Malaysia Airlines’ path to recovery: A journey of reflection after a global crisis

EVEN before the twin tragedies struck Malaysia Airlines (MAS) in 2014, the airline had been struggling.

It was open knowledge then that the airline was in “crisis”.

The decline continued into 2012 with local media outlet the Malay Mail Online reporting a loss of RM433 million (US$94.45 million).

Then, after being in the red for four quarters straight, MAS announced that it had recorded a RM1.2 billion loss (US$270 million) in 2013. It attributed this to stiff competition.

Two weeks after the announcement, Flight MH370 disappeared. Five months later, Flight MH17 was shot down over eastern Ukraine. A total of 537 lives were lost.

The airline’s dramatic loss at the end of 2014 could not solely be attributed to the two aviation disasters that struck that year. However, the incidents, coupled with already troubling circumstances, dealt the airline a damning hand.

A man writes messages and prayers for Malaysia Airlines Boeing 777-200ER MH370 upon its disappearance. Source: Shahrul Azman/Shutterstock

To cope with the losses, sovereign fund Khazanah bought out minority shareholders and delisted MAS from the stock exchange after losses in the first nine months of 2014 alone amounted to RM1.3 billion (US$300 million).

Today, the carrier, rebranded to Malaysia Airlines Berhad or MAB, is putting to work its fourth recovery plan, based on the calculations of local media outlet KiniBiz.

Christoph Mueller, known as a turnaround expert after fishing Irish airline Aer Lingus out of debt, was brought in to helm the sinking ship and immediately put into play a plan to slash costs – chief among which was laying off 6,000 of the 20,000-strong staff.

Despite the airline being “technically bankrupt,” when he joined, the German national remained optimistic that he could revive the five-star carrier and return it to profitability.

He was there to “stop the bleeding”.

After selling aircraft, axing long haul routes and an entirely new corporate brand, however, Muller in April 2016 announced that he was leaving MAB due to personal reasons, cutting short his three-year contract after just 12 months.

Former Malaysia Airlines CEO and MD Christoph Mueller resigned last year. Source: AP

Peter Bellew, a RyanAir veteran and no stranger to cost-cutting measures, was then tasked with turning the airline around.

“No one has been through what Malaysia Airlines has been through. It’s more like a mission. It’s not like a normal job,” he told Fortune earlier this year when recounting his first accepting the job in June 2016.

In its five-year, 12-point turnaround plan, which Khazanah announced when it delisted MAS in 2014, the state-owned corporation said it was prepared to pump RM6 billion (US$1.36 billion) into the recovery in order to bring the airline back to black by late 2017.

Bellew said MAB would be back on the stock market by 2019.

Since taking over, Bellew has set himself apart by straying from the rebranding strategy so many of his predecessors had attempted for the airline. Instead, he emboldened the Malaysian spirit MAS represented and fought hard to preserve the traditional wau bulan logo.

“We will be the pride of the nation again,” he said proudly to Fortune.

Besides working the baggage carousel with ground staff and discussing business strategies over teh tarik (Malaysian frothy milk tea) with his team, Bellew also decided to go down the tried and true method of keeping services bundled, unlike low-cost carriers like AirAsia that has unpacked each travel feature and offered them to passengers at a fee.

“We’re not going down that road. In fact, if we can give people more stuff for free, that’s what we’re going to do. And we’ll set ourselves apart from the low-cost carriers,” he said.

Today, the airline is no longer in scrimp-mode, as evidenced by its plans to purchase 42 wide-body jets over the course of several months, Bloomberg reported last month.

Things are slowly but surely looking up for MAS. Source: Phuong D. Nguyen/Shutterstock

According to the report, MAB is looking to lease up to a dozen used Airbus Group SE A330 or Boeing Co. 777 aircrafts followed by an order for up to 30 Boeing 787s or A330neos aircrafts. The deals could cost the airline US$7 billion.

Bloomberg also reported the airline as turning a profit in December after it posted an 81 percent load factor and a 90 percent occupancy rate then.

While admitted that getting back into the crucial Chinese market will be tough – most of the passengers on the missing MH370 were Chinese nationals – that has not stopped the airline from mounting a plan to win the heart of the Asian powerhouse.

Bloomberg reports MAB as having plans to add nine new routes to China this year followed by another eight in 2018.

Playing to its strengths, MAB has also initiated Project Hope – an initiative to service the lucrative market of Muslims looking to perform their pilgrimage in Saudi Arabia.

No airline in aviation history has ever been dealt the hand Malaysia Airlines has had in the last decade. Yet, the airline has managed to keep its head above water and survive.

It will be years before MAS can call itself a success but for now, things seem to be looking up. Bellew said, “Things have gone a bit better a bit quicker than I expected.”

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