This had given
tremendous effect to the ability for MAS to run the business.

Opportunities
MAS has identified some new markets to be captured. It has found that many
people used MAS service to travel to Indonesia, China, Thailand and India.
MAS has two subsidiaries, which are Firefly and MASwings. Firefly is Malaysias
first community airline. It is expected to gain a potential customer base of 100
million in the Indonesia- Malaysia- Thailand area. MAS airlines set up Firefly as a
test-bed in managing low cost operation. Once it is proven successful, the group
hopes to adapt Fireflys processes into the operation of the national carrier and
expand its customer base further.

Threats

Threats are the elements from outside of the organization which could have
negative effect on the company. There are some threats that will affect MAS such
as economy, intense competition, competitors, foreign currency fluctuation, and
terrorism and political unrest, increasing jet fuel prices, and foreign currency
fluctuation.
Changes in economy will directly affect every business positively and negatively
in many aspects. If the economy are having crisis, it will affect the whole
business globally. As one of the company airlines, Malaysia Airlines has many
connections through out the world and it will give a big impact to the company if
there are any changes in economy level. Thus, it is important for the organization
to prepare some alternatives to overcome this problem because these
unpredictable problems may occur anytime. Malaysian Airlines suffered its first
unprofitability during the 1997 Asian economic crisis, a loss of RM 260 million for
that financial year. Malaysian Airline did not anticipate and prepared for that
crisis and suffered the consequences, though they took a cost cutting measures
as a lesson-learned after the 1997 crisis.
Obviously, Malaysia Airlines is not the sole Airline existed in the SEA area.
Competitions were coming in from all corners, with intense rivalry from Thai
Airways, Singapore Airlines and emerging low carriers such as Air Asia and Jet
Star. These competitors were proven to be a major threat for Malaysia Airlines
and they have to strategize so that they will not lose their market share,
especially in the Asian region.
Malaysia Airlines having global scale of operations faces intense competition
from both domestic full fare and low cost airlines. On the international
competition front, the group faced stiff competition from both established airlines
and new start-up operations. Competition in particular comes from the Middle
East, China and India, other low cost airlines and seasonal chartered flights. *his
competitiveness in the market could create a margin pressures and unstable the
group's overall revenues.
Terrorism is leading to decrease tourism and confidence in the airlines. It might
happen in many ways of terrorism either in certain countries or it might happen
in the plane itself. As example, we know that Malaysia Airlines flies to 88
destinations. In cooperation with code-share partner airlines, the airline serves
more than one hundred destinations worldwide. If there is terrorism happen in
the area of Southeast Asia, Malaysia Airlines need to stop their flight destination
to the Southeast Asia for a certain time. It is because it will be too dangerous to
the people and the whole crew as well as the plane. At the same time it will
decrease the confidence in the airlines.
In recent past, the prices of Jet fuel have increased sharply, hurting the bottom
lines of most airlines. For instance, the prices of jet fuel have increased from
&1.5 per gallon in May 2005 to $2.1 per gallon in May 2007, representing an
increase of about 40%. Jet fuel accounts for a significant portion of the operating
expenditure of airlines. If jet fuel prices reach higher levels, then the margins of
these companies will come under pressure.
As an international airline, the group's revenue streams are denominated in a
number of foreign currencies resulting in exposure to foreign exchange rate
fluctuations. The Use of foreign currency borrowings and currency derivatives to

hedge future operating revenues is the group's strategy to manage the risk of
foreign fluctuations. In addition, fluctuations in inflation and interest rates could
also have some impact on the exchange rates between two currencies. In spite
of risk management strategies, the group remains exposed to foreign currency
risk which could lead to decline in top line growth and put pressure on the
group's margins.

http://www.malaysiaairlines.com/my/en/corporate-info/our_story/about-us.html
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L_ISSUES_History_of_Malaysia_Airlines
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