Jul 312014
 

Malaysia Airlines has lost $1.3 billion dollars in the last three years. A name change could allegedly be coming soon for the Malaysian flagship-carrier after the loss of 537 lives in five months. Owned by the Malaysian government, officials must seek private investors to rebuild the ailing southeast Asia air carrier.

Photo Credit: Three of the airliner assets of Malaysia Airlines. Source: Agence France-Presse (AFP) is an international news agency headquartered in Paris. It is the oldest news agency in the world and one of the largest.

Discussed in this article is a strategic questions now confronting the executive leadership and board governance of the ailing Malaysian air carrier under crisis: What are the ‘Potential Opportunities’ for a Re-Branded Malaysia Airlines?

Malaysia Airlines is now in the fog of the greatest dual-crisis in international aviation safety and security history,” I said recently on Reuters.

As I added further on July 18 to Reuters, it was unprecedented for a commercial airline to suffer two tragedies in such rapid succession with 537 people dead. “I don’t see how Malaysia Airlines is going to recover from this as a firm.”

What are the ‘Potential Opportunities’ for a Re-Branded Malaysia Airlines?

Several approaches to save the firm are now on the table, which are said to include renaming the air carrier, which carries 50,000 passengers a day and employs 20,000 staff, confirms The Sunday Telegraph (U.K.) and Mirror (U.K.).

Strategically for Malaysia Airlines, this regrouping and reorganization is essential to realign the firm’s strategic leadership along four essential fronts:

  1. creating value for a regrouped Malaysia Airlines to broker future deals in the marketplace,
  2. delivering value to the customers, employees, shareholders, and Malaysian government stakeholders of a future re-branded Malaysia Airlines, as a more culturally cohesive air carrier for the southeast Asia region,
  3. transferring value through the air carrier’s future reputation, integrity and trust in the implicit promise of its new brand, as a responsible and accountable aviation industry player in the southeast Asia region, and
  4. sustaining value for a future renamed Malaysia Airlines, as an industry partner in international aviation safety and security.

A similar approach in the commercial passenger airline business was taken years ago by former American low-cost air carrier, ValuJet, upon the loss of one of its DC-9 airliners, operating as flight 592 on May 11, 1996 from Atlanta to Miami, in a crash inside a Florida Everglades swamp. After a series of safety problems and the fatal crash of Flight 592, the company merged with the much smaller regional airline AirWays Corporation, as the holding company for AirTran Airways. The former ValuJet air carrier was rename as AirTran, which has now been acquired in 2011 by highly profitable Southwest Airlines.

Considering above all,

  • the nature of the international airline industry’s transaction costs,
  • the Malaysian air carrier’s asset specificity of its air fleet and flight crew and staff capabilities,
  • the airline firm’s public-private governance coordination and control of markets in the southeast Asia region, and finally,
  • the contemporary thought on potential value migration from the Malaysian air carrier after the MH370 aviation tragedy and the MH17 aviation disaster,

Two underlying fundamentals frame the central issues facing the ailing air carrier:

  1. What can corporate executives and board governance leaders learn about the essence of Malaysia Airlines’ marketing leadership and value recovery in the region?
  2. What are the potential threats of the Malaysian air carrier’s sustainability in the modern economic environment of Joseph Schumpeter’s (1942) “creative destruction” evolution of international aviation industrial organization?

Bottom-Line Takeaway:

Malaysia Airlines has no choice but to become the international air carrier entrepreneur in the southeast Asia region.”

This could be achieve through better pricing and cost mechanisms in the international discount airline industry.

The air carrier also must be redesign and re-branded as a new and valuable organizational substitute in the southeast Asia market, tied to an integrative and interdependent infrastructural system of more private-based, entrepreneurial organizational activities.

In other words, the Malaysian government must let loose its stronghold onto the reins of the ailing air carrier, now bleeding $1.3 billion in cash these past three years, aside from the recent MH370 and MH17 extreme events, bombarding the firm during these past five months. Continued bureaucracy has not and will not work going forward, as the air carrier attempts to regroup inside a highly-competitive international commercial passenger airline industry.


Photo Credit: Jimmy LWH. MH370’s Boeing 777-200ER airliner, Registration Number 9M-MRO, disappeared on March 8, 2014.

Malaysia Airlines’ future entrepreneurial vision could be a renewed organizational construct that effectively re-emerges the air carrier, efficiently back into its competitively-advantaged position in the southeast Asia international passenger air travel market. This market will soon feature, possibly by the end of the year, safer and more secure “real-time airliner tracking.”

The principal strategic window of opportunity hinges on simultaneous investment along three schools of thought on achieving competitive advantage for a renamed Malaysia Airlines:

  1. a ‘scale and scope’ school – achieving superior scale and scope economies, through superior marketing and re-branding that not only maintains, but also enhances the renamed air carrier’s lower transaction costs relative to its airline competitors in the southeast Asia region;
  2. a ‘resource-based’ school – developing unique capabilities of customer satisfaction, responsiveness, and service of the re-branded air carrier, through its remaining 13 Boeing 777-200ER assets, new mid-size airliner fleet inventory management, and working capital and cash management, including protecting the air carrier’s capital reserves, through effective and efficient crisis management; and
  3. a ‘core competencies’ school – cultivating innovative and cross-cutting core knowledge and skills, derived from information and communications technological development that builds the air carrier’s service quality to customers and responsiveness by employees that are not only rare, but also not easily imitated or substituted by the renamed Malaysian air carrier’s competitors.

In the classical spirit of Jensen-Meckling (1976) organizational theory of the firm, the structural threads that bind together the future of a renamed Malaysia Airlines’ re-investments are a hybrid “centralized-decentralized” organizational coordination.

This coordination enhances managerial autonomy and training in heightened quality to customers. Yet, the new coordination reduces transaction costs of agency problems, tied to natural self-interest of the renamed air carrier’s decentralized decision management.

Such controls of agency cost problems can be achieved through the new air carrier headquarters’ significant investments in transportation and communication technological interconnections to centralized decision controls for proper monitoring, risk compliance, and board governance oversight.

Enhanced oversight and controls ensure a diversified portfolio of decision rights allocations integrally-tied to incentive-based structures linked to the new air carrier’s corporate-level, competitively-advantaged strategy of family-focused customer service.

Most of all, this oversight must be integrated with reward systems motivated by the new air carrier’s corporate-level financial strategy of “everyday low prices of safe and secure, quality international passenger air travel.”

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