Malaysia Airlines chief executive Idris Jala has issued a rallying call to his staff, urging them to pull together even harder to face the crisis and combat both the downturn and the “quadruple squeeze” that is placing such a massive strain on the industry.
Saturday’s Straits Times here in KL carried a double page advertising splash from the national carrier calling on every one of MAS’ 19,000 employees to work together to overcome what Jala labels as “the worst environment airlines have seen in a long, long time”. But he adds: “After we finish the crisis, we will think it was a great crisis because we didn’t waste it.”
 |
|---|
Airlines are under pressure from falling demand, says Jala, but their health is also being eroded by high-cost fuel hedges which were fixed when prices were spiralling upwards. “Effectively airlines are paying more than $100 barrel for fuel,” he says. Meanwhile, lower fuel prices mean fuel surcharges are no longer available to ease the hangover. “As if that is not enough, the airline industry is caught up with the fourth squeeze of swine flu,” adds Jala. “Caught between four squeezes, the man in the middle is finding it hard to survive.”
He believes it is essential for airline industry leaders to bring hope, and translate that hope into action by innovating, trimming capacity, cutting non-value-adding costs and keeping yields in check: “Dog-eat-dog is a very, very dangerous thing.” Jala also believes “long and deep” consolidation will be key to industry recovery. Hope, action, ‘Malaysian hospitality’ and teamwork are his buzz words.
Under Jala’s leadership MAS has undergone a major turnaround. He says: “We want to become the Toyota of the airline industry – not the Mercedes and not the Lada either. We need to keep on the bandwagon of reducing costs.” Over the last three years, Jala has slashed 2.3 billion ringgit from the airline’s overheads, or around 15% of its cost base. This year his goal is another 700 million to 1 billion in savings, helping position MAS as a “five star value carrier”. But he says: “You can’t just create a slogan like that without saying what you are going to do about implementing it.”
On the revenue side, Jala is rolling out customer-focused innovation to boost load factors and revenues, such as a stimulus package of nine fare deals aimed at specific target markets. But he recognises this strategy must be underpinned by low costs. He talks about good and bad costs. Bad costs that do not directly add to safety or customer service should be eliminated. Good costs are all about finding the “sweet spot” between cost and customer satisfaction, so both sides win, he says.
With the first stage of the business turnaround plan (BTP) completed, Jala is now working on a second phase: BTP2. He says this has not been significantly impacted by the downturn: “It was written with the philosophy of assuming the worst and planning for the best, so we painted a worst case scenario that looks like now. We assumed the downturn would happen around 2012, but it is happening now, so we have compressed the timeline. Essentially the document was spot on.”
Fundamental to Jala’s strategy is understanding the customer, their profile, demographics and behaviour patterns. For example, MAS has tailored its in-flight catering on a route-by-route basis after finding several cases where passengers preferred a cheaper alternative. But he adds: “To find the sweet spot, you cannot standardise – it is based customer needs for that particular route.”
Despite initial concerns about cannibalising its own customer base, MAS is offering cheap, non-flexible fares 30 days before departure to broaden market reach. Jala says: “I believe we can learn from supermarkets that sell products nearing their expiry date, cheaply. In terms of segmentation, we are trying to address the market that has traditionally belonged to low-cost carriers; price seekers. They naturally converge on low-cost carriers, but this is the mid-group that we are both fighting for.”
Jala is under no illusions about the financial challenges he is facing: “It is going to be tough, but I am confident we are going to survive. We will put in 110% effort to make sure we are [profitable].” He urges IATA members to pool their resources and keep the industry’s cyclical nature in mind - especially in relatively good times - by avoiding unbridled growth.
But some things cannot be controlled. Jala says the last of his six business turn-around principles is divine intervention. “More than 60% of things are beyond our control. There is no certainty you can achieve what you want to achieve. Do the best you can do, and if you are a spiritual person, pray for it. And when it doesn’t work because of things beyond your control, don’t shoot the troops.”
Click here to see our video interview with Jala and other chief executives during the IATA 2009 AGM
Click here to read the Airline Business cover interview with Jala from April 2008
Source: Airline Business
