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Crisis Must Bring Change in the Airlines Industry in Malaysia.

In: Computers and Technology

Submitted By taufiqzaini
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Airline can be described as provide air traffic services to passenger from origin to destination. Airlines also can be known as oligopoly market structure. This is because only few firms that involve in producing similar or differentiated product, that is air traffic services. Many characteristic or factor that make airline as oligopoly market structure and ca n be categorized as high barrier to entries. Because of that, small factor can be easily affect and bring the airline into crisis.
The industry generates substantial cash flow to repay debt and buy new airplanes, which, like most tangible goods, depreciate over time. The industry also is distinguished by the amount of time and effort which must be concentrated on customer service, requiring a high amount of labour. More than one third of airlines’ revenue is consumed by the industry’s work force.
Revenue from aircraft industry can be simplified as from sources such as passengers (75 percent), cargo shippers (15 percent) and other transport services. About 80 percent of passenger revenue comes from domestic tickets, while frequent flyers, which travel more than 10 times annually, constitute about 40 percent of trips but only 8 percent of the total flying public.

What is ‘crisis’? A crisis is any event that is, or expected to lead to, an unstable and dangerous situation affecting an individual, group, community or whole society. Crises are deemed to be negative changes in the security, economic, political, societal or environmental affairs, especially when they occur abruptly, with little or no warning. More loosely, it is a term meaning 'a testing time' or an 'emergency event'. From observation and research there are major factor that can bring airline fall in crisis to the airline:
1. Fuel
2. Economic fluctuation
3. Natural disaster
4. Political changes
5. Laws
6. Social
7. Foreign exchange
Normally different airline have different management skill depends on their strategy and advantages. For Malaysia airline they have own identity in managing their business. In operating their business, they have faces many crisis that can be improvement in the future.
Economic Crisis Effect
The airline industry, which can be difficult to grasp from a theoretical perspective, basically is one in which airlines perform the service of transporting customers from one point to another for a price. There is no physical product or inventory, and making a profit is extremely challenging and high barrier to entry.
Changes in the economy have a big affect on the airline industry. The elasticity of demand, externalities, wage inequality, and monetary, fiscal, and federal policies all have an impact on this airline industry. The airline industry is constantly changing due to today’s market, economic situation and today we will be looking at the reasons behind it. Price Elasticity of Supply and Demand Travelling by air is both elastic and inelastic depending on whom it is that is travelling is some kind characteristic of aircraft.
Malaysia airline has been report to be loss due to several factors. From reported by Bloomberg news, Malaysian Airline System Bhd. (MAS), the nation’s largest long-haul carrier, reported a fourth straight quarterly loss on rising fuel costs and provisions for returning leased aircraft early.
The net loss of 1.28 billion ringgit that is $426 million in the three months ended in December compared with a profit of 225.9 million ringgit a year earlier, according to an exchange filing yesterday. This raised its full-year loss to 2.5 billion ringgit, which was more than twice the mean estimate of 1.21 billion ringgit in a survey of 15 analysts and published by Bloomberg News.
“The company is in crisis,” Md Nor Md Yusof, Malaysian Air chairman, said in a statement. “The results make for unpleasant reading. The board and I are confident that we now have a team and business plan in place that will bring the necessary sacrifices to ensure a turnaround.”

There are several characteristic of airline that make airline sensitive due to economic fluctuation. In economic fluctuation situation, demands on travel by using air traffic transport have been decreased. For an example, business man that have seminar or works need to travel fast to minimize time that being used. Because of that, they need to travel by using aircraft to their destination. In other example, if a family is planning a trip just to take a vacation and the price of an airline ticket is extremely high, so that they will decide to wait on the trip until the prices are lower. This shows that the airline industry in considered elastic due to economic fluctuation.
Government need to improve their production and give support to the government sector or private sector, which can bring economy of their country stable within nation situation. When the economy improving and companies are doing great and have a lot of business, the will send some of their stuff to seminar or business survey that need air traffic services.
Due to economic crisis, Malaysia airline have been taking their action to overcome this situation. Malaysian Air (MAS) has planned for another full-year loss this year though will strive to break even, Ahmad Jauhari to overcome them bleeding. “The bottom-line group losses for 2011 underscore the imperative need for Malaysian Air to immediately adopt strong measures to stop the bleeding,” he said in the statement. “These include staff redeployment, increasing productivity and efficiency, relentless cost control and making further route reviews.”
From the statement, Malaysia airline have been take a step by staff redeployment, increasing productivity and efficiency, relentless cost control and making further route review.

Table show about generally cost of operating an airline.…...

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