Last Updated 12 May 2020

Business Analysis: SWOT of Malaysia Airline MAS

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    SWOT of Malaysia Airline (MAS)

    Strengths

    • Government Support
    MAS as a carrier of national airline plays an important role in representing Malaysia’s reputation. In fact, government has their responsibilities to protect MAS from financial distress and get rid of any difficulties.

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    . As shown, Malaysia Airlines get strongly supported from the government.
    • Strong Brand Recognitions
    Along the years MAS been operating, they won numerous awards in the airline industry. The recognitions received by MAS successfully attracted lots of loyal passengers. In 2012, the company's punctuality rate was 87.22%, which developed the reputation of reliable airline (Bernama, 2018). MAS has a well-recognized brand image in both domestic and international markets. As a well-known brand, Malaysia Airlines has always been the choice of public especially their exclusive business class always preferred by many businessmen and government executives who travel around the world. The 5-star status at the Skytrax World Airline Award 2012 received by MAS put them on the elite status.
    • International route
    Malaysia as a tourism country, the national airline company always concern by travellers all around the world. In 2013, Malaysia Airlines officially became a member of One world Global Airline Alliance, which getting benefits from more connectivity and new routes (Mutzabaugh, 2013).The alliance currently covers approximately 950 destinations in 150 countries, making it possible to provide a broader global network for MAS passengers (JTF, 2018).

    Weaknesses

    • Poor Management
    In recent years, MAS fall into financial crisis with low efficiency in yield management, continuous management replacement, and poor cost control. Poor revenue management and expansion decisions lead to negative returns to the business. In fact, these negative issues brought negative impacts to Malaysia Airlines. As solution, government tried to fund but the decision interfered by management team in MAS because it will affect the freedom during business management (Mouawad, 2014).
    • Poor Financial Performance
    MAS fall in poor financial performance throughout the years and it lower the confidence of investors into this business. MAS did not make any profit since 2010 before the tragedy in 2014. In addition, MAS had lower control over the domestic market and their market growth rate constantly weak (CAPA, 2013). The company's net profit margin was only 2.3%, which below the airline industry average of 4.9%.

    Opportunities

    Strategic Location

    Malaysia’s location is strategic where the point that connects with many countries in between such as China, India, Australia and many others. In 2016, the Asia Pacific region maintained its position as the leading region for air travel, accounting for 35% of the global market share (WIT, 2016). Demand for air travel in the Asia Pacific region is rising due to increased economic activity in emerging Asian countries such as China and India. Thus, the revenues earn by MAS from the Asian region will increase.

    Tourism Industry

    The low exchange rate of the Malaysian Ringgit is one of the reason why tourists from all over the world love to shop and travel in Malaysia. The large amount of profit generated by the tourism industry enabled the government to focus on the development of the tourism industry actively and give full support. Therefore, MAS receive government support in variety ways because the government always ready to support and subsidize MAS in order to earn profit continuously. One of the step is to make Kuala Lumpur International Airport a regional air hub.

    Low cost opportunity

    In Malaysia, the most recognized low fare airline is AirAsia. To compete with domestic and regional low-cost carriers, MAS has its own low-cost community airline, Firefly. It is also the only airline which connecting three popular destinations - Penang, Koh Samui and Phuket. This allows MAS to reduce its domestic flight class and more focus on other profitable overseas destinations to further expand its customer base (TheStar, 2012).

    Threats

    • Increasing jet fuel prices
    With the global raising in jet fuel prices, it had a huge impact on all airlines. The reason is that one of the most expensive cost involved in the airline business is the cost of fuel (TheStar, 2018). When it is aggravated, it also means that the profit was reducing, and these companies will come under pressure. High operating costs and rising landing fees have affected the financial position of MAS Airlines.
    • Intense competition
    MAS will compete with domestic and international companies because MAS is not the sole carrier operating in the Asian region. In addition, Malaysia Airlines' fares seem to be high compared to other airlines. Due to the high fares on domestic routes, the major domestic market segments are taken over by Asian airlines. Compared with Malaysia Airlines, customers more willing to take AirAsia as it is relatively cheap and reasonably price. In terms of international competition, the group faced fierce competition from both established airlines and new start-up operations.
    • Unfortunate tragedy
    For the impact of the MH370 and MH17 tragedies, Malaysia Airlines suffered an incalculable loss in 2014. The main reason for the loss was that the public’s negative perception of its brand name which related to the suspicious safety in the tragedy. The negative news caused the stock market and exchange rate to fall. Despite the risk management strategy, MAS remains exposed to foreign exchange risk, which may lead to a decline in revenue growth and put pressure on the group's profit margins (NEWS, 2014).

    SWOT of Singapore Airlines (SIA)

    Strengths

    • Young Aircraft Fleet
    Singapore Airlines has one of the youngest fleets of aircraft in the airlines' industry. It is the first airline in the world to fly and operate the Airbus A380 in October 2007. SIA’s reputable fleet maintained by apply strict policy to replace older aircraft to the latest improved models like Boeing 777. According to survey conducted by Airlineatlas, Singapore Airlines was ranked as the second airline of the world's youngest team (SilverKris, 2017).
    • Profitable
    Among the Southeast Asian flag airline, Singapore Airlines continue to maintain its leading position as the most profitable flagship airline in Southeast Asia during 2014 (CAPA, 2014). The company's new transformation plans, including centralized pricing units have increased revenues, while the airline also saved cost by using fuel more efficiently and reducing waste. Singapore Airlines’ group revenue increased from 6.3% to S$15.8 billion for the full year, and all lines of business improved with a 3.5% increase in costs, with fuels increasing by 18% (Freed, 2018).

    Weaknesses

    • Reliance on international traffic
    The population of Singapore is currently about 5.8 billion had making the domestic market very limited. Due to the limited population, there are no intercontinental flights available. Therefore, Singapore Airlines rely heavily on passengers and travellers from all over the world thus unable to rely solely on their domestic market to sustain.
    • Expensive tickets
    Singapore Airlines is one of the most expensive airlines in the world. Travel expenses are the most pressing issue facing by Singapore Airlines, as most passengers prefer to pay cheaper prices compared to fly with SIA, although service levels are low due to cost savings. In fact, this may lead customers to other low-cost carriers.

    Opportunities

    • Partnerships can be expanded
    SIA can build more partnerships and improve the areas that have traditionally been weak. By forming more of these strategic operational alliances, it will help to strengthen SIA's market position and enable airlines expand their achiever and cater to a larger group of travellers. But most of their partnerships are not comprehensive, and the SIA remains relatively passive member of the Star Alliance. Among their 24 partners, currently only 11 serve Singapore (CAPA, 2014).
    • Tourist country
    Since tourism is booming, the development of tourism in developed countries helped to increase revenues and profits which indirectly will increase the demand for SIA services. Due to SIA with strong operational base, it can benefit from the growth of global tourism and bring additional income to SIA. According to preliminary estimates released by the Singapore Tourism Board, the total number of tourists increased by 6.2% year-on-year to 17.4 million, while tourism revenue increased by 3.9% to $26.8 billion (Tay, 2018).

    Threats

    • Intense competition
    The aviation industry is highly competitive industry. Singapore Airlines’ direct competitors are airlines that fly on the same route and also faced indirect competition from those have indirect flights and other modes of transport. In addition, airlines often compete on price through price discounts and fare matching (HubPages, 2015). If SIA wants to make some changes on its fare, it may have disproportionate impacts on its operations and financial results. Therefore, the fierce competition facing SIA may affect its operating profit margin.
    • Rising Fuel Costs
    The operating costs of Singapore Airlines are affected by jet fuel prices and pose a significant impact. Due to various uncontrolled factors, international crude oil prices have fluctuated greatly. Although SIA used hedging to overcome fuel price risks, it might not be fully effective (Tani, 2018)

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    Business Analysis: SWOT of Malaysia Airline MAS. (2018, Jan 01). Retrieved from https://phdessay.com/business-analysis-swot-of-malaysia-airline-mas/

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