Overhaul bitter but worth it, says MAS boss

Malaysia Airlines CEO Christoph Mueller says its previous precarious situation is mainly caused by uncompetitive cost levels, while coming under attack from new low-cost carriers for its short haul network. – The Malaysian Insider file pic, January 10, 2016.

The just-ended year saw the team at newly-formed Malaysia Airlines Bhd (MAB), led by Chief Executive Officer Christoph Mueller, working at putting the building blocks together as part of the transformation process.

After years of financial haemorrhaging worsened by the double tragedy in 2014, Malaysia Airlines started on a clean slate from September 1 last year, with MAB no longer dragged down by the turbulent financial baggage of the past.

Mueller began his first week by circulating a letter to the employees to drive home the point that the medicine for the overhaul was “bitter, and the fitness programme required to bring us back into shape would cause a lot of sweat and sometimes tears. But it would be rewarding in the end.”

The bloated workforce was shrunk to 14,000, having to let go 6,000 employees.

To ensure sustainability of the livelihood of the 6,000 affected employees, Khazanah Nasional Bhd, the owner of Malaysia Airlines, set up the Corporate Development Centre (CDC).

The CDC which opened its doors on June 1 last year, provided avenues and opportunities to free outplacement, training services and re-skilling of the exiting Malaysia Airlines’ employees who were not offered re-employment by MAB.

The employees were provided with access to a broad range of services, including talent profiling, career counselling, basic and detailed training, job-seeking skills, entrepreneurship, retirement planning and placement.

As at November 27, over 3,000 former employees had registered with the CDC. Some 1,165 registrants have successfully left the CDC, of which 466 were successfully re-employed, with 650 choosing to become entrepreneurs and 49 opting for early retirement.

Currently, 392 registrants are attending programmes, while 964 others who completed their respective basic coaching programmes, have transitioned into active up-skilling programmes. The remaining 583 are job-seeking candidates undergoing various technical and non-technical certification courses.

In addition to shedding its workforce, other bitter measures taken was to cut costs overall by 20%, including renegotiating suppliers’ contracts, route rationalisation, as well as review of work processes to bring the airline on par with global practices.

In the same letter, Mueller also highlighted that the airline's previous precarious situation was mainly caused by its uncompetitive cost levels, while coming under attack from new low-cost carriers for its short haul network.

Coupled with this, the super connectors from the Middle East and Turkey are gaining market share on long haul, putting MAS' cost level at up to 20% above its competitors.

Mueller has vowed to “stop the bleeding” by last year, stabilise the business in 2016 and look for growth again by 2017. By 2018, the national airline targets to be profitable. 

The implementation comes in the form of a range of initiatives aimed at furthering operational improvements, boosting product offerings and enhancing internal processes and procedures, as well as rebuilding confidence following the twin disasters of having one airplane go missing and another being shot out of the sky.

Rather than compete with the super connectors from the Middle East and Turkey, the synergistic move to remain a full-service international carrier connecting continents, saw Mueller inking a global aviation partnership with Emirates, that will see an increase in the two-way traffic between the two sides of the globe.

From February 1, Malaysia Airlines will also begin widespread code sharing on Emirates’ flights from Kuala Lumpur to Dubai and then onward to destinations across Europe, the Middle East, Africa and the Americas, providing passengers with more choice over when and where they travel.

The improved connectivity will enable Malaysia Airlines customers to reach up to 38 destinations in Europe on a daily and even double daily basis for key European cities such as Zurich, Rome, Munich, Frankfurt, Madrid, and Barcelona.

What this means is that a Malaysia Airlines ticket will take passengers far beyond its destinations.

Axing the unprofitable routes will still enable passengers with Malaysia Airlines tickets to travel to those axed destinations.

Mueller is positioning Malaysia Airlines to retreat from some markets until it has regained a competitive cost status. In other words, retreat and regroup, before growing again being the ultimate target.

While retreating from one part of the globe, Emirates is currently the Kuala Lumpur International Airport's top airline in terms of passengers, latching on to Kuala Lumpur for connectivity to this part of the world.

With all these initiatives in place, analysts are confident that 2016 will be a better year for MAB.

Mueller is on track to realise his vision of Malaysia Airlines turning the corner with a modern product on offer plus new uniforms, a new common building, a new process driven organisation, anchored by a new, more collaborative style of working with each other. It's work in progress.

Malaysia is expecting 30.5 million tourists to contribute RM103 billion in revenue this year and this target can be achieved through various programmes in the pipeline.

Malaysia Airlines is now better poised than ever in being the major player in bringing the tourists here as well as connecting to this region. – Bernama