Malaysia Airlines Marketing Analysis

Malaysia Airlines Marketing Analysis Jump to: PEST Analysis | Marketing Mix Analysis | 5 Ps Analysis Malaysia Airlines, more commonly known as MAS was founded in 1947, as Malayan Airways. Its primary hub used for domestic and international flights is the Kuala Lumpur International Airport, the secondary hub being Kota Kinabalu International Airport. Malaysia Airlines has flights that cover most of Asia and flights that go on the Kangaroo Route between Europe and Australia. They also operate transpacific flights from Kuala Lumpur to Los Angeles, via Tokyo. MAS consists of two main airline subsidiaries that are MASwings and Firefly. Firefly focuses on flights to tertiary cities whereas MASwings prioritizes inter-Borneo flights. Apart from that, MAS also has a freighter fleet operated by MASKargo, which commands freighter flights as well as aircraft cargo-hold for all Malaysia Airlines passenger flights. Lastly, MASCharter operated charter flights using MAS aircrafts. 2.0 Market Environments Micro and Macro 2.1 Micro Environment Malaysian Airlines Systems (MAS) has suffered financially throughout the past decades due to many factors, just like other major full-service carrier airlines company in other countries. Due to events such as the September 11th terrorist attack, the war in Iraq and Afghanistan and also the outbreak of many viruses notably the Influenza virus, the airlines companies throughout the world had suffered its consequences. In order to evaluate Malaysia Airlines microenvironment, the method used is the Porters five forces analysis which consists of Threat of New Entrants, Power of the Customer, Power of the Supplier, Substitutes and Competitive Rivalry. 2.1.1 Threat of New Entrants Malaysian Airlines Systems (MAS) has not been affected by any threats of new entrants for the international stage because the company has been in the industry for a long period of time, which makes the company more stable and mature through the service they offer in the airlines industry. Although the company may not be threaten right now, there could be possible new entrants to the market which may be created by merging two or more airlines company as one. These mergers may also offer competitive prices and services to their customers and could possibly dominate the full-service carrier market in Malaysia. For the local market, Malaysian Airlines Systems (MAS) had been threatened by the new entries to the market notably Air Asia, and a few other entrants such as Tiger Airways and Berjaya Airways. Although these companies target the low-cost carrier market, they have made a dramatic effect to Malaysia Airlines performance and operations. There could be a possible reason that this trend would continue in the future if MAS through its subsidiary company, FireFly could not be as competitive as the other company. 2.1.2 Power of the Customer The airlines industry is full of operations that fly to many locations from many other locations. In Malaysia, there are other airlines company such as Emirates Airlines and KLM Airlines which offers value for money to customers to fly overseas mainly to Europe, which affects the operations of international flights for Malaysia Airlines. The choice of the customers choosing which airlines they prefer are more open due to its variety of offerings from these flight operators with their competitive prices. Therefore, one company does not have the power to monopolize the market because of customers have power to choose and select when they want to fly at the price they are willing to pay. Based on a research, the power of the flight operators has been decreasing in the late 1990s with business airfares decreasing drastically up to 50%. 2.1.3 Power of the Supplier Aircraft maker, Boeing has been dominating the market of supplying aircraft to airlines companies throughout the world, alongside Airbus and other smaller companies. MAS has been buying planes from Boeing since the start of its operations and for this reason; supplier has the power to control the market due to limited choices for the flight operators to choose from. Most of Malaysia Airlines pilots and staff had been trained to use the Boeing systems since the majority of planes owned by Malaysia Airlines are from Boeing. Recently, Malaysia Airlines had purchased a few up to date aircrafts from Airbus, notably the Airbus A380 Jumbo, for their upgrades to their aircraft line-up. Boeing and Airbus has the power towards their customers because they have been monopolizing the market for a very long time and they produce high quality aircrafts and the safety measures they provide are excellent. 2.1.4 Substitutes For a long distance travelling, substitutes are not possible as there are no other form of transportation that can compete with what airline companies can offer which is comfort, the ease of travel, the speed of travelling and also affordability as compared to other source of travelling such as by car, train, busses or by sea. Travelling through air is also more environmentally friendly, able to save a lot of travelling time and can be considered affordable in the current time. 2.1.5 Competitive Rivalry MAS has been competing with other big competitor in the Asian flight market; one of the companies is the neighbouring airlines company, Singapore Airlines and Thai Airways. Singapore Airlines has been offering attractive promotions and discounts to their customers and these have affected Malaysia Airlines operations and profitability in the full-service carrier market. The only way for these companies to survive is through merging with other airlines company. 2.1.6 Prospects Malaysia Airlines has been collaborating with many other airlines operators to share international routes mainly with Australias Qantas Airways, where Malaysia Airlines can fly to more routes that provide them with more profits. Malaysia Airlines should also monitor their performance for the unprofitable routes and cut them off from their offerings so that they could avoid huge losses in the future. 2.2 Macro Environment The definition of Macro Environment is the major external and uncontrollable factors that influence an organizations decision making, and affect its performance and strategies. To evaluate the macro or external environmental factors, PEST analysis is used to provide information on the factors that relates to MAS. 2.2.1 Political Factors It is essential to consider political factors towards the airlines industry in Malaysia due to its important nature in order to determine the future growth of the company. Malaysia has been viewed as a peaceful and harmonious country to others, and has become one of the popular and famous attractions for tourist all over the world because the country is politically stable. Malaysia also has many attractive travel destinations for people to visit and it is considered safe to travel anywhere throughout these destinations. The government of Malaysia has been promoting and maintaining its tourism assets and also implements policies and legislation to protect the investors, customer and the public, so that everyone feels at ease when they are in Malaysia. 2.2.2 Economic Factors In the past decade, global financial crisis has happened notably in year 1998, 2003 and year 2008. This event has affected the performance of the airlines industry globally and most airlines companies had suffered a huge loss and bankruptcy. Malaysia Airlines is one of Airlines Company that got affected the most in this region. Malaysia has been categorised as a developing country, therefore, from the past global financial crisis, the purchasing power of the people has gone down drastically and people rather save up more for important needs rather than getting on a flight for holiday or business trip. Although Malaysia Airlines has been pressured by many other competitors in the airlines industry, they have tried to overcome it by launching their initiative plan such as, Everyday Low Fares promotion in which they offer attractive discounts to any flight that has a lot of unsold seats to attract more customers to fly with them. People prefer to fly with low-costs carriers when the glo bal financial crisis occurs. 2.2.3 Social Factors Social factors are elements which consist of demographic and cultural considerations that affect the size of potential market and the needs of its customers. These factors includes beliefs, value, attitude, opinions and lifestyles of a person which may affect the companys external environment such as cultural, ecological, demographic, religious, ethnic and educational. Government has already implemented some ways to boost the tourism and airlines industry by carrying out campaigns by investing in maintaining the attractiveness of the tourists hotspots and provides excellent hospitality towards the tourism industry. People still prefer to travel by air due to its convenience. The change in the lifestyle of the people in Malaysia will probably help boost the tourism and airlines industry in line with the increase in gross national income per capital (GDP), to indicate that more people can afford to travel by air. 2.2.4 Technological Factors Malaysia Airlines provides online services for their customers to book tickets online, and they also provide other packages such as hotel bookings, lease of car, travel insurance and other commodities. In the recent years, Malaysia Airlines has upgraded its online system in which they implement the Passenger Services System (PSS). This system ensures the smoothness of transactions made online, snappier service delivery and also loyalty programmes, namely the Enrich loyalty programme. Malaysia Airlines has also been providing excellent in-plane entertainment systems such as digitalized entertainment screen for selected seats that consists of movies, music on demand, games and interactive applications. 3.0 Marketing Targeting 3.1 Segmentation Market Targeting is a marketing concept that helps marketers to diverge the market into small units that include people of the same mind. Market segmentation can be divided into several areas such as geographic, psychographic and demographic segments. According to demographic research, the average age of Malaysia Airlines passengers is 14.6 years and mostly ranges from 25 years and above. Most passengers of Malaysia Airlines earn high income that enables them to use their services anytime and it is also seen that most of their passengers are business people that travels all the time. Geographic segmentation The Kangaroo Route that Qantas Airways provides connects flights from Europe to major Australian and New Zealand gateways via Kuala Lumpur International Airport within 5 hours. 3.2 Evaluating Market Segments 3.2.1 Segment Size and Growth Demand for flights from Asia as well as North America and Europe has increased at a high rate since 2002, which dramatically outpaced supply growth. Intra-Asian demand has increased by 40% in the same time span. The predicted Asian economic recovery ensures that MAS has a chance to profit from this excess demand. According to their Business Plan, MAS expects ASEAN passenger demand to double by the year 2020. 3.2.2 Company Objectives and Resources To properly execute their Recovery Plan, MAS intends to further develop their branded customer experience. MAS plans to put their customers as top priority and will be making investments in several tools as well as processes which will mobilize the organization and enable them to execute their vision. Also, they will undergo an overhaul which will allow them to excel on three major dimensions which are commercial effectiveness, flight operations and cost management. They plan to continually improve in areas such as revenue management, direct sales, and intend on the usage of social networking to aid in marketing. MAS also plans to make their service to a more performance-based culture. They are also going to hire more suitable people for the senior leadership of MAS and shall not hesitate to make key decisions to put that objective into action. By cutting down and creating a more limited board of leaders, decisions will be quick and they will once again become a competitive and winni ng organisation, according to their Business Plan. As MAS is to obtain 23 new aircrafts in 2012 with state-of-the-art passenger features, this will generate more sales and marketing functions focusing on the premium sector. Also, in the first half of 2012, MAS launched their new short-haul brand which is flying an entirely new Boeing 737-800 fleet. 3.2.3 Selecting a Market Segment Based on their new business plan, Malaysia Airlines plans to target the premium sector, much like the strategy of Cathay. MAS has the vision to become the preferred premium carrier which will lead to competition between them and competitors Cathay and SIA. Their focus on the premium sector is influenced by the growth in demand in the last decade for domestic as well as international flights where demand greatly outstrips supply. MAS is putting emphasis on a branded customer experience and their new premium carrier will focus on international flight destinations with high traffic rates which in turn will generate revenue at a quicker pace than before, according to their Business Turnaround Plan. 3.2.4 Choosing a Market-Coverage Strategy While Malaysia proves to be a fairly small country in comparison with other Asian countries, MAS plans to harness Malaysias geo-economic centricity in ASEAN which emphasises on their natural cost-competitiveness. In line with focusing on the premium sector, Malaysia Airlines network plans to include destinations where their premium travelers have a high demand and also expand their network to cover the worlds major economic hubs and regions. MAS plans to focus on the individual customer needs of regional premium travelers. This is brought about by the launch of their new short-haul brand which will set standards that emphasise on operational excellence, premium service and cost efficiency. Their new plan to focus on the premium sector is highly advertised with several television ads, news alerts and public service announcements which are easily accessible online, increasing the coverage of aforementioned advertising methods. 3.3 Choosing implementing a positioning strategy MAS makes sure maintenance staff, flight operation staff, and ground crew are world class trained on their technical skills, cabin crew are highly trained and committed to excellent service. Based on MAS recovery plan in 2012 they will buy 23 new aircrafts and slowly get rid of the A330-200 and B747-400 aircrafts over the next 3 years. By 2015 they will have the youngest fleet in the region, where their aircrafts would be equipped with the best hardware. MAS will redo their approach of their branding, distribution and customer loyalty. They will also restore their commercial approach towards their customers. 3.3.1 Product differentiation Service MAS focus on service quality which has earned the company the status of a top-tier global brand. In 2004 Skytrax awarded MAS Five Star. This recognition has won them the Best cabin crew for four consecutive years. MAS staff are trained in their technical skills, their cabin crew is highly trained and committed to excellent service and professionalism. Personnel MAS makes sure maintenance staff, flight operation staff and ground crew are world class in their technical skills. Cabin crew are highly trained and committed to excellent service. Location MAS estimated that 60% of their routes are not profitable on a fully cost allocated basis. To help with their recovery, they are reducing the capacity on routes that have generated losses over the years. Physical attributes MAS will be buying 23 new aircrafts in 2012, and slowly get ride of the A330=200 and B747-400 aircrafts over the next 3 years. By 2015 they will have the youngest fleet of aircrafts that will be full equipped with the best hardware. 4.0 Marketing Mix 4.1 Product In the 4Ps of Marketing Mix, the term product refers to tangible, physical and also the service provided. It characterised the direct product or service to fulfil the customers needs. Malaysia Airlines has been providing up to date products and service. One of it is the e-Ticketing service. E-Ticket service is an online service that provides electronic tickets. With the purchase of e-Tickets, customers need not have to go to physical outlets to purchase their tickets but they can make their purchases online and print the tickets as proof of purchase. It is more convenient to the customers and the airlines company also able to save handling and administrative costs. Customers only need to bring a copy of the printed tickets that indicate details such as booking reference and purchase details. To purchase the e-Ticket, customers need a valid credit card and other approved payment methods. Malaysia Airlines also provides easy payment to their customers. Currently, Malaysia Airlines accepts many different types of payment methods such as credit card (Visa/MasterCard/American Express), Local banks online banking (Maybank2U, CIMB Clicks) and also PayPal. Malaysia Airlines Engineering and Maintenance is one of Malaysia Airlines subsidiaries which are well known for its world class service. The standards of service that they provide is on par with the work carried out overseas such as top European companies in the same line of service and have been in compliance with EASA as recognition for its competency and quality standard. 4.2 Place Malaysia Airlines fly to more than one hundred destination across six continents and they would expand their routes to new attractive destination in the future. They fly domestically and also to foreign countries in North America, South America, Europe, Central Asia, Middle East, Australia, New Zealand and so on. Malaysia Airlines has been recognised as Asias Premier Airlines that offers intensive network to more than 100 destinations worldwide. Recently, Malaysia Airlines offers new destinations such as flying to Narita, Japan and cut off its unprofitable routes including those to Dubai, Johannesburg, Buenos Aires and Cape Town. 4.3 Pricing Malaysia Airlines is currently implementing a new micro-segmentised fare system for its domestic network which covers 23 routes. This is in line with the Flying to Win Customers aspect of the MAS Business Turnaround Plan. Apart from price flexibility, every fare segment has its own set of conditions regarding aspects like ticketing deadlines and refunds. The revised fares allow travelers the choice to combine different one-way fare flights to plan a personalized travel experience. With the new fare system, customers can enjoy cheaper air fare rates. According to the managing director of MAS, Mr Idris Jala, MAS customers will still be able to enjoy some of the lowest air fare rates globally even though the full fares for economy and business class have been raised to an average of 15% and 30% respectively. Research shows that Malaysia is behind Thailand in terms of the average fee of domestic fares. When inflation caused living cost and in turn fuel costs to hike, Malaysia Airlines to ok into consideration that their customers would want more affordable air fares. They implemented cost cutting strategies that positively affected their air fares plus the overall Business Turnaround Plan. MAS plans to remain committed to the governments plan for national integration initiatives which are currently offering trans-Malaysian fares that begin from lower rates than before 21st August 2006. They also plan to continue offering discounts to senior citizens, members of parliament and the like. Aside from these discounts, MAS has ceased to offer its previously discounted price fares. During the implementation of the new micro-segmented fare system which is currently in motion, Malaysia Airlines will still deem all transactions carried out with the previous fares valid. To ensure transparency of said transactions, all fares sold are effective immediately and this is reflected on the tickets of the customers which tallies with the recent cut over to nett fares displayed on tic kets. 4.4 Promotion MAS has strength which is derived from its global acclaim as a 5-star airline with a highly acclaimed brand supported by service orientated personnel. MAS strives to not only provide comfortable long distance service, but luxurious service. Their expertise in providing immaculate service from every aspect has had MAS named Worlds Best for 3 consecutive years. As of late, travelers have bestowed upon Malaysia Airlines the 5-Star WorldAirline Ranking in the 2006 Skytrax Passenger Survey. Participation in the MATTA-MITM Fair 2006 was part of their Business Turnaround Plan to increase revenue via their existing routes plus deliver the their brand experience to customers and business associates. Subsequently, MAS has increased its capacity to cater to the increasing number of web-surfers, Mastercard and Visa credit card users. The users can now pay for their tickets by calling and booking via the call center for flights departing from Malaysia. Customers who opt for this method of payment also enjoy the extra convenience that is the ability to obtain their tickets anytime before their determined departure date from any Malaysia Airlines ticket office in Malaysia or online. MAS has also added the ability to check-in and print your boarding pass via the internet. 5.0 Conclusion In conclusion, Malaysia Airlines has identified the factors that are hindering their growth as a company such as economical factors affecting fuel charges which in turn result in a fare price hike. To rectify this and minimize losses, they have devised a new business plan which is focused on the premium sector that is currently