What does the future hold for Malaysia Airlines?

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Rumours have been intensifying over recent weeks that Malaysia Airlines (Malaysian Airline System/Mas) is heading towards bankruptcy. So how have things become so bad at Malaysia’s national carrier? And what – if anything – can be done to save it?

The problems at Mas are so serious, and so deep-rooted, that it’s amazing it has survived so long. The airline’s accounts have been bleeding red ink for most of the last two decades. And despite being a private company, it is the Malaysian taxpayer who has had to pick up the tab again and again.

The national carrier is in the midst of its fourth major turnaround programme in the space of 12 years, and like the previous three, it looks set to fail. This is because all the restructuring exercises have dealt with surface issues, rather than underlying faults.

Probably the most serious problem at Mas is the quality of its staff, from top management down. It’s hard to avoid the conclusion that the carrier is run as a Malay employment scheme, rather than as a proper commercial entity. Not only does Mas have too many staff – 19,000 at last count – many of them are simply not up to their jobs.

When your employment policies are based on race, religion and connections, instead of talent, hard work and honesty, it is not surprising that efficiency and customer service suffers. No wonder the airline’s unions were so opposed to the proposed merger with Air Asia in 2011.

Another serious issue, as with other government-linked companies, is the practice of awarding fat contracts to well-connected Malay-owned firms. Not only is this morally dubious, it is also bad business.

If Mas were operating in a vacuum, then perhaps it could carry on like this forever. Unfortunately, aviation is one of the most competitive industries in the world. Stubbornly high operating costs mean that Mas is unable to compete, both in terms of price and quality of service.

We did a random search of flights to see how Mas compared to its rivals. We chose three destinations, one domestic (Kota Kinabalu), one regional (Shanghai), and one long-haul (London), all departing from Kuala Lumpur.

It was not a surprise that Air Asia was cheapest domestically, offering a return flight to KK for RM335. It was a shock though how much more expensive Mas was, with its cheapest ticket coming in at RM1,869.

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When it came to Shanghai, Air Asia X came up trumps, this time offering a return for RM848. Flying with Mas would have been more than twice as expensive, at RM1,956. Even taking into account extras like seat, baggage and meal fees, Air Asia X was still much cheaper.

No budget carrier offers the KL-London route at present, so you would expect Mas to be more competitive. Again though, it was amongst the most expensive full-service carriers. While its best offering for a return flight was RM4,891, Qatar Airways was only RM3,901.

More worryingly for Mas, several other full-service carriers, including Air France, Sri Lankan Airlines, British Airways, Emirates,  Alitalia, Turkish Airlines and Etihad Airways, were also significantly cheaper. As most of these airlines offer comparable or better service, why would anyone chose to fly Mas?

If things were not already bad enough coming into 2014, the loss of Flight MH370 on March 8 has caused huge reputational damage. Airlines do recover from major crashes, but it is a long, hard process to rebuild trust. And crucially, there must be a genuine acceptance that business cannot continue as normal.

Malaysian Airlines plane

There seems little doubt that without drastic action, Mas will continue to limp from one crisis to another. But neither the airline’s management, nor the government, seems to recognise the seriousness of the situation. And until they do, Malaysia’s long-suffering taxpayers will continue to pay the price.

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