marketing plan - malaysia airlines

1. Table of ContentsExecutive Summary............................................................................................41. Company Background.................................................................................5

1.1 The Challenges..................................................................................................................62. Situation Analysis.........................................................................................6

2.1 The Company....................................................................................................................62.2 Competitors.......................................................................................................................7

2.2.1 Industry Competitors:................................................................................................82.3 Customer Analysis............................................................................................................82.4 Collaborators (alliance, suppliers, distributors)................................................................8

2.4.1 Subsidiaries................................................................................................................92.5 Climate – PEST Analysis..................................................................................................9

2.5.1 Politics.......................................................................................................................92.5.2 Economics................................................................................................................102.5.3 Social-Cultural.........................................................................................................102.5.4 Technology..............................................................................................................10

2.6 Market Summary.............................................................................................................103. SWOT Analysis...........................................................................................11

3.1.1 Strengths..................................................................................................................113.1.2 Weakness.................................................................................................................123.1.3 Opportunities...........................................................................................................133.1.4 Threats.....................................................................................................................13

4. Segmentation, Targeting and Positioning (STP).....................................144.1 Segmentation...................................................................................................................144.2 Target Markets................................................................................................................144.3 Positioning......................................................................................................................15

5. Marketing Strategy....................................................................................165.1 Marketing Goal and Objectives......................................................................................16

5.1.1 The Goal..................................................................................................................165.1.2 The Objectives.........................................................................................................17

6. Marketing Mix - 4P Strategies..................................................................186.1 Product and Service........................................................................................................19

6.1.1 Fleet Status...............................................................................................................196.1.2 Lifestyle and Comfort..............................................................................................196.1.3 Technology and Convenience..................................................................................21

6.2 Price................................................................................................................................226.3 Place, Distribution Channel............................................................................................236.4 Promotion / Communications.........................................................................................24

7. Implementation, Evaluation and Control................................................257.1 Marketing Implementation..............................................................................................257.2 Evaluation and Control...................................................................................................26

7.2.1 Annual-plan control - “to be in top 10 airlines by 2017”.......................................267.2.2 Profitability control – “to be profitable by 2017”....................................................26

BMMK5103 – Marketing Plan – Malaysia Airlines Berhad Nor Helmee Bin Abd Halim

7.2.3 Efficiency control....................................................................................................277.2.4 Strategic control.......................................................................................................27

8. Summary.....................................................................................................27References..........................................................................................................29Appendices.........................................................................................................30

Appendix 1 – Financial Report..................................................................................................30Appendix 2 – Revenue disadvantage to FSC peers...................................................................31Appendix 3 – Cost disadvantages to LCC peers.......................................................................31Appendix 4 – Frequent Premium Travelers...............................................................................32Appendix 5 – Frequent Traveler by Country or Residence.......................................................32

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Executive Summary

“MAS is part of Malaysia’s history. It is a symbol of national pride, of our ambitions and our

place in the world. In short, it is more than just a company to us” Prime Minister of Malaysia,

Dato Seri Najib Tun Razak.

Malaysia Airline System (which will be adverted to as “MAS” in this paper), has been in

the aviation market for many years. It has gone through a mix of good and bad experiences as a

Malaysia national flag carrier. From global economic downturn, fuel price hike to air disasters

have colored the journey of the airline. In spite of various challenges, MAS is still around giving

pressure to other airlines. 1st September 2015, has brought MAS to another level when it changed

its name to Malaysia Airlines Berhad (which will be adverted to as “MH” – Malaysian

Hospitality, the brand of the airline in this paper).

MH has many competitive advantages like world-renowned best cabin crew, which has

been recognized eighth time since 2001 by Skytrax. MH also has a robust fleet base which has an

average of 4.2 years active fleets. MH is competing in “full service” segment which targeting

business travelers and corporates as the prime target market and leisure traveler as the secondary

target market. The service differentiation which can’t be matched by other airlines is the key

point for MH to remain competitive in the marketplace.

The disappearance of MH370 and the downing MH17 have made safety conscious as the

main priority for MH to rebuild the brand and to “win” back customer’s confidence. As such, the

positioning strategy has included safety in the positioning statement – “as the safest premier full

service airline”.

The outlined strategy is for the five year plan until the year 2020, and expected to yield in

terms of profits by the year 2017.

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1. Company Background

1st of September 2015 has been branded as a historic event when MAS, the Malaysian flag

carrier changed its name to Malaysia Airlines Berhad. The adoption is part of a five-year radical

rebranding and restructuring plan of the home air carrier. The relaunch of the company is headed

by Christoph Mueller, the first non-Malaysian CEO.

MAS history dates back to 1937, when it was founded as Malayan Airways Limited

(MAL), a joint enterprise between the Ocean Steamship Company of Liverpool, the UK; the

Straits Steamship Company of Singapore; and Imperial Airways. By 1947, the group expanded

its operations by offering flights to Jakarta, Medan, Palembang in Indonesia and Saigon,

Vietnam. Later on the independence of Malaya in 1957, MAS took the next stride in becoming

part of the new corporate scene in Malaysia. The participation of British Overseas Airways,

Qantas, the government of the Federation of Malaya, Singapore and the Territory of North

Borneo launched MAL as a public limited entity (Malaysia Airlines, 2012).

In 1966, the government of Malaysian and Singapore became the majority shareholder in

the national carrier. The first re-branding exercise meant that the group changed its name in 1967

to Malaysia-Singapore Airlines and also expanded its international routes. However, the

partnership between Malaysia and Singapore was dissolved in 1971 and MAS was incorporated

in the same year. With an authorized capital of MYR100 million, the group produced a final

rewrite to its name in 1971, resulting in the formation of Malaysian Airline System (MAS).

In 1972, MAS became a member of the Orient Airlines Association to increase its

international capabilities. By the end of 1973, the airline was flying two million passengers to

various destinations around the world. The expansion in European region started in 1976 has

opened a gateway for the group to offer traveler a passage to the East, starting routes to

Frankfurt, Amsterdam and Paris. The carrier first flights to the US were initiated in 1986. By

1990, the MAS global reach was extended to more destinations, including Guangzhou, China;

Ho Chih Min City, Vietnam; Fukuoka, Japan; and Pontianak, Indonesia.

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The highlight is in 2001 when the group became the first airline in the world to fly a

twin-engine commercial jet through newly opened polar routers. Since then, MAS continued to

extend its business through alliances with other airways. A year later, in 2002, the group gone

through another expansion and reorganization plans, with particular focus on regional and

domestic routes. Routes to China, Japan, the Middles East and India were increased as part of the

restructuring.

1.1 The Challenges

In 2005, MAS faced a major crisis due to impact from the Asian financial crisis. The airline

reported a loss over RM1.3 billion – the biggest in the company’s history. Under the lead of the

new CEO, Datuk Seri Idris Jala, he announced the airline’s Business Turnaround Plan (BTP) on

February 2006 to overcome the crisis. From a 9-month loss, MAS achieved a record of its

highest ever profit in 60 years of RM851 million in fiscal year 2007. However, in 2008 onwards,

new challenges struck the airline, which resulting poor financial performance.

Last year, 2014, the airline lost two planes carrying 537 people. The twin air disasters

have made the airline financial even worse. Since 2001 until June 2014, the cumulative net

adjusted losses are RM8.4 billion. After years of poor performance, the disasters have crippled

the airline brand badly and another financial blow. (See Appendix 1 – Financial Report).

2. Situation Analysis

2.1 The Company

MH is in a major crisis! In October 2015, MH is introducing its second month of its

operations under the new restructured organization, a brand new name – Malaysia Airlines

Berhad. MH operating flights from Kuala Lumpur International Airport (KLIA) and from

secondary hubs in Kota Kinabalu and Kuching to destinations around the world. The company’s

headquarters is located at KLIA. Sultan Abdul Aziz Shah Airport in Subang was the previous

headquarters prior to 1st September 2015.

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In a decade, the recent restructuring is the fifth recovery plan after suffering from one to

another yearly net loss. The first recovery plan was in 2001 when the government of Malaysia

took over in the wake of the Asian financial crisis. This time, routes, jobs are being cut, and

frequency of some routes is being reviewed.

After 78 years in the industry, MH is serving 50,000 guests on 330 flights to more than 50

destinations daily. In 2013 financial report, MAS carried on average 10,000 more passengers

each day. In the same year, MAS became a part of oneworld® which brings together 15 of the

world’s biggest and best names in the airline industry and 30 affiliate airlines serving more than

10,000 departures. Through oneworld®, the global alliance enables the best connectivity with

seamless journeys to almost 900 destinations across 150 countries, and access to over 550 airport

lounges worldwide.

Under workforce capacity, prior to MH, the carrier has approximately 20,000 employees

scattered all over the world. MH has laid off 30% of its current workforce or 6,000 employees

and offered new contracts to 14,000 employees. The revised contracts and smaller workforce

will help MH to stay afloat in the marketplace. All these are part of the 12-point “recovery plan”

proposed by the major shareholder of MH, Khazanah Nasional Berhad, the state investment fund

of the Government of Malaysia by 69.4%.

2.2 Competitors

A view from market competition, the aviation market has become even more competitive with

the rapid increase of the low cost carrier (LCC) segment, continued growth of the Middle Eastern

full service carriers and revival in the fortunes of Asian full service carriers such as Garuda,

Japan Airlines (JAL) and Thai Airways (Mas & Plan, 2014), (Malaysia Airlines, 2011).

Singapore Airlines, Cathay Pacific and Garuda Indonesia are the direct competitors under the

“full service” segment. All three airlines are currently the leading top 10 airlines in the world.

The number of competitors is quite high, and the emergence of low cost carrier has made

the competition stiff. The rise of AirAsia as the local low cost carrier is a big threat, although the

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airline is not competing in the same segment. The cost differentiation approach has changed the

scenario of the aviation market in the Asia particularly.

2.2.1 Industry Competitors:

1. Local competitors are AirAsia, AirAsia X and Malindo Air

2. International competitors are Singapore Airlines, Cathay Pacific (two main competitors),

Garuda, Thai Airways, Japan Airlines

3. And four main Low Cost Carriers, AirAsia, Malindo Air, Tiger Airways and Jetstar

2.3 Customer Analysis

MH provide domestic and international flight services. The majority of the customers are

international flights customers from home base, Singapore, Indonesia and Singapore. Malaysia’s

current population of 30 million is growing steadily at an annual rate of about 1.8%. By the year

of 2020, the population is estimated to reach 32.4 million. Increased populations mean greater

opportunity for all airlines in the marketplace. The home base has seen a steady increase in the

standard of living with an all-time high of USD7304.14 GDP per capita in 2014.

The demand outlook for Asian aviation is also strong. There is huge growth in disposable

income across Asia. Southeast Asia in particular, with its combined population of over 500

million is a well-placed for aviation growth. Furthermore, ASEAN passengers demand is

expected to double by 2020.

In terms of customer satisfaction ratings published by Skytrax, MH is currently rated 6

out of 10. However, due to a recent restructuring, the overall quality rating is still under review.

The last ratings in 2013, MH was at the 14th spot.

2.4 Collaborators (alliance, suppliers, distributors)

Becoming a member of one of the world’s three largest global airline alliances, oneworld® is

part of the plan to enhance the airline network as well as realization in becoming a profitable

preferred premium carrier. With the help of alliance, MH will be able to offer improved global

coverage and connectivity through an expanded network of various airlines across the globe. The

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alliance would also open up opportunities for the airline to form joint ventures with other airlines

in the alliance.

MH has a large database of suppliers, vendors, contractors and financiers. Prior to

restructuring, the airline has 20,000 vendor contracts. The list of contracts will be reviewed and it

is required to be cut down to less than 5,000 contracts. The airline relies heavily on its coalition

and other collaborators to sustain the operations.

2.4.1 Subsidiaries

Firefly and MASwings are the two subsidiaries of the airline. Firefly operates scheduled flights

from its two home bases Penang International Airport and Subang International Airport. The

focus of Firefly is tertiary cities and MASwings focuses on inter-Borneo flights. MH has a

freighter fleet operated by MASkargo, which manages freighter flights and aircraft cargo-hold

capacity for all Malaysia Airline’s passenger flights. MH also provides aircraft maintenance,

repair and overhaul (MRO), and aircraft handling services to other companies.

Other revenue sources for the airline include aircraft maintenance, repair and overhaul

(MRO), aircraft ground handling, aircraft leasing, aviation engineering, air catering and tour

operator operations.

2.5 Climate – PEST Analysis

The macro analysis will cover the environment in Asia in general.

2.5.1 Politics

“Open skies” policy is one of the top topics in 2015. The policy is planned to be implemented by

the end of 2015. Under this policy, it will allow the carrier from any country to serve passengers

in more overseas markets, unrestricted overflight and landing rights to one another. This

circumstance will expand the aviation market and become more liberalized. In reality, MH will

have to double up the effort in sustaining its operations as the environment and competition will

become more challenging.

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2.5.2 Economics

As the increased in population and high disposable income has been forecast, it means a positive

impact on the economic growth across Asia. When economic situation is stable, the tourism and

aviation industries will grow simultaneously. MH has an equal chance in the market and

therefore, focus on cost differentiation will be part of the strategy.

2.5.3 Social-Cultural

In the context of Low Cost Carrier business model, people are willing to sacrifice premium in-

flight services in exchange of cheaper airfares (POLL, 2013). The most significant consideration

that influenced passenger’s decision is how much the cost of the airfares comparing to other

airliners going to the same destination. LCC is a booming trend, therefore MH has to focus on its

market segmentation and win the target market in order to maintain competitive advantage in the

marketplace.

2.5.4 Technology

With the advent of Internet technology, social media, mobile business and online business give a

great opportunity for MH to be technology differentiation. User friendly online ticketing system

and the use of social media as marketing medium have become the key factors for other airlines

maximizing its profits. MH, in the opposite site, has yet to fully utilize the power of this

technology.

2.6 Market Summary

MH is well-versed in the aviation market, especially in the premium segment of the market.

However, MH lost focus in product innovation, which resulting poor product quality in general.

People expect a premium product when they pay premium airfares.

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In terms of service standards, MH is still on the winning side after numerous awards

winning since 2001. As the vision of the airline is to become “the preferred premium carrier”,

MH will continue to focus on this segment particularly for Asian aviation marketplace.

3. SWOT Analysis

The major job, routes cut exercise and a few other initiatives under the 2015’s recovery plan has

changed the overall game plan of MH. The airline will refocus on its core business which is

“flying passengers” to their destinations. The ultimate goal for MH is to achieve profitability by

the end of 2017 and by 2020, MH should have established a clear competitive advantage,

achieved sustainable profitability and financial self-sufficiency and lastly earned recognition as

an industry leader.

In realization of the goals, a SWOT analysis to capture the key strengths and weaknesses

of the airline and describe the opportunities and threats facing the airline is further discussed as

follows;

Table 1 – SWOT Analysis

Strengths Weaknesses

- Strong brand recognition

- World-renowned employees and

awards winning airline

- Diversified geographic spread

- Robust fleet base

- Strong support by The Government

- Weak financial performance

- High Costs, low margins

- Limited market share growth

- Unprofitable routes

- Ineffective Utilization

Opportunities Threats

- Rebranding, improve presence

- The enactment of “MAS Act”

- Benefit from joining oneworld®

alliance

- Suppliers new contract renegotiation

- Intense competition

- Regulatory conditions

- Rising fuel costs

- Foreign currency fluctuation

- Terrorism

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- “Open Skies”

3.1.1 Strengths

The MH (MAS), has a very strong brand name which has been well recognized globally. The

recent twin tragedies, the disappearing of MH370 and the downing of MH17 may have tarnished

the brand name but many aviation analysts said that changing the airline name may not give a

significant impact when such airline like MH (MAS) has been in the industry for many years.

Despite of the incidents, people still fly with MH, although the numbers are declining.

World-renowned pilots and cabin crew - the Cabin Crew of MH is one of the best cabin

crew in the world. MH received the “World Best Cabin Crew” awards by Skytrax since year

2001 until the recent award in 2012, a remarkable eight times. The pilots of MH are well-trained

and highly regarded by other airlines in the world. The ground staff, engineering and other

departments contributed the same effort in terms of work quality. This is supported by numerous

awards, which MH received in the past years, including awards received by MASkargo, “Cargo

Airline of the Year” in 2013 for the sixth consecutive year.

The airline has a diversified geographical spread. The network and operational routes are

across the world. It generates significant revenue across all the geographic regions it operates in.

This is also backed by a robust fleet base. The airline has more than 100 aircraft with an average

active fleet of 4.2 years including six A380s. Compared to Singapore Airlines, 7.1 years and

Cathay Pacific 9.3 years. Due to surplus to requirements, two of the A380s are confirmed to be

sold as part of the latest restructuring plan (Mas & Plan, 2014), (Outlines, 2015).

The national flag carrier received a strong back up from the Government of Malaysia

after the first restructuring plan in 2001. The airline will receive financial support up to RM6

billion on a staggered basis to aid the restructuring and investment plan.

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3.1.2 Weakness

The airline has a very weak financial performance for many years. The only year the airline

record positive results was in 2007. The airline is still struggling to find the rhythm of success.

The airline operation costs are on the high side which affects the profit margins

significantly. Being in “full service” segment has significant impact in profit margin if cost

structure is not looked intensively. When profit margin is limited, it impacts on the overall

market growth of the airline too.

At this point of time, the airline is still revising the unprofitable routes and its frequency.

This is an ongoing activity under the restructuring plan. Apart from this, the same notion on

ineffective utilization, especially on workforce. Although the airline has cut 30% of its current

workforce, the exercise will not just stop there. Further reduction could be possible to strengthen

the operations of the airline.

3.1.3 Opportunities

The recent rebranding activity of the airline is hopefully will bring back the “hey day” of the

airline. It was not a full fledge rebranding exercise as the company just announced a major

overhaul which include name change, logo change and livery of its aircraft in November 2015

(The Star. “MH to unveil new name, logo and livery”. 2015).

The enactment of the MAS Act will hope to give a major advantage to the airline in light

of the restructuring exercise. MAS Act is generally to ascertain a smooth sail of the restructuring

exercise. It protects and covers legacy issues from supplier contractual agreements to trade union

activities and processes. Meanwhile, contract renegotiation activity is viewed as an opportunity

for the airline to review the overall operations costs as well.

The much discussed about “Open Skies” policy is about to be implemented by the end of

2015. There will be a lot of opportunities for MH and other airlines to compete healthily in the

aviation market once it takes place. As such, collaboration with other partners like oneworld®

and other airlines is very important for the airline to stay competitive in the challenging market.

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3.1.4 Threats

The “Open Skies” policy and agreements could be a potential threat if no proper planning is

carried out. Intense competition from other airlines, especially from the LCC may hit hard on

MH as a consequence to the deployment of the policy.

Volatile jet fuel prices for the past few years has already impacted most airlines including

MH. This is seen to give further pressure and threats if no mechanism on how to improve the

cost, especially on the fuel consumptions process and so forth.

As the disappearing of MH370, the unresolved issue is haunting a lot of people including

first-time flyers. Until today, there is no concrete evidence linking the tragedy with terrorist

activity, however terrorism is known to be the biggest threat in the aviation industry.

4. Segmentation, Targeting and Positioning (STP)

4.1 Segmentation

The segmentation strategy is focusing on the premium service sector or full service flights. This

segment includes all domestics and international flights, short haul and long haul.

4.2 Target Markets

The primary target is corporate, businesses or business travelers. The age is between 30-49 years

old. Most of FSCs rely on business travelers as they are the most frequent buyers, most loyal,

and are willing to pay the extra money than the average traveler. The typical business traveler is

from upper middle class, managerial-level pay grades, Directors and C-Level (i.e. CEO, COO,

CFO). Based on Asia Pacific Business Traveler survey conducted by Accor Asia-Pacific, (2012),

found the average business travel for executive (Directors level and above) is 20 trips a year

where the most frequent travelers by country is from China, India and followed by Singapore.

Most of the travelers are travelling internationally and dominated by men. (See Appendix 4 –

Premium Frequent Traveler and Appendix 5 – Frequent Traveler by Country).

Figure 5.0 – Prospect and Business travelers from other regions

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Source: PwC

According to D’Alessandro and Kletzel, (2013), in today’s competitive travel market,

flyers are expecting airlines to behave more like retailers and less like a mode of transportation.

Flyers are technological equipped with mobile devices as their number one companion. Business

travelers are increasing, making purchase decisions based on a wide range of features and value

enhancers, from extended seat space options and priority security line access to mobile ticketing,

and inflight Wi-Fi availability. Business travelers have their own preferences and willing to pay

for different amenities. The buying habits and preferences of business travelers are changing

drastically. Premium segment is very challenging and demanding, and therefore it is imperative

for MH to line up good plans to capture the business traveler market.

The secondary market would be leisure travelers who are considerably price-sensitive.

The types of travelers vary widely in their demographics. Similarly to the primary target market,

these consumers are always looking for a good deal and look for the cheapest airfare.

4.3 Positioning

MH will position its brand as a safest premier and luxury full service airline to the business

travelers flying short haul and long haul destinations. Safety has become the top priority of the

airline as to regain customer’s confidence after the recent twin air disasters.

This can be realized by providing state-of-the-art ground handling service, cabin amenities,

signature cuisines and a variety of in-flight entertainment program, highest safety measurement

and offering competitive airfare that match market norm. At the same time, leveraging and

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maximizing the benefits of oneworld and other partners for a maximum customer satisfaction

and customer experience.

5. Marketing Strategy

In light of the recent twin tragedies, the brand name for MH is badly impacted, although the

downing of MH17 has nothing to do with the airline – the aircraft was at the wrong place, at the

wrong time. The MH370 incident is still a mystery until physical evidence is found. Whether the

root cause was by a terrorist attack, pilot error or technical issue is yet to be proven. The main

priority is to bring back the airline to where it belongs before – the “hey day” period. As such,

safety improvement is the highest marketing strategy priority alongside secondary priorities

which are focusing on premium service improvement as well as cost competitiveness against

competitors rendering “full service” (Full Service Carriers – FSC) and Low Cost Carrier (LCC).

Despite the two incidents, MH brand is still strong in the eyes of the world particularly in the

Asian region. MH has a strong foundation in the aviation market through its diversified

businesses, engineering and safety capacity, world-renowned pilots and cabin crew, highly-

skilled and friendly ground staff and strong home base loyal customers. These elements are the

core key points for the airline marketing strategy.

5.1 Marketing Goal and Objectives

5.1.1 The Goal

MH will target a specific segment that prefers “premium service airline with the highest level

of safety, highest level of customer satisfaction, and with competitive cost” in the market.

The goal can be achieved by providing commercial excellence which includes best-in-class flight

operations and safety, as well as cost optimization.

Commercial excellence – Improving direct sales through the website and building strong social

media capabilities as part of improvement on marketing effectiveness.

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Best-in-class flight operations and safety – Preserving the excellent record of cabin-crew service

and the most important thing is improving efficiency of engineering services which no room for

error as to ensure the passenger’s safety is the utmost importance.

Cost optimization – the goal is to improve by reducing the turnaround time, improving fuel

consumption, renegotiate procurement costs in catering, ground handling and maintenance. The

other area to look at is to improve productivity levels of all functions and departments.

5.1.2 The Objectives

The “full service” used to be bread-and-butter, however, MH has lost its focus over the past

decade. The product quality has decreased with no significant improvement for quite some times,

while other FSCs have done massive improvement to capture the market share from MH, as a

result, the airline lost the hard-earned loyalty of many home base flyers to other FSC competitors

(Cathay Pacific, Singapore Airlines, Garuda Indonesia and Thai Airways) flying to a city served

by MH.

A fresh new ideas, look and major overhaul is the top priority in the desire to attain the

first goal which is also aligned to the main corporate goal, “to be the profitable premium

carrier”

Objective 1 – Leveraging the power of the Internet to improve direct sales by 50% through the

MH website and profitable airline by 2017, and maximize the power of social networking to

improve the customer experience (CX)

Tablets and smartphones have become the best companion for all including business travelers,

leisure travelers and individuals. People read news, retrieve information, make purchases and so

forth using their smartphones or mobile devices. MH will embrace the power of the Internet to

be competitive differentiation in the market. Social networking plays an important role in

marketing as well as a communication medium and customer support customers (B2C).

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Objective 2 – Increase safety measure to “win back customer” and preserving the excellent

record of the workforce, especially the cabin crew, alliances and other business partners – to

be ranked in top 10 airlines by 2017

Rebuilding the trust of customer post twin tragedies is the highest priority. Sales are declining

and booking cancellations have increased which have badly affected the sales revenue. The

family of MH, especially the cabin crew is the key service differentiation element compared to

other competitors, therefore, MH to continue in providing training and retaining the key

resources in the organization in hopes of rebuilding the MH brand. MH to also build a strong

relationship and networking with alliances and create more business opportunities with business

partners to strengthen the presence in the market, especially in Asia market.

Objective 3 – Close unit revenue gap by 10-15% from FSC peers and improve cost

differentiation by a 15 % gap from the Low Cost Carrier “LCC”

This objective can be achieved by improving the pricing and revenue management capabilities,

marketing and sales force excellence and other initiatives like revamping the Enrich loyalty

program, unbundling ancillary products and services. It can also be achieved by focusing on the

network where MH can win from FSC peers by fly profitable routes only, reconfigure its fleet to

better fit MH network and market, which could include moving to smaller aircraft, retiring

specific aircraft types, and (or) adding seats to aircraft to reduce unit costs.

The short haul sectors are currently dominated by LCC due to its cost leadership strategy

and service differentiation. MH will reposition the cost to retain current short haul customers or

travelers as they make up the majority of MH’s current base customer. Today’s trend, there is

increasing emphasis on the short haul business traveler’s preference for efficiency and

convenience versus premium product, and MH premium advantages are eroding as LCCs

continue to innovate its products. For example, Wi-Fi is now available on LCC aircraft. As such,

MH will pay close attention on its LCC rivals. (See Appendix 2 – Revenue disadvantage to FSC

peers and Appendix 3 – Cost disadvantages to LCC peers).

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6. Marketing Mix - 4P Strategies

6.1 Product and Service

MH provides tangible product and intangible services which can be divided into few categories.

6.1.1 Fleet Status

The airline has the youngest fleet in the region with an average active fleet age of 4.2 years. In

2012, MH phased out its A330-200 and B747-400 fleets and replaced with A333 and A380.

These aircraft are equipped with best-in-class hardware, technology and energy saving. This

differentiation is significant with the marketing goal to ensure the highest level of safety for the

customers as well as to provide competitive pricing. Comparing to competitors like Singapore

Airlines, their average active fleet is 7.1 years and Cathay Pacific 9.3 years (Mas & Plan, 2014).

Figure 6-1. – Aircraft age.

6.1.2 Lifestyle and Comfort

“MH” is more than an airline code, MH is “Malaysian Hospitality”. It’s the trait of Malaysia as a

country with MH carries to the sky. Like the other FSCs, MH offers three types of class:

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1. First Class (only on A380s)

It offers a premium experience with full-stretch seats, entertainment options on-call,

internet connectivity, charging points for gadgets and whole menu of gourmet to pick

from. The passenger will get 50 kilos excess baggage allowance.

2. Business Class – Golden Club Class (all fleets)

This class is ideally for frequent flyers, it offers special lounge service when on the

ground and unbeatable in-flight services. From specially prepared meals, to

communication via flight phone and over 100 hours of on-demand entertainment. The

passenger will get 40 kilos excess baggage allowance.

3. Economy Class (all fleets)

Travel for less with outstanding services, cozy seats and warm meals at affordable prices

await customers. Special meal for those with medical or religious reasons can be arranged

if informed in advance. With a nominal fee, passengers can select their favorite seats

from either extra legroom, quick disembarkation, friend or family, great window views to

easy aisle walks. The passenger will get 30 kilos excess baggage allowance.

Flying long haul with the airline is a luxurious experience even in the basic Economy Class.

Customers will also enjoy in-flight duty-free shopping. The warm smiles of the cabin crew have

won the airline the Skytrax “World’s Best Cabin Crew “ award remarkably eight times since

2001, while succulent signature satay (in First and Business Class only) has won the Skytrax title

of “Best Airline Signature Dish” twice in a row for 2012 and 2013. In-flight entertainment

system that features over 90 movies, 70 TV programs, 400 music albums and games. First and

Business Class passengers enjoy ample legroom and greater reclining freedom, as a choice of 25

fine dining options via pre-booking from the Chef-On-Call menu.

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6.1.3 Technology and Convenience

In the advent of technology especially social media network has become one of the strategy to

strengthen the business to customer operation and support. For example, MH has become the

first airline to offer its customers the choice of choosing who they wish to sit next to (seat-mate)

based on their social media profiles via Facebook. This can be done via an application called

“MHbuddy” which allows users who book and check in via the carrier’s Facebook page to see

whether any of their “friends” will be on the same flight or in their destination city at the same

time. The platform, which claims 3,000 monthly active users (and growing), also enables

existing friends to select seats together. Beside the primary intention to generate revenue, this

strategy is practically to encourage people to use their flying time constructively, for example

mile-high dating or a blind date.

MH will also continue to market, promote and enhance the existing applications;

1. MHmobile – for all mobile devices

The customer can book flights and find the cheapest fares available, online payment via

PayPal, credit card, mobile banking, share itinerary on social media, online check-in,

paperless boarding pass, flight status, check status of lost baggage instantly should

anything go amiss, view Enrich balance, transactions and history. There will be also

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huge savings exclusively for mobile-only deals and offers which is not widely

promoted to the public yet. Awareness and promotion will be part of product strategy.

2. MHupgrade – this facility is getting its popularity nowadays where all confirmed

Economy Class or Business Class ticket will be offered an opportunity to upgrade by

determining your own price for the upgrade.

3. MHinsure – “Travel with peace of mind”, is the tagline for this product. MHinsure

gives access to 24-hour Emergency Medical and Travel Assistance anywhere, anytime.

4. MHsim – It helps MH’s passengers to stay connected while travelling overseas,

allowing passengers to use mobile phone without the high roaming charges. At the

moment, the service is only for Australia, Malaysia and New Zealand passengers only.

5. E-timetable – It’s a common feature for all airlines nowadays and MH is joining the

bandwagon as well. Departure and arrival information is at the customer’s fingertips.

6. Online booking system and deals of the day – The use of online booking will be

maximized to increase the sales revenue, and the use of travel agents will be reduced as

the preferred transaction today is via online which is secured and convenience. “Deals

of the day” offer will be improved further to attract new customers as well as to retain

existing customers.

“Enrich” membership program or previously known as “frequent flyer program”, the

customer loyalty program will continue to be part of the strategy for customer retention

initiative. The backend system will be revamped to ensure news, updates and promotion will

reach the intended recipient. Enrich program will bring customers to an advance information that

will ensure members are one step ahead of others.

6.2 Price

The MH pricing strategy is based off the positioning strategy as an FSC. MH airfares are

significantly moderate and affordable as compared to other FSCs. This is a fact that accepted by

the business travelers as the airline provides the best cabin services. This is the service

differentiation which other airlines are struggling with. As a cost leadership differentiation

strategy, the focus will be on online ticketing as the airfares are much cheaper compared to the

frontline counter. The proven best cabin service by MH will be the selling point to attract new

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and retain existing customers. This will be the key strategy that cannot be beaten up by other

FSCs (Mohd Zulkeflee Abd Razak & Ilias, 2011).

The pricing can be described as offering a lot for the price. The tagline for online

ticketing to be used is “What You See Is What You Pay For”. It will be the benchmark for MH

in offering better and competitive airfares. The emphasis is on price transparency and there is no

hidden charges as some might have experience with other airlines.

6.3 Place, Distribution Channel

The conventional distribution strategy for MH is using third party sales and contracted travel

agencies through its global distribution systems. Abacus GDS is a MH partner with eleven other

airlines. This strategy will stay, but MH will streamline its sales and distribution through direct

sales via its website and online purchase via online partners. Through the conventional strategy,

MH has partnerships with third party ticket local companies such as Mayflower being one of the

famous travel agents. This channel is used mainly by businesses and corporates. There are

approximately more than 60 registered travel agents. This channel will continue to be part of the

strategy, but will not be emphasized further to give room for direct sales strategy.

Going forward for individual markets, MH will maximize the use of the internet for its

online distribution strategy. This is in line with the cost optimization objective as direct sales

improve sales profit which indirectly gives bigger room for MH to be more competitive in terms

of pricing in the market. In terms of online sales partnership, MH will strengthen the relationship

with existing partners like Expedia, Travelocity, Orbitz and will build new networking to

improve the online distribution strategy.

Apart from conventional and online strategy, MH will also participate in travel fairs. The

biggest event is MATTA fair, which is usually held in March and September annually. Other

than this, MH will organize seasonal promotions like “Year End sales”, “Mid-year sales” and

special occasions like the festival season offer and so forth.

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The multi-channel distribution strategy is strategically designed to provide businesses and

corporation as well as individual and business travelers with access to MH tickets and content,

through their preferred booking tool as discussed above.

6.4 Promotion / Communications

Promotion will start with a brand awareness campaign - global advertising campaign called the

“Journeys” will be launched. The primary objective is to boost awareness of products and

services. The plan is to increase MH brand awareness, to improve brand health matrix. The

tagline “Journeys are made by the People you travel with” will be featured in print, out-of-home

advertising, TV and radio and social media platforms. The campaign will run for at least two

rounds, part one and two.

Along with its traditional forms of media, MH will also explore Search engine marketing

strategy or Search Engine Optimization (SEO) with popular search engine, Google, subscribes

pay-per-click advertising, email blast and direct mails. MH will also invest in social media

marketing on Facebook, Google+ and Instagram. MH will leverage its social media presence and

align very closely with the technology driven business traveler market.

Sponsorship is a common strategy applied by other FSCs and MH will continue this

strategy by sponsoring major events like F1, MotoGP, EPL football club and a few other events.

The current partnership and sponsorship is with tennis star Nick Kyrgios and Australian

MasterChef Poh. Sponsorship will be a great promotion strategy to remind people of a good MH

brand.

Corporate Social Responsibility (CSR) is another way of promoting the brand of MH.

From fund raising, charity campaign and community service have increased the popularity as

well as revenue to MH. CSR is part of corporate’s philosophy and MH will continue to invest in

this strategy.

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7. Implementation, Evaluation and Control

7.1 Marketing Implementation

The marketing implementation plan is shown as in Table 7-1 – Implementation Timeline.

Table 7-1 – Implementation Timeline

STRATEGY START DATE

END DATE

DEPARTMENT

Launch brand awareness campaign #1 – The Journeys part 1

1/11/2015 31/1/2016 Marketing

Revamp website – integration of new booking system, mobile devices friendly

1/11/2015 15/1/2016 IT

Form social media division – operation and support

1/11/2015 31/12/2015 IT

Revamp loyalty program - Enrich 1/11/2015 31/12/2015 Marketing

Training – safety recurrent training, cabin-crew, engineering, ground handling

1/11/2015 Ongoing HR

Review and enhancement program with alliances and business partners

1/11/2015 31/1/2016 Marketing

Review current routes and publish the updated routes

1/11/2015 31/1/2016 Operations

Review fleets management, maintenance, replacement

1/11/2015 Ongoing Operations

Review and publish new pricing 1/11/2015 15/1/2016 Operations/Marketing

Launch brand awareness campaign #2 – The Journeys part 2

1/1/2016 31/3/2016 Marketing

Advertising campaign #1 1/1/2016 30/6/2016 Marketing

Advertising campaign #2 1/3/2016 31/12/2016 Marketing

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7.2 Evaluation and Control

Measuring the results of new strategies is just as important as the development of the plan and

strategy themselves. In order to measure success of the strategy, the evaluation and control types

will be based on annual-plan controls, profitability control, efficiency control and strategic

control. The control approach is to ensure that the objectives are met under the current

circumstances of the company. The progress will be constantly monitored and necessary action

or corrective action will be taken based on the evaluation results, for example action to be taken

based on any changes on the internal or external environment

7.2.1 Annual-plan control - “to be in top 10 airlines by 2017”

The prime responsibility for annual-plan control will be the top management and middle

management of MH. The main purpose is to examine whether the planned results are being

achieved and to ensure the performance is in line with the marketing objective that is “to be

profitable by 2017”. Some approaches to be used under this control type will be;

Sales analysis – The sales report will be monitored by monthly, quarterly and yearly basis. This

can also be done through market surveys and at the point of sales with the assistance of

distribution partners.

Market share analysis – This approach indicates how well MH is doing in the marketplace

compared to the competitors. It will be tracked on quarterly and yearly basis.

Financial analysis – This approach is to determine the financial position and stability of the

organization. This will be tracked and analyze based on quarterly and yearly basis.

7.2.2 Profitability control – “to be profitable by 2017”

The prime responsibility will be the marketing controller. The purpose is to examine where the

company is making money and losing money. The approach to be used to gauge profitability will

be done by;

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Product – The sales of first class, business class and economy class seats will be tracked and

monitored on monthly, quarterly and yearly basis.

Customer – This will be tracked by which customer group contributes or not contributing in

revenue and profitability of the company.

Segment – The sales of long-haul and short-haul will be tracked and analyzed on monthly,

quarterly and yearly basis.

7.2.3 Efficiency control

This responsibility lies with staff, management and the marketing controller. This is to evaluate

spending and improve the efficiency and impact of marketing expenditures. The approach in

efficiency, control will be monitored through sales force, advertising, sales promotion and

distribution channels.

7.2.4 Strategic control

Top management and marketing auditor hold the main responsibility of strategic control. The

purpose is to examine whether the company is pursuing its best opportunities in markets,

products, and channels. The approach is to analyze and review marketing effectiveness review,

marketing excellence review and company ethical and social responsibility review (CSR).

8. Summary

Based on the comprehensive strategies and strict implementation timeline detailed in this paper,

MH is facing an uphill battle, but realistically it is a doable and workable solution for MH to

bring back the glorious day. MH needs strong support internally from the family of MH

(employees), the people of Malaysia regardless of geographic location to join the journey to

recovery.

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The support that MH gets from the government is a strong indication that the national

flag carrier is one of the national icons that has to be protected and preserved. As a primary

national carrier, MH does not possess total liberty to operate based on free market principle,

which concerns on profit maximization. MH carries the obligation to serve the political and

social obligations that may restrain its profitability objectives. Although MH is commercially

driven, it is also obliged to carry out specific social responsibility and expected to juggle between

serving national interest and commercial interest.

In conclusion, like other national carriers, MH had undergone a severe financial turmoil

due to various reasons especially economic downturn. Hence, the marketing plan formulated in

this paper is an intensive tactical move to ensure MH is still flying high.

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References

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D’Alessandro, P., & Kletzel, J. (2013). Experience Radar 2013, Lessons Learned from the Airline Industry. Experience Radar, 5(October).

Malaysia Airlines. (2011). Business Plan Our Way Forward, (December).

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Mas, T., & Plan, R. (2014). Rebuilding A National Icon -. Rebuilding A National Icon, (August).

Mohd Zulkeflee Abd Razak, & Ilias, A. (2011). Seven Unique Differentiation Strategies to Online Businesses: A Comprehensive Review of Malaysia Airline System (MAS). Journal of Internet Banking & Commerce, 16(2), 1–16. Retrieved from http://content.ebscohost.com/ContentServer.asp?T=P&P=AN&K=67359758&S=R&D=bth&EbscoContent=dGJyMMvl7ESeqLU4v+vlOLCmr0qep7NSs6+4SrOWxWXS&ContentCustomer=dGJyMPGtskm1qbNOuePfgeyx44Dt6fIA\nhttp://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=67359758&

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Appendices

Appendix 1 – Financial Report

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Appendix 2 – Revenue disadvantage to FSC peers

Appendix 3 – Cost disadvantages to LCC peers

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Appendix 4 – Frequent Premium Travelers

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Appendix 5 – Frequent Traveler by Country or Residence

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