TURNING AROUND MALAYSIA AIRLINES

MA SEN

AZYAN LIYANA

FARHAH ADILAH

Analyze the facts and evaluate the success of the plan.

Before Idris tenure, MAS experienced the possibly the worst and most difficult time in MAS history since establishment.

• Recorded financial loss of RM1.3 billion in 2005

• cash and profit crisis

BTP1 is a 3 year programfinancial survival in 2006profit generation in 2007 sustainable profit growth in 2008 Actions taken:revenue enhancement cost reduction

Business Turnaround Plan (BTP1) was announced in 2006

BTP2 covers year 2008 to 2012Increase the profit by 50% to RM 1.5 bil by 2013

HOW ?

Business Transformation Plan (BTP2) was announced in 2008

During Idris tenure, MAS received the highest number of awards, such as:

• 5-Star Airline Award 2006, Skytrax• Best Cabin Staff Award 2006, Skytrax

Non- Financial Performance

Financial Statement analysis techniques

LIQUIDITY RATIOS

RATIO 2005 2006 2007 2008

Current Ratio 0.81 0.74 1.26 1.38

Quick Ratio 0.70 0.66 1.19 1.31

LEVERAGE RATIOS

RATIO 2005 2006 2007 2008

Total Debt To Asset Ratio

0.68 0.73 0.61 0.49

Total Debt To Equity Ratio

2.12 2.74 1.55 1.17

PROFITABILITY RATIO

RATIO 2005 2006 2007 2008

Operating Profit Margin

0.03 0.02 0.02 0.03

Return on Asset

(0.14) (0.01) 0.06 0.02

Generate alternative solutions to the cash flow problem

Alternative Solutions to the Cash Flow Problem

1. Lay-off employees to reduce salary expenses.

2. Sell or disposal of the asset

3. Increase the domestic price

4. Cut-off unprofitable routes

5. Reduce turnaround time

Lay-off employees to reduce salary

expenses.

• MAS should lay-off some of its employees in order to cut some expenses.

• Besides, the company should seek the automation for non-value activities such as check-in.

• By using the automation, MAS will incur only the installation cost as well as maintenance cost.

• It differs to manpower cost, despite of giving them salaries, the company should also give the bonuses and other employees’ incentivesthem .

Sell or disposal of the asset

• This method will generate money quickly by selling unutilized asset.

• The company does not have to pay maintenance cost for such unutilized assets.

• It will minimize the operational cost and also boost up cash inflow

Increase the domestic price

• MAS should also increase the domestic price in order to cover it’s over expenses

• MAS can implement the administration fee per person, which they are not done it before

• It will generate cash inflow to overcome the shortage of cash problem

Cut-off unprofitable routes

• MAS have many unprofitable routes which they cannot change such routes

• The routes cutting would help Malaysia Airlines to lower its maintenance and operating costs.

• . For example, the route of Kuala Lumpur – Manchester which had been claimed to be so dysfunctional that it had to be 140% capacity full to break-even

• . The company should give attention to the routes that give the company a lot of profit. MAS should also reschedule all of its flight timing and changed its operation model from point to point services to hub.

Reduce turnaround time

•The turnaround time is crucial to Airlines company, if they take more time for that then, they have to bear more expenses.•To reduce its operational cost they should reduce MAS turnaround time.•Then, in order to sustain MAS and make them be be able to pay its expense, the turnaround time should be managed wisely.•By reducing turnaround time, the company can save the price for fuel consumption, manpower, in flight services and maintenance cost.