Malaysia Airlines Soars to New Heights
Malaysia Airlines is older than Malaysia but is very young at heart. Having flown several long and short haul flights with Malaysia, this writer is in an excellent position to judge. Its on-time performance on all flights was perfect. Overall, it provided a seamless airline experience.
The airline is consistently receiving accolades for its high standard of service. Malaysia Airlines has won top prize for the “world’s best cabin staff,” five years consecutively, and it is also ranked at the top as a “five star airline.”
Malaysia Airlines operates from its hub at Kuala Lumpur’s new airport KLIA, which itself is ranked, by the UK’s Skytrax research, as one of the two top airports worldwide. The airport, although some distance from downtown Kuala Lumpur, has an excellent high-speed train service which whisks you to the city center in less than half an hour. The airport was built to serve a growing nation’s needs far into the future and travelers are accorded a level of comfort and infrastructure few other airports match.
Recently, this writer sat down with Idris Jala, former Shell Oil executive and currently Malaysia Airlines managing director, to find out more about how he has helped improve on the airlines profitability and efficiency.
Q: Has your experience in the petroleum industry helped you with your tenure at Malaysia Airlines?
Although the petroleum industry and commercial aviation industry are completely different, my experience in the former has been a great help in my present position. In Shell, I was involved in the turnaround of a few companies under the Shell Group, locally in Malaysia and also overseas. In the mid- 1990s, I was part of the core team in the business process reengineering of the entire Shell Malaysia. Then I became the national manager who looked after all the retail stations in Malaysia. In 1998, I was appointed as the managing director of Shell Sri Lanka whereby I turned around the compan y that has lost money for more than 20 years.
In 2001, I took over the position of vice president of retail marketing worldwide, whereby I had to turn around all the loss-making retail (station) businesses across the globe. My last position in Shell was as the managing director of Shell Middle Distillates Synthesis in Bintulu, Malaysia. I am pleased to say that this company, which has been losing money for 10 years straight, was successfully turned around in six months.
Idris Jala, Managing Director
Q: How has that contributed to Malaysia Airlines success today?
All in all, these successful turnaround experiences have provided me with a good foundation and excellent practices to turn around Malaysia Airlines. Before I joined on 1 December 2005, the company was bleeding cash and was projected to lose RM1.7 billion by the end of 2006. If we didn’t do anything, the company would have plunged into bankruptcy by mid-April 2006. So there was no time to lose. On the first day of my arrival, I announced the Business Turnaround Plan (BTP).
I am happy to say that the BTP has been successfully implemented with the support of the board o directors and the staff of the company. Everyone has worked very hard to help the airline successfully beat all our BTP targets. To date, we have beaten the BTP targets for Q1, Q2, Q3 and Q4 and for the 2006 financial year.
We recorded a profit of RM240 million for the third quarter of 2006 – the airline’s first-ever quarter profit of this magnitude since 2005 and a subsequent fourth quarter 2006 profit of RM121 million. Since the launch of the BTP, there was marked improvement in the areas of cost cutting and efficiency, yield and overall cost management—a must considering the high fuel cost and competitive environment.
Already, things are looking much better for MAS. Its high ranking in various categories by airline survey companies has certainly added to the airline’s value, while clever initiatives and revenue-enhancing measures such as the introduction of new competitive fares, the opening up the “store fronts” by publishing net market fares and the implementation of tighter inventory controls has enhanced our competitiveness.
As a result, the airline that was hemorrhaging [money] has transformed itself into an operationally profitable entity in the short space of just nine months since we unveiled the BTP. This is quite a coup considering that the airline industry is at its most unforgiving, given the volatility of fuel prices. I am confident that 2007 will be the turning point of Malaysia Airlines as we pursue profitable growth.
Q: Much emphasis has been put on being “proactive,” particularly in Malaysia Airlines’ segmented workshops, where you sort out issues on a country/continent level and keep all levels of your staff communicating with one another until the issues are resolved. Was this your idea? Have you any concrete results/examples you can show from these actions?
When I first joined, we ran laboratories or “labs” where we put people from various disciplines or functions into small task force, who will then brainstorm and come up with solutions to fix problems that affect their cross-functional areas.
One of labs we did was the Route Profitability Project (RPP), which was implemented to improve the revenue/ yield for the passenger business. We set up eight regional labs and put the teams in separate rooms at our MAS Training Academy for 1-1⁄2 months. Each lab team will review and brainstorm the viability of their regional business using a set of pre-fixed six levers; i.e. price, sales & distribution, network, schedule, fleet and station cost.
As a result of these labs, our yield, i.e.: Revenue per Available Seat Kilometer (RASK) grew 17 percent from 2005 to 2006, which clearly showed that despite a slight reduction in load factors, the yield improvement more than compensated for the reduction. As a result, revenue increased by some RM973 million.
Q: With Malaysia Airlines only serving the American east and west coasts, The U.S. is obviously not your primary market. But do you plan any increase in capacity/frequency in the near or medium term future? And how important is the U.S. Market?
The US market is an important market for us. Between January and December last year, there was a 15.2 percent increase of tourist arrivals in Malaysia from the US.
In anticipation of such growth, we increased the weekly flight frequency from 5 to 6 using a 359-seater B747-400 aircraft on the Kuala Lumpur-Taipei-Los Angeles route since 29 October 2006. This was further increased to daily operations since 16 January 2007, to capture more business traffic through corporate accounts, which prefer daily operations.
Our business class seat factor has been good for the Los Angeles route mainly due to our sleeper beds in first and business classes and exemplary in-flight service.
In addition, with the Visit Malaysia Year 2007, we have been aggressively promoting Malaysia out of (the) USA, with a few programs including dual destinations such as Malaysia and Vietnam, Malaysia and Singapore, etc, and we expect the number of tourist arrivals from USA to Malaysia to experience a double digit growth this year.
To further boost “leisure focused and business interested” traffic arrivals and increase our passenger loads, we are also pursuing various options to increase connectivity between Kuala Lumpur and the U.S. East Coast. We are in active discussions with a few trans-Atlantic carriers to develop links with cities in the U.S. East Coast via Amsterdam. With the retention of the KLIA-Stockholm-Newark route and the possibility of alternative connectivity between the U.S. East Coast and Malaysia, we will continue to enhance efforts to promote inbound traffic into Malaysia from the USA and the Scandinavian region.
Q: You also seem to be partial toward Boeing. Any changes in the offing? I have noticed models of the A380 floating around. Is a purchase of the 380 on the cards?
We are still in discussions with Airbus. The A380, which was ordered by our parent company, Penerbangan Malaysia Bhd, (was) supposed to be delivered by end of this year and later rescheduled to mid-2007. Subsequently, Airbus announced that this will be further delayed. We will continue discussions with Airbus on this matter. We will also consider and assess all available alternatives and options.
