Airlines In Aviation Industry Of Malaysia Marketing Essay

Malaysia Airlines (MAS) is the government-owned flag carrier of Malaysia. It is the largest and last long airlines in aviation industry of Malaysia. There are two factors that are affecting the performance of MAS which are Macro and Micro Business Environment.

Macro environment factors will be the beginning. Firstly, the political environment are newly set or amended by the government. Malaysia has a Civil Aviation Act 1969 [Act 3] [1] that makes better provision in the law relating to Civil Aviation and for matters connected therewith and ancillary to it.

Secondly is the social cultural environment. The social and cultural dimensions of the environment consist of customs, lifestyles, and values that characterize the society in which the firm operates. MAS have take action to fulfill their social responsibility to participate in the carbon offset program and the Kyoto Protocol. Carbon offset program is one of the efforts made by people to slow down global warming and Kyoto Protocol is to stabilized the atmospheric greenhouse gas concentrations at an appropriate level, thus preventing severe damage of climate change on human.

Next will be the technological environment. MAS airline had advanced their technology to meet their customer needs in information technology such as provide online services. Demographic play an important role in affecting sales of MAS. As the population increase, the number of potential customers will also increase.

The last one will be the economic environment. MAS have many connections throughout the world and it will give a big impact to the company if there are any changes in economy level.

Second main factors will be the micro environment factors. Competitors are the main issue in the highly competitive market, thus MAS keep an eye on their competitors and try to predict their likely next moves in order to survive.

Other than that, customers are the main resources of revenue to the airlines. MAS have to be able to find out the customers’ needs on the flight services. The quality of employees’ services has been upgraded to a different level by having the training program and academy the provided by MAS.

Besides, the intermediaries are also playing an important role. Access to effective intermediaries can be decisive for marketing success. MAS got their own intermediaries to help them sell the flight tickets. The media helps MAS to create awareness to the public about the MAS and its activities or promotions.

We have undertaken SWOT analysis to identify the company strengths, weaknesses, opportunities and threats. Our recommendations had been based upon the analysis.

Business Environment in Malaysia

According to World Bank, Malaysia ranks 24th in the Ease of doing business. Malaysia is an excellent destination to do business. Malaysia has a favorable demographic structure and geographically advantages. Meanwhile, the economy condition is stable at the moment. Malaysia government are welcoming foreign investment in Malaysia and establish legal requirement to guide and protect foreign investment [2] . (Malaysia Business Environment, 2010)

The Gross Domestic Product (GDP) in Malaysia expanded at an annual rate of 2.40 percent in the second quarter of 2010 from the previous quarter. From 2000 until 2010, Malaysia’s average quarterly GDP Growth was 1.18 percent reaching an historical high of 5.70 percent in September of 2009 and a record low of -7.80 percent in March of 2009 (Refer appendix 1.1).

The inflation rate in Malaysia was last reported at 1.90 percent in July of 2010. From 2005 until 2010, the average inflation rate in Malaysia was 2.77 percent reaching an historical high of 8.50 percent in July of 2008 and a record low of -2.40 percent in July of 2009. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power [3] (Refer appendix 1.2). (Trading Economics, 2010)

Foreign Direct Investment (FDI) in Malaysia is set up following the holding of at least 10% of the total equity in a resident company by a non-resident investor. Malaysia has been one of the most successful Southeast Asian countries in attracting Foreign Direct Investment (FDI). Malaysia has been an encouraging economy to foreign investors. The FDI movement is derived from financial institutions and non transaction factors like foreign exchanges, price changes, and other changes during the reference period [4] . (Trade Chakra Website, 2010)

Foreign envoys have commended Malaysia’s Economic Transformation Programme (ETP), an action plan that will see the country becoming a high-income economy by 2020.The comprehensive ETP, which was launched on 25 October, has 131 entry-point projects (EPPs), 12 reporting labs and 60 business opportunities, which will eventually create some 3.3 million new jobs [5] . (MIDA Official Website, 2010)

The unemployment rate in Malaysia was last reported at 3.70 percent in March of 2010. From 1998 until 2010, Malaysia’s Unemployment Rate averaged 3.43 percent reaching an historical high of 4.50 percent in March of 1999 and a record low of 2.90 percent in March of 1998 [6] (Refer appendix 1.3). (Trading Economics, 2010)

Malaysia is now moving-up the value chain and is currently focusing on attracting high-technology, high value-added, knowledge-based and skills intensive industries, incorporating activities such as design and development and research and development. The last decade has seen a deepening and widening of Malaysia’s industrial base as well as the further development of its services sector. As such, a strong foundation has been laid for the economy to move forward into the new globalised environment.

Company Background

Malaysian Airline System Berhad, also known as Malaysia Airlines (MAS) is the government-owned flag carrier of Malaysia. Malaysia Airlines operates flights from its home base, Kuala Lumpur International Airport, and its secondary hub in Kota Kinabalu. It has its headquarters on the grounds of Sultan Abdul Aziz Shah Airport in Subang, Selangor.

Malaysia Airlines had its humble beginning in the golden age of travel. A joint initiative of the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore and Imperial Airways led to a proposal to the government of the Colonial Straits Settlement to run an air service between Penang and Singapore. The result was the incorporation of Malayan Airways Limited (MAL) on 12 October 1937. On 2 April 1947, MAL took to the skies with its first commercial flight as the national airline. Fuelled by a young and dynamic team of visionaries, the domestic carrier turned into an international airline in less than a decade.

With the formation of Malaysia in 1963, the airline changed its name to Malaysian Airlines Limited and soon after, Borneo Airways was incorporated into MAL. Within 20 years, MAL grew from a single aircraft operator into a company with 2,400 employees and a fleet operator using the then latest Comet IV jet aircraft, 6 F27s, 8 DCs and 2 Pioneers. In 1965, with the separation of Singapore from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines (MSA). A new logo was introduced and the airline grew exponentially with new services to Perth, Taipei, Rome and London. However, in 1973, the partners went separate ways; Malaysia introduced Malaysian Airline Limited, which was subsequently renamed Malaysian Airline System, or simply known as Malaysia Airlines. Today, Malaysia Airlines flies nearly 50,000 passengers daily to some 100 destinations worldwide. 

The airline holds a lengthy record of service and best practices excellence, having received more than 100 awards in the last 10 years. The most notable ones include being the first airline with the “World’s Best Cabin Crew” by Skytrax UK consecutively from 2001 until 2004, “5-star Airline” in 2005 and 2006, as well as No.1 for “Economy Class Onboard Excellence 2006” – also by Skytrax UK. It is one of only six airlines to be given a 5-star status airline by Skytrax (the other 5 are Asiana Airlines from South Korea, Cathay Pacific from Hong Kong, Qatar Airways from Qatar, Singapore Airlines from Singapore and Kingfisher Airlines from India). [7] (Malaysia Airlines Home Page, 2010)

Macro Environment

Political and legal environment

The political environment is one of the less predictable elements in an organization’s business environment. Political environment has a great impact on the opportunity and threats of Malaysia Airlines. The ASEAN open sky agreement took effect in December 2008 and is scheduled to be fully implemented by 2015 [8] (Wikipedia, 2010). The agreement will allow regional air carriers to make unlimited flights to all 10 ASEAN member states. According to Minister of Transport Malaysia Dato Seri Kong Cho Ha, the agreement will further expand and open cities in ASEAN member nations and from all routes, and he also believes that it will bring region’s positive development of the aviation industry. This development plan is including flight liberalization, aviation safety, air traffic management, aviation technology, aviation environmental protection, air management framework and human resources development. As the biggest government owned flag carrier of Malaysia, MAS also be protected and to consolidate its international image in the ASEAN.

The Malaysian government has never had a clear written commercial air transport policy. The national carrier MAS was asked to operate both domestic and international services but in the early years, more emphasis was placed on domestic services. The case of the emergence of AirAsia’s approval to operate low-fare services both for domestic and international services cause a ridiculous situation where MAS had to compete with AirAsia which was charging low fares, being a low-cost carrier as MAS’ fares and rates were controlled by the government. However, since 2007, MAS has been allowed to charge its own domestic fares. By this, MAS can meet the demand of the public for low fares with a fair and balanced consideration [9] . (The Malay Mail Homepage, 2010)

Besides, the policy of the other countries will also affect MAS performance. For example, the airport tax of Changi Airport in Singapore will be rise in 2011. The airlines and travelers using Changi Airport will have to pay more start from April next year. The travelers subjected to a passenger service charge and a security service charge which will be added to the price of the air ticket. This will result in budget travelers also paying more. This might reduce the number of customers to take flight with MAS to go to Singapore as they need to pay more on the tickets price [10] . (Airport Charge Website, 2010)

The legal environment serves to define what organizations can and cannot do at a particular point in time. Normally acts and regulations are not directly affected MAS daily operation; it is only a way to decease the criminal. The following are Aviation Acts and Regulations:

Civil Aviation Act 1969 [Act 3]

An act to make better provision in the law relating to Civil Aviation and for matters connected therewith and ancillary to it.

Carriage By Air Act 1974 [Act 148]

An act to give effect to certain Conventions relating to carriage by air and to provide for matters connected therewith and ancillary thereto.

Civil Aviation Offences Act 1984 [Act 307]

An act to give effect to the Convention on Offences and Certain other Acts Committed on Board Aircraft signed at Tokyo on 14 September 1963, the Convention for the Suppression of Unlawful Seizure of Aircraft signed at The Hague on 16 December 1970, the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation signed at Montreal on 23 September 1971, and the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, concluded at Montreal on 24 February 1988 and for purposes connected therewith.

Airport and Aviation Services (Operating Company) Act 1991 [Act 467]

An act to provide for the vesting of property, rights and liabilities of the Government of Malaysia relating to civil aviation in a company, to make financial arrangements for that company, to provide for matters relating to staff and for other matters connected therewith.

International Interest In Mobile Equipment (Aircraft) Act 2006 [Act 659]

An Act to implement the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment.

Social and cultural environment

The social and cultural dimensions of the environment consist of customs, lifestyles, and values that characterize the society in which the firm operates. Social and cultural components of the environment influence the ability of the firm to obtain resources, make its goods and services, and function within the society. Social and cultural factors include anything within the context of society that has the potential to affect an organization. Population demographics, rising educational levels, norms and values, and attitudes toward social responsibility are examples of Social and cultural variables.

MAS airline are not only do their business on Malaysia and also on other countries, especially Southeast Asia, East Asia, South Asia, Middle East and on the Kangaroo Route between Europe and Australasia. Every social and cultural factor of those countries may affect MAS airlines operation. MAS airline are trying many way to match all different cultural and social factors to gain their profit. And now MAS airline was co-operation with 31 airlines those from different countries to know more about the local cultural and social.

As we know MAS airline has more 50 years doing their business in Malaysia, so they are always no forget the Malaysia people. We can know that from their uniform, female flight attendants are wearing Sarong Kebaya which are superimposed on the kelarai motif is a mixture of Malaysian flora, such as the cempaka, jasmine and the leaves of the hibiscus. Recently, MAS airline was launched some new services and promotions for their lovely Malaysia local people. Such as “Balik Kampung”, it means going back to hometown, the super low fares are also perfect for customer business and holiday trips with 5-star airline come standard at no extra charge.

MAS have take action to fulfill their social responsibility to participate in the carbon offset program and the Kyoto Protocol. Carbon offset program is one of the efforts made by people to slow down global warming [11] (Refer appendix 2.1). With this environmentally friendly manner, MAS calculates the required economic cost to offset these carbon dioxide emissions, and then contribute to the specialized enterprises or institutions after aware that 2% of the world’s carbon emissions of greenhouse gases are contributed by the aviation industry. (Wikipedia, 2010)

The purpose of the Kyoto Protocol is stabilized the atmospheric greenhouse gas concentrations at an appropriate level, thus preventing severe damage of climate change on human [12] . Malaysia as one of the signatories, MAS also has an obligation to perform their responsibilities to restore the harsh environment of earth. Besides that, MAS also implement the Green Plan Concept in their operation and management that consist of Reduce, Recycle, and Re-use. The plan not only focuses to reduce material and energy consumption, reduce emissions of harmful substances, but also concerned in make products and components to facilitate the separate collection and recycling or re-use. (Wikipedia, 2010)

Technology environment

Technology is another aspect of the environment a firm should consider in developing strategic plans. Changing technology may affect the demand for a firm’s products and services, its production processes, and raw materials. Technological changes may create new opportunities for the firm, or threaten the survival of a product, firm, or industry. Technological innovation continues to move at an increasingly rapid rate.

MAS airline had advanced their technology to meet their customer needs in information technology such as provide online services (tickets selling) that able to reserve the seats their needs (Refer appendix 2.2). MAS airline was providing e-ticketing, it’s an easy way for their customer to purchase ticket but only can allow a party of 9 passengers and below in a single booking. There is a 6 alphanumeric character given during booking and also printed on your E-Ticket. It is also referred to as Booking Reference, Reloc MH etc. This information technology has a certain role in promoting the number of airline passenger.

MAS continue to improve airport facilities technology such as airport construction and equipment installation, new energy and environmental technologies airport, airport lighting, airport barrier-free facilities and technology, airport construction steel, ground support equipment and services etc to promote the development of the airport and increase the satisfaction of passengers.

Most of Malaysia Airlines aircraft are made by Boeing Company (Refer appendix 2.3); Boeing Company is the world leader in the aerospace industry company and the world’s largest manufacturer of civil and military aircraft. It also increases the confidence of passengers on MAS airplanes. In addition, the rotor design and manufacture, electronic systems and advanced information and communications systems of Boeing aircraft are effective in helping Malaysia Airlines to provide the best in-flight services.

Malaysia Airlines (MAS) is considering an additional aircraft type for its new fleet plan- the A350, B787 Dreamliner or Boeing’s latest B777 variant, B777-300. MAS already have three B737-800s on lease. The airline, in an effort to lock in its financing costs early, has also issued out request for financing proposals to cover its deliveries until 2012. MAS plan to receive 14 B737-800s, eight A330-300s and five A380s by the end of 2012.

Economy environment

Economic factors refer to the character and direction of the economic system within which the firm operates. Economic factors include the balance of payments, the state of the business cycle, the distribution of income within the population, and governmental monetary and fiscal policies. The impact of economic factors may also differ between industries.

From the perspective of the world economy, world trade growth will slow down; the U.S. subprime mortgage crisis has caused turmoil in international financial markets and the slowing U.S. economy, and to some degree of drag on the global economic growth. This also affected the MAS must holding a conservative approach in decision making to reduce the risk.

But according to optimistic forecasts by senior economist at HSBC Global Research, economic growth in Malaysia is expected up 7.3% this year supported by the strong rebound in exports and soaring commodity prices. The overall level of consumer prices rise about 8% and domestic economic development will benefit the entire aviation industry. As one of the company airlines, MAS airline has many connections throughout the world and it will give a big impact to the company if there are any changes in economy level. As we know economy of Malaysia are growing slightly, people purchasing power are growing slightly also. More and more people are spending their money for travelling either out of Malaysia or in Malaysia. Normally, people will purchase more during some season especially the school holiday. MAS was providing some promotion to increase their revenue, such as ASEAN Pass, “Balik Kampung”, MAS Holidays Packages, etc.

Demographic Environment

The population growth has a great impact on the sales of Malaysia Airlines. The population in Malaysia was increasing from 23,274,690 (2000) to 28,306,700 (2009)(Refer appendix 2.4). The increasing numbers of population in Malaysia will affect MAS’ sales indirectly. As the population increase, the number of potential customers will also increase. At the same time, the demand for MAS’ services and products will also increase. Due to this reason, MAS should satisfy the needs of the future customers in order to increase the sales.

Based on the statistic, the population of East Malaysia in year 2009 is 5,793,700 and the population of West Malaysia in year 2009 is 22,513,000 (Refer appendix 2.4). This shows that the population of West Malaysia is more than East Malaysia. Therefore, MAS should pay more attention to the West Malaysia because there has a higher opportunity and faster growth for MAS.

Micro Environment

There are some factors or elements in an organization’s immediate area of operations that affect its performance and decision making freedom. These factors include competitors, customers, intermediaries, employees, media and shareholders.

Competitors

Competitors exist in all the industry. In airlines industry, MAS have many competitors such as Air Asia, Tiger airway, Jetstar and others. The major competitor for MAS is Air Asia. In this highly competitive market, MAS should keep an eye on their competitors and try to predict their likely next moves. Air Asia offers a device called e-player that allow customers to select and switch between movies, tv shows, music and games by pressing the screen (Refer appendix 3.1). Due to this, MAS also offer customers their very own 10.4″ LCD touch screen monitor to watch any one of 12 video channels of their choice in their personal space (Refer appendix 3.2). The screen monitor also becomes a video game console if the customer needs extra excitement [13] . (The business environment 6th edition ,Adrian Palmer& Bob Hartley 1.3.4 ,pg15)

Although they have many competitors, but MAS also can outstanding. This is because MAS use the non-price decision strategy. They use this strategy to remove themselves from the price competition. MAS competes their competitors by providing the best services to the customers. For examples, MAS provides a comfortable seat (versatile new flat bed seat) to their customer (Refer appendix 3.3). Besides that, MAS and their competitors also got provide the online services like purchase tickets or check the schedule of the flight to the customers (Refer appendix 2.2). But MAS always upgrade their website to ensure the customers can browse their website faster and not waste the consumer time. At the other sides, MAS also provide the high quality of food and drinks to the customers. All the food that they provide is clean and healthy.

Customers

Malaysia Airline System (MAS) is the largest airline in Malaysia. The target market for MAS is frequent travelers, businessmen, families with young children and new marriage couples.

The airline industry is full of operators that fly to many locations form many other locations. Therefore it is possible for a customer wanting to travel to be able to select from a whole range of companies. No one company has a monopoly on flights to a country. This means that the customer will have a lot of power and be able to select when they want to fly at the price that they are willing to pay. Hence, MAS should pay attention on the behaviors and demand of the customers.

Businessmen always travel around the world to do businesses. There is a statistic shows that businessmen are the most frequent people that taking flight. It is important for MAS to do research about the businessmen’s demand on flight services as businessmen are the biggest group of customers for them. MAS introduce a frequent flyer program called Enrich by Malaysia Airlines (Refer appendix 3.4). This program is for frequent travelers that comprises a variety of airlines, banks, credit-card issuers, hotels and lifestyle retailers around the world. Therefore, the businessmen’s demand can be fulfilled by this program.

Additionally, research shows that the number of teenagers taking flight is increasing. Nowadays, teenagers are doing everything online include buying stuff, checking for information and so on. Since teenagers are the future potential customer, thus, MAS provide online services such as online tickets booking, online schedule checking, tickets price checking, hotel booking and so on (Refer appendix 2.2).

Intermediaries

Access to effective intermediaries can be decisive for marketing success. MAS got their own intermediaries to help them sell the flight tickets. Travel agency is one of the intermediaries of MAS. The travel agency provides many packages of tour to customers and the ticket of MAS. Travel agency introduced some tour packages with flight tickets. Most customers will buy the whole packages include the tickets from the travel agency directly because the price of the tickets are cheaper. This can also helps the customers to save their time to go book or buy tickets online.

Besides that, MAS also established the ticket office in many place. The ticket office will help MAS to sell the tickets to customers. It will convenient the customer that live far away from the airport. Other than that, hotel also considers as an intermediary for MAS. MAS also provided hotel booking services to the customers for their convenient and benefits them such as will get cash refund with term and condition (Refer appendix 3.5). Transportation service is also provided in the packages to customers between airport and hotel when they reach their destination. At the other sides, MAS also hire the agents to help them sell the tickets. The agents will sell the ticket in Matta Travel Fair and others. Many customers will buy the tickets from agents because it is cheaper and easy to get.

Employees

An employee contribution to an organization is very important. Employees are one of the main reasons for MAS to obtain the achievement for today. Employing the right staff and keeping these staff motivated is a necessary move for an organization. MAS give academy for the employees to provide the training program to their employees and train their employee become professional (Refer appendix 3.6). The academy includes operations management, business and finance, people and technology, jeppesen training, service training and so on. Like this, the customers will get the professional services from the employees of MAS. And MAS can gain competitive advantages from doing this [14] . (Malaysia Airlines Homepage, 2010)

Besides that, MAS also provide many offers to their employees. They will give free tickets to their employees and travel to other country. On the other hands, MAS also will give more discounts to the family members of their employees. MAS also give the high salary and allowance to their employees. At the other sides, MAS also give high bonus to their employees. Like this, their employees will more hardworking to work and also provide the best services to the consumers.

Media

Malaysia Airlines (MAS) advertising campaign designed to create awareness to public about the MAS and its activities or promotions. The media is use to improve the communication between MAS and public. MAS’ internet website is update frequently in order to update customer knowledge about MAS services and activities.MAS also hired advertising agency to design a series of ads to promote their flight plans and catches the attention of customers (Refer appendix 3.7).

MAS also advertise on the television to emphasize the quality of services provided by the crew cabin on the plane. This strategy can increase interest of the customers to take a flight with MAS. MAS were on television to promote their Air Bus A380 – one kind of their airplane to their customers to build confidence on five-star air services.

SWOT Analysis

SWOT stand for Strengths, Weaknesses, Opportunities and Threats.

SWOT analysis is an instrumental for examining the overall strategic position of a business and its environment. In other words, SWOT analysis is use to analyze the Strengths and Weaknesses of your organization, as well as the Opportunities and Threats revealed by the information you have gathered on the external environment.

Strengths

MAS Has World Class Image

Malaysia Airlines (MAS) is a well-known government-owned flag carrier of Malaysia. It is the pride of a nation, their success is important to the country. This means that they are funded by the government. Based on the statistic from Sep 15, 2010 through Nov 15, 2010, the current on-time performance of MAS is 96% which is one of the highest in worldwide (Refer appendix 4.1). MAS have an average delay of 11.0 minutes and it is a better performance than other flights (Refer appendix 4.1). Unless there is terrorism or disease burst out, otherwise MAS’ market prospects are better with growth of tourism and increase in disposable incomes. The benefits can only be easily gained if both Changi and KL International Airport maintain similar facilities and procedures. Besides, Malaysia Airlines is being ranked as the world’s top 10 airlines. And it is also one of the only six airlines to be given a 5-star status airline by Skytrax [15] . (Flight Stats Website)

MAS Has Good Facilities

MAS have invested a large amount of money on IT and they use this IT to the benefits of satisfied their customers’ needs and enhanced their overall performance. MAS provide comfortable seats, safeties, and food and beverage supplies. The versatile new flat bed seat that MAS provide allow the customers to enjoy the comfort afforded by several preset positions accessible just at the touch of a button (Refer appendix 3.3). The headrest is adjustable and the massage elements provide maximum comfort to customers. In addition, the best part about MAS versatile new flat bed seat was that each chair had a liquid crystal display television (Refer appendix 3.2). The 10.4″ LCD touch screen monitor had video game console and it allows customers to watch any one of 12 video channels of your choice in your personal