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Assignment Organizational Behavior


A case analysis of the Organizational Behavior of Malaysian Airlines (MAS) and

its Impact.

1.0 Introduction
Ever since its inception as an independent airline in 1987, Malaysia Airline System Berhad is
doing business as Malaysia Airlines. Proudly running as the national-flag carrier of Malaysia, it
operates flights from its main home base of Kuala Lumpur International Airport (KLIA) with
secondary hubs at Kuching and Kota Kinabalu on the second island of the Malaysian state. With
a concentration of network on both regional as well as international sectors, MAS has come to be
known as a world renowned airline as well as a local favorite along with its subsidiary, MAS
Wings, credit being given to its staff hospitality and its marketing campaigns. After conducting
an analysis on a local and international level it has been understood that there are various issues
and opportunities that are being faced or available by and to MAS. Some of these are an
overstaffing problem involving a workforce of more than twenty-thousand employees all over
the world. Another one, being incurred net losses of RM 479 million by the third quarter of 2011.
By the end of the fourth quarter the airline had incurred a loss of RM 2524 million, indicating a
substantial decrease from a profit of RM 234 million in the previous year. However the airline
had remained profitable in the previous fiscal year of 2010.
This report will analyze the organizational behavior of Malaysia airline which talks about four
parts: business efficiencies, customer relationship and marketing efficiencies, human resource
and knowledge efficiencies, differential efficiencies. It also involves a SWOT analysis on the
airline as well. Finally, MAS has the vision in the next 3-5 years to become a 5-star value carrier
through a strategic medium term plan which has been devised that might prove beneficial for the

1.1 Company overview and problem occurs in MAS

Malaysia Airlines is letting go of 6,000 of its 20,000 employees, only days after admitting that
almost 200 cabin crew members had quit recently. In addition to crew members leaving the
airline, MAS has suffered a $97.6 million loss for the second quarter and $140.8 million loss in
the first quarter following the disappearance of MH370 and crash of MH17.
In a desperate attempt to revive the airline, a major revamp of the system is completely
necessary. This is especially true considering the negative connotations that seems to come along
with its name.
Malaysian airlines have several problems issued arise not only in operating and financial
problems but also they have several issued in management. However, Malaysia Airlines had its
modest start in the golden age of travel. A cooperative plan 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 agreement to run an air service. The outcome was the
integration of Malayan Airways Limited (MAL) on 12 October 1937. On 2 April 1947, MAL
took to the skies with its first marketable flight as the national airline. The existence of BOAC
also facilitated MAL's entry as a member of IATA. After the Independence of Malaya in 1957
and with the contribution of BOAC, QANTAS, the government of the Federation of Malaya,
Singapore and the Territory of North Borneo, MAL was launched as an unrestricted limited
company. Fuelled by a young along with dynamic team of visionaries, the domestic carrier
turned into a global airline in less than a decade. With the creation of Malaysia in 1963, the
airline changed its name to Malaysian Airlines Limited. In 1965, with the severance of Singapore
from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines
(MSA). In 1966, the Governments of Malaysia and Singapore became the majority shareholders
in the national carrier and Malaysia-Singapore Airlines (MSA). In 1971, the partnership
involving Malaysia and Singapore was dissolved, and Malaysia Airlines Berhad was
incorporated. With an authorized capital of RM100 million, the company made a final revision to
its name in November 1971, and Malaysian Airline System Berhad (MAS) was launch in new
name. However, the year 2005 Malaysia Airlines faced one of its most challenging times.
Operating against a challenging global economic climate, increasing competition and rising


Malaysia Airlines




broadly restructure


(Malaysiaairlines.com 2011). On 27 February 2006, newly appointed Managing Director or CEO

Dato Sri Idris 3 | P a g e Jala, along with a new management team announced a Business
Turnaround Plan (BTP). Since then a number of actions and changes were done to restructure the
business. The company had achieved a significant cost reduction of RM 665 million in financial
year of 2006 and more than 700 million in 2007. However, basically MAS s difficulties can be
considered into three key issues which are Financial problems, Operational problems and
Management problems. In 1995, MASs management had launched a strategic initiative to
aggressively scale up its operations and international network. As such, MAS has placed an order
of 25 new Boeings aircraft which are to be delivered in five years time. The purchases of the
aircraft were made in US Dollar and no hedging method was used at that time because of the
stable currency between Ringgit Malaysia against U.S Dollar. Unfortunately in 1997, Asian
countries including Malaysia incurred economic down turned which, has resulted the devaluation
of Ringgit Malaysia and an increased of interest rate. Consequently, MAS cost of purchase
increased tremendously. Due to the above scenario, MAS was reported to incur 5 consecutive
losses for the past 5 years. In 2001, MAS after tax loss was reported to be RM1.3 billion. There
have another problem occurred in poor customer service and management system which put this
airlines in great losses. Many of customers complain about their e-ticketing service which is not
handling by the management very strictly. The reason is, customer database is not monitoring
effectively by the management though there have a massive investment in Information System.
Organization in decision making delays the solution which they need to be delivered as soon as
possible to the customer. However, this problems are not stop here, in further management are
not concerning regarding about customers complain and neither given any prompt ticket refund
nor resolving e-ticketing problems. Nevertheless, Malaysian airline struggling with several
problems and getting bad feedback from the customers not only for poor management but also
external interaction of government and political issues and so on.

2.0 Strategic Organizational Architecture of MAS

In order to understand and analyze the current scenario of Malaysia Airlines and provide future
strategies the Efficiency Model has been used. Under the Efficiency Model MAS will be keenly
studied on 4 efficiency areas which are Business Strategy, Customer Strategy, HR Strategy and
Innovation Strategy.
2.1 Business Efficiencies
2.1.1 Finance Management
The Airline industry, more so than other industries is vulnerable to demand shocks created by
macroeconomic events. In 2011, there were two such shocks with the earthquake and tsunami in
Japan and the floods in Thailand. Furthermore, the possibility of a global recession caused by
Europes sovereign debt crisis and a continued high cost of jet fuel must be prepared for.
Malaysian airlines must unveil a new business and finance strategy aiming to restore
profitability. Net loss
The Malaysian flag carrier, which turned a profit in 2010, incurred net losses of RM 479 million
by the third quarter of 2011. By the end of the fourth quarter the airline had incurred a loss of
RM 2524 million, indicating a substantial decrease from a profit of RM 234 million in the
previous year. Fuel & Non-fuel Expenditures
Further more fuel costs had gone up 25% by the end of Q4 in 2011 to RM 305 million. Non fuel
costs had increased by 50% accounting for additional provision including redelivery of aircraft
among others. The provisions made in Q4, 2011 had totaled to RM 1.09 billion. Although the
fuel costs recovery rate had and continued to improve from the previous quarter, fuel price still
remains highly volatile affecting the airlines revenue performance.

In order the restore profitability the airline carried out a new business plan seeking to cut
capacity and increase focus on the premium sector.

2.1.2 Strategic Revenue Management

Over the past decade Malaysia Airlines has lost focus on its full service portion of the market
on which it had been increasingly dependent. Instead they had diverted resources to the low cost
segment of the market, operating one of the oldest fleets in the region and under-investing in the
customer experience that is key for success in the full service business. This decline in relative
product quality and customer loyalty combined with excess capacity had weakened substantial
yield increases. In 2011 the airline had lost 40% of passengers flying a full service competitor
airline to a city served by Malaysian Airlines. Revenue & Cost levels
The airline had seen an increase of group revenue of 2% from the previous year. However, the
unit revenue levels were still 15-25% below regional peers as can be seen in the chart below.
Furthermore, the airlines cost position was not sufficiently lower than competitors resulting in
loss. Increase in Yield & RASKs

The airlines lower load factor brought with it improved yields by the end of 2011. The RASK
(Revenue per available seat kilometer) had also increased by 2% as can be observed the figure
below. Although there had been a modest growth in revenue, yield and RASKs by the end of
2011 it was insufficient to offset higher fuel costs. Revenue & Profitability Recovery

Without taking drastic measures the airline is forecasted to be bankrupt by the end of 2012. One
possible step to recover from the losses incurred in 2011 is to cut back on several loss-making
routes including the long haul routes to South Africa and Argentina. The airline acknowledges
that 40% of its routes are unprofitable, and although it only operates five weekly flights to South
America and Argentina it accounts for over 5% of total international capacity per ASKs. This
cutback will allow Malaysia Airlines to increase capacity within Southeast Asia by adding
frequencies to core markets in the region.
The airline has a full service cost base but its revenues are closer to those of low cost carriers
such as AirAsia rather than full service carriers such as Cathay Pacific. A crucial step to recovery
includes investing in order to win back the loyalty of premium passengers by operating modern

wide body aircraft and improving other aspects of product quality which is necessary for the
success of such a premium full service carrier.

2.1.3 Network Strategy

Malaysian Airline operates flights from its home base, Kuala Lumpur International Airport and
with a secondary hub at Kuching. It operates flights in Southeast Asia, East Asia, South
Asia, Middle East and on the Kangaroo Route between Europe and Australasia. It also operates
transpacific flights from Kuala Lumpur to Los Angeles, via Tokyo. Malaysia Airlines consists of
two airline subsidiaries: Firefly and MASwings. Firefly operates scheduled flights from its two
home bases Penang International Airport and Subang International Airport. The airline mainly
focuses on tertiary cities. On the other hand, MASwings focuses on inter-Borneo flights.
Malaysia Airlines has a freighter fleet operated by MASKargo, which manages freighter flights
and aircraft cargo-hold capacity for all Malaysia Airlines' passenger flights.
As it has been mentioned in the report earlier the Malaysian flag carrier, which turned a profit in
2010, incurred net losses of RM 479 million by the third quarter of 2011 and by the end of the
fourth quarter the airline had incurred a loss of RM 2524 million, indicating a substantial
decrease from a profit of RM 234 million in the previous year.
The initial recovery plan would result in the termination of MAS highly unprofitable routes to
South Africa and Argentina and its only destination in Latin America. Other long-haul routes will
also be eliminated but have not yet been mentioned by MAS.
Malaysian Airline recognizes that over 40% of its current routes are unprofitable. While
numerous long-haul routes will be dropped, MAS plans to surge its capacity within Southeast
Asia by adding frequencies to the main markets in the region. MAS hopes to produce sufficient
cash on the expected doubling of passenger demand in the Southeast Asian market by 2020.
According to CAPA, MAS operates only five weekly flights to South Africa and Argentina
(including two on a Kuala Lumpur-Cape Town-Buenos Aires routing and three between Kuala
Lumpur and Johannesburg), they account for over 5% of MAS total international ASKs

(Available Seat Kilometers). MAS also need to work on reducing about 25% of its European
capacity in order to achieve the goal of a 12% system-wide capacity reduction.
MAS now serves five destinations in Australia and Auckland in New Zealand but it is doubtful
they would eliminate these flights as MAS seeks to forge a close partnership with Qantas, which
is sponsoring MAS entry into oneworld alliance.
Australia and New Zealand hold 22% of MAS international ASKs, while Europe accounts for
29%. A minor increase in capacity in expected from Asia which accounts for 39% of total
international ASKs.

The network changes have a great chance to improve the carriers structure by MYR220 million
(USD69 million) to MYR302 million (USD95 million) annually, starting from 2012. With its
smaller long-haul network MAS will focus mainly on the premium segment, leaving Malaysian
long-haul low-cost carrier AirAsia X to focus only on the budget sector.
MAS plans to win or gain back its premium long-haul passengers, mostly through changing its
carriers. A phase-out of MAS ageing widebody will be pursued and simultaneously new
passenger facilities will be introduced. By the end of next year the carrier will be operating only
three types of modern widebody aircraft A330-300s, B777-200ERs and A380s. A330-200s and

B747-400s will be lashed out by the end of 2012. MAS assumes the average age of its fleet will
decline over the next four years from 13 years to only five years, giving it a younger fleet than
Asian leaders AirAsia, Cathay Pacific and Singapore Airlines (SIA).

A set of additional A330-300s and MAS first batch of A380s will be delivered in 2012. The new
business plan which was conducted by Malaysian Airlines confirmed that their first A380 aircraft
will be positioned on the Kuala Lumpur-London route. MAS mentions that the A380 will have
exceptional in-flight services which will help determine improvements in its yield and load
factor. MAS London route, which served with double daily B747-400s, suffered months from
low load factors and yields. The A380 will bring in more change and result in extra capacity at a
time. MAS is also pursues a connection with oneworld member British Airways (BA), which did
not serve Kuala Lumpur back in 2011, leading to a potential joint venture in the UK-Malaysia
market and beyond. Qantas, which already operates A380s to London and has an existing joint
venture with BA on the UK-Australia route, could also end up in this partnership.
MAS begin to transfer all of its B737-800s to its new regional premium carrier. The new carrier
plans to operate regional international routes within four hours of Kuala Lumpur, including to
destinations in Southeast Asia, the Indian subcontinent and China. A preliminary initial route
map for the new carrier includes six ASEAN destination which
include Singapore, Jakarta, Manila, Hanoi, Ho Chi Minh City and Bangkok as well as the east
Malaysian domestic destinations of Kuching and Kota Kinabalu. But MAS declares that the
domestic routes will continue to operate with B737-400s which is expected to be phased out by

The use of B737-800s will allow MAS to significantly increase frequency on its regional
international routes because MAS now uses widebodies on these routes alongside B737s. MAS
says the switch to B737-800s will also result in cost improvements because the B737-800 is 26%
more efficient on a fuel cost per ASK basis than the A330-200 and 23% more fuel efficient on a
fuel cost per ASK basis than the B737-400.CAPA data shows MAS operates 14 B737-800s with
40 more of the type which has been placed on order. Several additional B737-800s will be
delivered next year as MAS now plans to take delivery of a total of 23 aircraft in 2012 which
would be a mix of B737-800s, ATR 72s, A330-300s and A380s.

MAS are confident that the new regional carrier, with its modern fleet and high product
standards, will better meet the needs of Asias regional premium passenger. MAS expects this
"win back customers" portion of its new business plan to generate a profit impact of MYR394
million (USD124 million) to MYR477 million (USD150 million) annually. This will be achieved
by improving yields by 19% in 2012 while unit costs are expected to remain flat. In addition to,
the new partnership with AirAsia is also expected to have a big impact on the revenue side as
MAS begins to use AirAsia to improve its network connectivity. MAS reveals in its business
plan that a connection service will be launched on non-overlapping routes. The new connection
product with AirAsia will allow MAS to gain access to over 24 cities which MAS did not serve
back in 2011, resulting in additional feed to MAS long-haul network.
However, Firefly was a major component of MAS previous strategy of having an additional
budget to help the group compete against AirAsia in the domestic and regional international

markets. But while Fireflys turboprop operation, which was launched in 2007 and followed a
hybrid regional low-cost airline model with some frills, was profitable, the newer jet operation
was tormenting up big losses until it was shut in September. MAS new management team
says the previous strategy of focussing on Firefly was a mistake because it diverted resources
away from its premium business. Firefly, which was growing fast and had been allocated 30
B737-800s from MAS order book, left MAS mainline with one of the oldest fleets in Asia. MAS
claim the result was its mainline product languished, leading to lower yields and a decline in
customer loyalty.
To end with, Malaysian Airlines new business plan represents a major change and an
improvement in their network strategy. The Malaysian flag carrier, while always striving to offer
a top notch product, has struggled over the years to compete with Asias leading carriers for
premium business. MAS are finally now committed to investing in the products needed to
compete with the likes of SIA and Cathay.
2.2 Customer Relationships and Marketing Efficiencies
2.2.1 Communication and Marketing
Since MAS have incurred a net loss of RM 1.2 Billion in the first 3 quarters of 2011 alone,
maintaining its brand and customer experience has become a vital concern for this airline. In
order to gain back their position and customer loyalty it requires MAS to focus on building its
brand and adopting various innovative strategies and develop approached to stimulate demand. Innovation
In 2010 MAS renewed their emphasis on providing world class products and services to enhance
customer experience thereby increasing sales. They upgraded their Passenger Service System
which has enhanced their offerings today. The system includes the MHmobile service where
passengers can book tickets, check-in, track their baggage as well as check on their flight status
and Enrich points via their phones.
Also in 2010 MAS came up with a new strategy. It became the first airline in the world to offer a
comprehensive booking and checking-in application on the iPad. The first MHkiosk which

utilises this iPad application was also launched in June 2010 at Malaysia Airlines Kuala Lumpur
Ticketing Office at KL Sentral, followed by Kota Kinabalu and Kuching in July.
During this process MAS carried a refresh of their internet website basically a makeover to
further enhance its ease of use and to offer anew products. This process was carried out to
provide better service as well to respond to feedback from customers in order to maintain their
loyalty and customer experience. Stimulating Demand
Since MAS has been facing problems in it growth face, it embarked on a more aggressive
campaign to improve sales by introducing MHdeals. It is an application based on the augmented
reality concept on the iPhone, with the dual purpose of enhancing customer experience and
increasing demand. MHdeals enables the iPhone to display information about certain tourist
attractions, as well as deals that are currently on offer by Malaysia Airlines to cities situated in
the general direction detected by the phone. The Company had collaborated with Sabah Tourism
to implement the service in Kota Kinabalu, and will work to add more content and destinations
to the application.
Other campaigns that were carried out in 2010 to stimulate demand included a partnership with
Australia Tourism called Only in OZ Holidays that was launched with its supporting website
MAStraveller.com, the Saya Nak Cuti reality television show was used to promote Malaysia
Airlines as a national carrier, the threeday Merdeka sales, the MAS Everyday Value Fare
promotion, as well as the appointment of the popular Chef Wan as a Travel Icon. Promotion
In MAS website special promotional deals are offered for those members as well as non
members. Though being a member holds more advantage than a non member. Passengers get to
purchase air ticket with discount price and enjoy exclusive member only fares. There are various
deals offered such as deals of the day, MHcoupon, MH deals and MASholidays. Deals of the day
allow customers to enjoy big savings which include exciting destinations at a fantastic pries.
MHcoupons is where customers get to enjoy exclusive saving on MAS flights. This online
coupon comes in the form code. MHdeals is a free application that use iphone GPS sensor to

locate airport around you and display the best MAS deals. Lastly, MASholidays is a deal that
provides holiday package that suit a variety of budget. It includes holiday package within
Malaysia or outside of Malaysia at an attractive price.
Other than the deals offered MAS sponsors The White Jersey. The organization of Le Tour de
Langkawi, recognized by the International Cycling Union (UCI) with an Excellent Level of
Organization, has led Malaysias Leading Airline to continue its support for the 17th edition of
the race. MAS have been a long running corporate partner of the race. Once again in 2012 MAS
sponsored The White Jersey of the best Asian rider classification.
In 2011, Queens Park Rangers have announced a multi million pound shirt sponsorship deal with
MAS for the next 2 years. The sponsorship of jerseys for Queen Park Rangers (QPR) enabled
Malaysia Airline System (MAS) to reinforce its global full-service presence and premium
franchise via football fans globally.
As a part of their promotional strategy, recently on 14th Jan 2012 passengers arriving at Kuala
Lumpur International Airport were greeted with a flash mob of around 100 dancers and singers
into a spontaneous entertainment as a part of MAS special event to welcome the New Year with a
bang, it was carried out by MAS advertising and promotion team and their advertising agency
involving not just professional choreographers but also MAS staff and cabin crew in their
uniform. It kick started with MASs theme song We Fly followed by other Bollywood and
Hollywood songs. Ever since, the flash mob trend has been growing worldwide into marketing
schemes, involving a sizeable group of people who out of the blue break into a dance act at a
public place, MAS took this opportunity to promote and help the airline gain strong online
presence on social media.
On 24 April 2012 Malaysia airlines and firefly were big winners at the Putra brand awards 2012.
The Putra Brand Awards are the largest consumer-based sampling of its kind in Malaysia,
measuring brands through four key attributes: growth, relevance, confidence and differentiation
where Malaysian consumers themselves are the judges. Malaysia airlines was rewarded Gold for
its transportation and travel and tourism category while its subsidiary Firefly was the recipient of
the most promising brand. MAS group VEO Ahmad Jauhari considered this recognition as a

fitting testimony that consumers continue to value Malaysia Airlines branded customer
experience in spite of all the problems faced.

2.2.2 Customer Loyalty Programs

Malaysia Airlines introduced its enhanced Enrich frequent flyer program on 12 June 2006. The
program is now known as Enrich by MAS. It aims to recognize and reward frequent flyers with
free travel and special benefits. Usually a FFP is introduced by an airline to maintain its
customers loyalty in the long run, and MAS holds the same purpose. Under this program there
are four levels of Enrich memberships- Blue, Silver, Gold and Platinum. Each level has different
privileges to offer. To name few priority check-in, priority standby and extra baggage allowance,
amongst others. The most basic features of FFP miles can be accrued by the Enrich members on
qualifying Malaysia Airlines services as well through partners, including airlines, hotels, car
rental agencies and credit card companies. The miles earned by the members allow for
redemption for free travel, free upgrade and other complimentary services. Members of Enrich
are able to accrue miles on qualifying though Enrich Airline Partners such as Air France, Alitalia,
All Nippon Airways, Delta Airlines, Etihad, Jet Airways, KLM, SriLankan Airlines, Virgin
Atlantic and many more. Malaysia Airlines also includes a frequent flyer program for students
above 12 years old which is knows as GRADS. It offers discounted airfares, great packages and
other special deals.
2.2.3 CRM Customer Interface
CRM basically means continuous interaction with customers in order to enhance relationship and
to develop long term loyalty thereby earning profit. MAS have adopted many methods to keep
their customers satisfied. MASs customers are their top priority. There are various channels
which include call centers, sales offices, agents, airports counters and town center kiosk for the
convenience of walk-in customers.
Malaysia Airlines internet booking system was launched in august 2004. The internet booking
system not only enhanced customer relationship and experience but also allowed MAS to reduce
airlines distribution cost significantly over the years. The website allows customer faster access

to information to their travelling needs and to look through its products and services offered.
Also the use of this internet booking allows customer access to MAS inventory worldwide with
ease. CRM in Social Media

One of the most comprehensive testaments of MAS innovation in social media is the
introduction of MHbuddy to Malaysia Airlines Facebook page in March 2011, it is an application
that allows users to book and check-in for flight, and share details of their trip with their
Facebook friends. This application is considered to be the most comprehensive for an airline on
the Facebook platform. This innovative strategy developed by MAS is an interesting approach to
leverage Facebook to book a flight.
MAS have a key presence on both Twitter and Facebook as mentioned earlier. Separate tweets
and pages for specific markets such as students, the expatriate community and several foreign
localities in their native language have been formed in order to make it easy for customers to
access and use. An approach to develop customer relationship management. These channels
complement Malaysia Airlines existing consumer platforms, such as the sales offices and call
centers, and allow the Company to interact with a different segment of the market and to engage
them in a different way.
As analyzed from the above information we can come to a conclusion that MASs current
marketing efforts have been predominantly focused on tactical sales promotion rather than brand
building. In spite of this approach they have been able to generate low yields insufficient to cover
an increasingly uncompetitive cost structure. In order to win back its customers MAS should
improve customer satisfaction at every touch point which is pre flight, in-flight and post flight. It
should focus on building its brand making sure it delivers on its brand promise consistently.
Measures MAS needs to focus on are to refresh Enrich Loyalty Programme, competitive product
roll out, enhanced advertising and promotion development and finally to focus on branding
revamp. The below figure depicts Malaysia Airlines recovery plan for Branded Customer

3.0 Reccomendation
3.1 Literature Reviews
Following the appointment of a new CEO, Malaysia Airlines (MAS) has announced initiatives to
track and boost performance of employees.
In a quarterly progress update, the airline reported sustained progress amidst a backdrop of
external macro-economic fluctuations.
Group chief executive officer of Malaysia Airlines, Christoph Mueller said We have seen a
challenging quarter but I am pleased to see continued progress made in all key areas such as ontime performance and costs. Malaysia Airlines has been operating for six months now and
although we have a long way to go and areas for improvement, we are making steady progress in
the restructuring.
We are focused on building momentum with our restructuring in 2016. Diligent execution on
efficiency and tighter cost controls has already produced results which have seen us emerging
leaner and more focused. There is still plenty to be done but the group is working hard to ensure
that Malaysia Airlines succeeds and prospers for the years to come, added Mueller.
Part of these initiatives to boost profits involve strengthening the firms talent pipeline and
enhancing skills of employees.
MAS emphasised people development and succession planning remained an integral part for the
organisations sustained success, remains a key focus in 2016.
To this end, the quarter saw the introduction of the revamped performance management system,
which aims to boost productivity by providing clear targets as well as a clearer path for career
The system will enable us to spot skills gaps and escalate retraining programmes, MAS stated.

To address skills gaps, the airline will also be exploring joint ventures with established
international organisations to provide training and specific skillsets.
Whilst being beneficial for the airline, the firm added this venture is also very much in line with
the Governments Economic Transformation Programme.
The airline has been working hard in closing the skills gap via the Malaysia Airlines Academy
which will be based in KLIA, providing a centre of aviation skills for Malaysia. The newly
revamped academy will ensure future generations of leaders for the airline will be groomed
entirely from within, the report stated.
To this end, MAS confirmed it has successfully recruited 20 management trainees towards
building a talent pipeline as well as growing the aviation skillsets in Malaysia.
The trainees will be assigned and rotated across the various divisions in Malaysia Airlines to
ensure exposure across all functions of the organisation and to inspire passion for the industry.
The quarter saw further strengthening of the leadership team with the announcement of a new
Head of Revenue Management and Head of Engineering. The new team is an important strategy
of having world class and diverse talent to reflect the companys global business and operations,
the report concluded.

3.2 Organization Leadership Theories

Leadership, as explained by successful businessman Alan Keith, is "ultimately about creating a
way for people to contribute to making something extraordinary happen." Good leaders move
their followers to action and help them realize their potential to accomplish a greater objective.
While larger companies actively mine the work force for great leaders, for small businesses,
owners often need to fill this role themselves. Understanding the theories of organizational
leadership helps you grow and develop leadership skills and identify potential leaders during the
hiring process.

Trait Theory

The idea that great leadership derives from a person's individual characteristics or traits is known
as trait theory. Research identifies six personal traits that strongly relate to leadership:
intelligence, adjustment, extraversion, conscientiousness, openness to new experiences and selfefficacy. According to trait theory, individuals with these characteristics emerge as leaders
regardless of the situation.
Behavioral & Style Theory
This theory describes leadership not as a set of traits but a set of behaviors and styles. Theorists
studied three main leadership styles: authoritarian, where the leader dictates what followers must
do; democratic, where the leader presides over a collective decision process; and laissez-faire,
where the leader does not participate in the decision process. The results of the studies indicate
that followers preferred the democratic approach to leadership and that performance increased
when leaders used positive reinforcement.
Functional Theory
Functional theory argues that leaders' primary responsibility is to assess what their followers
need and ensure that those needs are met. A range of studies indicate that leaders must perform
five primary functions: monitor the environment, organize subordinate activities, train and coach
subordinates, motivate followers, and participate in the group's work.
Transactional Theory
Transactional theory argues that leadership arises from an individual's ability to reward or punish
subordinates based on their performance. Leaders must be given a goal, must possess the ability
to train and evaluate subordinate's performance towards that goal and must be given the authority
to reward subordinates when goals are met.
Transformational Theory
Transformational leaders focus on the big picture and use communication to motivate followers
to effectively and efficiently execute their vision. Transformational leadership theory calls for
leaders to be visible and accessible, and to actively seek out new ideas to realize objectives.
Environmental Theory

The environmental theory of leadership argues that leaders use psychology and self-awareness to
foster self-sustaining environments where group members bring out the best in one another. The
leader creates a culture that motivates and excites members to complete required tasks not
because they are required to but for the benefit of the group. Instead of carrying the group,
environmental leaders create a setting in which group members want to carry one another and are
empowered to do so.
Situational & Contingency Theories
These theories argue that the desired traits and behaviors exhibited by a leader depend largely on
the situation, and that there is no best way to lead. Based on this theory, the authoritarian
leadership style is effective during times of crisis but not for everyday operations, the democratic
leadership style is more effective when a consensus needs to be built, and the laissez-faire
leadership style is effective when subordinates are trained and experienced individuals who
appreciate the freedom it provides.

Malaysia Airlines Acquired By Khazanah

Malaysia Airlines will be owned completely by the Malaysian government from now on. Or
more specifically, the state investment company Khazanah Nasional, which used to own 69%
stake will now be taking 100% ownership by buying out other shareholders.
Khazanahs Managing Director, Tan Sri Azman Mokhtar stated that Khazanah will be buying out
the remaining equity from the shareholders at 27 sen a share. The airline will also be delisted and
a new company will be established to take over the airlines business. MAS is to be completely
delisted from Bursa Malaysia by the end of this year.
Malaysia Airlines will also restructure its routes, which does not come as a surprise to many,
considering the high numbers of empty seats on many of its planes. In fact, Malaysia Airlines has
not made any annual profit since 2010. According to the MAS Recovery Plan, it has seen
RM8.4 billion in cumulative net losses from 2001 to June 2013.

In addition, Khazanah is investing RM6 billion into the new company. Azman is hopeful for the
possibility of relisting the new company in three years time. While some would question the
insistence to keep MAS afloat, Prime Minister Dato Sri Mohd Najid bin Tun Abdul Razak
shared his sentiments on the matter in the MAS Recovery Plan released on 29th August 2014.
MAS is a part of Malaysias history, Dato Tun Abdul Razak stated. 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.
As we turn out minds to celebrating our independence, I ask that each of you consider how you
can support this national effort.

MAS will be appointing a new chief executive by July 1 st, 2015. Ahman Jauhari will continue to
lead MAS airlines until next year while Khazanah searches for a suitable replacement, which is
expected to be decided by the end of 2014.
3.3 Strategic plan to handle on Manpower Excessive issues

3.3.1 Job design Theories

Job design follows job analysis i.e. it is the next step after job analysis. It aims at outlining and
organising tasks, duties and responsibilities into a single unit of work for the achievement of
certain objectives. It also outlines the methods and relationships that are essential for the success
of a certain job. In simpler terms it refers to the what, how much, how many and the order of the
tasks for a job/s.
Job design essentially involves integrating job responsibilities or content and certain
qualifications that are required to perform the same. It outlines the job responsibilities very
clearly and also helps in attracting the right candidates to the right job. Further it also makes the
job look interesting and specialised.
There are various steps involved in job design that follow a logical sequence, those that
were mentioned earlier on. The sequence is as follows:
1. What tasks are required to e done or what tasks is part of the job?
2. How are the tasks performed?
3. What amount are tasks are required to be done?
4. What is the sequence of performing these tasks?
All these questions are aimed at arriving upon a clear definition of a specific job and thereby
make it less risky for the one performing the same. A well defined job encourages feeling of
achievement among the employees and a sense of high self esteem.

The whole process of job design is aimed to address various problems within the organisational
setup, those that pertain to ones description of a job and the associated relationships. More
specifically the following areas are fine tuned:

Checking the work overload.

Checking upon the work under load.

Ensuring tasks are not repetitive in nature.

Ensuring that employees don not remain isolated.

Defining working hours clearly.

Defining the work processes clearly.

The above mentioned are factors that if not taken care of result into building stress within the
Benefits of Job Design
The following are the benefits of a good job design:
1. Employee Input: A good job design enables a good job feedback. Employees have the
option to vary tasks as per their personal and social needs, habits and circumstances in the
2. Employee Training: Training is an integral part of job design. Contrary to the
philosophy of leave them alone job design lays due emphasis on training people so that
are well aware of what their job demands and how it is to be done.
3. Work / Rest Schedules: Job design offers good work and rest schedule by clearly
defining the number of hours an individual has to spend in his/her job.

4. Adjustments: A good job designs allows for adjustments for physically demanding jobs
by minimising the energy spent doing the job and by aligning the manpower
requirements for the same.
Job design is a continuous and ever evolving process that is aimed at helping employees make
adjustments with the changes in the workplace. The end goal is reducing dissatisfaction,
enhancing motivation and employee engagement at the workplace

3.3.2 Job Characteristic Model

Hackman and Oldham job characteristics model
The job characteristics model, designed by Hackman and Oldham, is based on the idea that the
task itself is key to employee motivation. Specifically, a boring and monotonous job stifles
motivation to perform well, whereas a challenging job enhances motivation. Variety, autonomy
and decision authority are three ways of adding challenge to a job. Job enrichment and job
rotation are the two ways of adding variety and challenge.
It states that there are five core job characteristics (skill variety, task identity, task significance,
autonomy, and feedback) which impact three critical psychological states (experienced
meaningfulness, experienced responsibility for outcomes, and knowledge of the actual results),
in turn influencing work outcomes (job satisfaction, absenteeism, work motivation, etc.). The
five core job characteristics can be combined to form a motivating potential score (MPS) for a
job, which can be used as an index of how likely a job is to affect an employee's attitudes and

Hackman and Oldhams job characteristics theory proposes that high motivation is related to
experiencing three psychological states whilst working:
1. Meaningfulness of work
That labour has meaning to you, something that you can relate to, and does not occur just
as a set of movements to be repeated. This is fundamental to intrinsic motivation, i.e. that
work is motivating in an of itself (as opposed to motivating only as a means to an end).
2. Responsibility
That you have been given the opportunity to be a success or failure at your job because
sufficient freedom of action has given you. This would include the ability to make
changes and incorporate the learning you gain whilst doing the job.
3. Knowledge of outcomes
This is important for two reasons. Firstly to provide the person knowledge on how
successful their work has been, which in turn enables them to learn from mistakes. The
second is to connect them emotionally to the customer of their outputs, thus giving
further purpose to the work (e.g. I may only work on a production line, but I know that
the food rations I produce are used to help people in disaster areas, saving many lives).
In turn, each of these critical states are derived from certain characteristics of the job:
1. Meaningfulness of work
The work must be experienced as meaningful (his/her contribution significantly affects
the overall effectiveness of the organization). This is derived from:
o Skill variety
Using an appropriate variety of your skills and talents: too many might be
overwhelming, too few, boring.
o Task Identity
Being able to identify with the work at hand as more whole and complete, and
hence enabling more pride to be taken in the outcome of that work (e.g. if you just
add one nut to one bolt in the same spot every time a washing machine goes past

it is much less motivating than being the person responsible for the drum
attachment and associated work area (even as part of a group).
o Task Significance
Being able to identify the task as contributing to something wider, to society or a
group over and beyond the self. For example, the theory suggests that I will be
more motivated if I am contributing to the whole firms bonus this year, looking
after someone or making something that will benefit someone else. Conversely I
will be less motivated if I am only making a faceless owner wealthier, or am
making some pointless item (e.g. corporate give-away gifts).
2. Responsibility
Responsibility is derived from autonomy, as in the job provides substantial freedom,
independence and discretion to the individual in scheduling the work and in determining
the procedures to be used in carrying it out)
3. Knowledge of outcomes
This comes from feedback. It implies an employee awareness of how effective he/she is
converting his/her effort into performance. This can be anything from production figures
through to customer satisfaction scores. The point is that the feedback offers information
that once you know, you can use to do things differently if you wish. Feedback can come
from other people or the job itself.
Knowing these critical job characteristics, the theory goes, it is then possible to derive the key
components of the design of a job and redesign it:
1. Varying work to enable skill variety
2. Assigning work to groups to increase the wholeness of the product produced and give a
group to enhance significance
3. Delegate tasks to their lowest possible level to create autonomy and hence responsibility
4. Connect people to the outcomes of their work and the customers that receive them so as
to provide feedback for learning

Reccomendation for decision making approach and solutions

Proposed decision making approach and solution:
After reviewing several problems from various angles it is clearly seen that MAS managements
are delaying to delivers their decision which have taken or somehow management taking wrong
approaches to take appropriate decision for the organization. However, in decision making
process there have two ways to make decision which is may the management of MAS can take
Logical approach or Magical Approach. However, for a big organization like Malaysian airlines
should be implement logical approaches rather than magical approaches. The problems which
arise in MAS management organizations need to be analyze their internal as well as external
factors very carefully. Through logical approach identify the problems in systemic ways and take
necessary action step-by-step. Once accomplish one problem than would be taking another step
for next. Moreover, management must be acknowledging that, each stage fully covered through
intelligence and care. ASK SIR L model, which is one of the most effective component in logical
approach decision making model.
Through this model organization will be identify the most important problems which is exist in.
For example, from the scenario of MAS customer service problem which state, customers trying
to change their flight through online service and getting trouble to fixed it. After that, they called
to administrator and did not get any feedback, later on send an email but no response at all.
However, again they called to the service department and explain overall scenario to the
management over the phone and get replied back I am not the one responsible for this and I not
in charge to resolve this issue and there is no one else to talk to this issue. However, this issue
gave a negative indication of MAS customer service.
What decision can take MAS organization through ASK SIR L model? Firstly, they need to find
out what are the causes existing thus the problem arise. Once specify next step will be find out a
possible solution to overcome from this. However, before implement the possible solution which
decision taken by the groups than forward it to the top management to review the decision. Once,
top management appreciates overall decision then will start to work for implementation.
Decision making through STEP analysis:

As earlier mention, problem-solving frequently contains of decision-making, and decisionmaking is specifically vital role for management and leadership. There are procedures and
methods to recover decision-making and the quality of pronouncements. After reviewing the
overall problems of Malaysia airline management can be take further decision through STEP
analysis to overcome from their existing problems.
Malaysia is self-possessed of three main races where Islam is the official religion. Its fruitfulness
in cultural variety and could be used as the attracting factor for the tourists to travel to Malaysia,
and indirectly helped MAS to progress its operation to contain more foreign destinations.
The Asian economic crisis in the late 90s which has affected the South East Asian region was
also a causative factor that caused MAS to suffer 5 consecutive losses. These circumstances got
degenerates as the Malaysian Ringgit currency was undervalued, which in turn led to high
interest on foreign trade. Investments made by MAS to expand its business by purchasing more
aircraft were highly affected by this. The devaluation of RM had also led to low spending power,
which caused lesser people to travel by air. The tragedy of September 11 has also contributed to
the reported losses by MAS. Since then, the world economy was on its downturn and the world
masses were getting phobia to travel by air. MAS have to bear the losses as its main operation
is based on the international network.
Politics and Legal
Due to the actual bad economic recession, Malaysian Government through Bank Negara had to
reread the foreign and monetary policies. As such, Ringgit Malaysia (RM) was attached to RM
3.80 to 1 US dollar. The Government had to impose stricter and tighter policies for Malaysian to
travel abroad to avoid currency outflow, which indirectly caused low rates of travelers for MAS.
The situation worsens, when the regional economic recession was coupled with the instability in
the political arena in Malaysia in 1998. As a result, the investors lost their confidence, being
more cautious and prefer the attitude of look and see and some of them have ceased their
operations in Malaysia, resulting in more layoffs.

MAS has also invested in IT and telecommunications advancement to increase the efficiency of
its operation. More people can have access to the MAS services just through the Internet where
people can book and buy their ticket online. Besides that, more promotions and advertisements
can be done through the Internet, which can attract more and more people to travel with MAS.
The growing demand in cargo services has resulted in more airlines opting to convert their
passenger aircraft into cargo aircraft. This new trend provides an alternative for MAS to reduce
some money on purchasing new cargo aircraft and perhaps enter into other possible profitable

Malaysian airline still holding their reputation in aviation industry. Hence, there have several
factors which they need to be overcome to reduce their further loss in nearest future. However,
management should take decision to improve their internal factors through implement logical
decision approach rather than magical approach. The companies like aviation industry, by made a
decision management require thinking analytically to resolve their problem. However,
management need to reflect some decisions and challenges which are difficult because probably
they dont have the necessary knowledge or experience, in which case they need first to decide if
the decision which made by them or challenge is actually suitable and necessary for at this stage.
There have few decisions which have to be made whether managements are ready or not, others
might not be as pressing as they imagine. Moreover, it also wouldnt be considerable to changebased decision if having considered the implications carefully to decide that it is not the best

thing to do. Management should take decision in right way as in right time so they can be
avoiding their nearest problem.


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