Discuss about the Case Study for Strategic Management of Malaysia Airlines.
Background of the Company
Malaysia Airline is the national air carrier of the Malaysia that is operating jet services on the network of domestic as well as international destinations in four of the continents. It is based on Passenger Transportation Industry. The slogan of the Malaysia Airlines is “Going Beyond Expectations” (Malaysiaairlines.com, 2014). Through various other subsidiaries, the airline industry manufactures aircraft parts, offering trucking, cargo transportation services, offers laundry and dry cleaning services for the airline industry.
Figure 1: Logo of Malaysia Airlines
(Source: Malaysiaairlines.com, 2014)
This airline industry becomes an award-winning carrier with a fleet of more than 100 flying machine that offers administrations to more than 110 destinations over the four continents. The Airline System is the corporation with a global expansion, and it grows in response to customer demand for international coverage (Chen, Liu and Guan, 2015). The airline industry enhances in-flight services; consistent ground support, as well as better infrastructure, will set world standards.
Malaysia Airlines System is also known as MAS, and it was found in the year 1947 as the Malayan Airways, and it changed its name in 1972. The Malaysia Airlines was built up from the joint activity and additionally an endeavor of the Imperial Airways and in addition Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore. Malaysia Airlines positioned second among the 88 contenders in the Aviation Week’s Top Performing Companies that measures the money related practicality of the aircraft business (Malaysiaairlines.com, 2014). For as far back as ten years since its foundation, it holds an excellence record of service.
In Malaysia Airlines, there are various types of competitive advantages such as the cost structure of the company, offerings of product, distribution of network as well as customer support. Malaysia Airlines can build a competitive position in the airline industry, as it is less expensive than other international airlines (Pearson et al. 2015). It is a well-maintained modern fleet, excellent in in-flight service, better airport facilities and services and comfortable services. This company is given an extension towards a culture of warmth as well as sociability, improved website with better booking engine and competitive promotions. The competitors of Malaysia Airlines are Singapore Airlines, Jet Airways and Air India Express (Thomas, 2015). The competitive advantage of Malaysia Airlines is based on differentiation such as in the first and business class; there is fast check-in, extra places of cabin baggage and golden lounge. In the economy class, there is in-flight entertainment and in-flight shopping.
Strategic analysis understands of the external environment of Malaysia Airlines to maximize its interaction, potential as well as capability between the environments. The Malaysia Airlines can achieve profit and competitive advantage if the company follows three strategic processes such as analysis, formulation as well as implementation. With an increase in demand of the customers and improving the flying equipment, people are traveling across the world. It has led to increase in the tourism industry (Grant, 2016). The airline industry is focusing on reducing the environmental impacts associated with their business. Aircraft today are become 80 percent more fuel-efficient. As the Malaysia Airline’s share of global emission is small, therefore the industry expects to increase to 3 percent in the year 2020 due to growth in the air transport sector (Shapiro and Varian, 2013). Data inventory of the airport owned vehicles as well as transport, consumption of electricity are the key segments to develop carbon footprinting as well as reduction.
Strategic Positioning
In order to position Malaysia Airlines in the airline industry, SWOT Analysis is carried out. The strength factors are that more than 70 years of airline services, it has recognized the brand name (Hill, Jones and Schilling, 2014). The company depends on the government in order to protect their financial distress. The weakness factors are that the airline industry has strong revenue growth, and its operating margins are below the industry average. There is a high cost of staff, aircraft maintenance and overhaul charges (De Neufville, 2013). The opportunities for the company are to increase cargo traffic and expansion of passenger traffic. The threats are high competition and increase in the price of fuel.
Figure 2: SWOT Analysis
(Source: Liou, 2012, pp-62)
Malaysia Airline Industry commits to recover their environmental performance by running their global operations in order to reduce the impact on the environment. The on-going renewal results into measurable fuel efficiency gains (Liou, 2012). The cost of ownership is one of the most important criteria in the purchasing decisions of this particular airline industry. As fuel is the biggest cost component of the airline industry, therefore the manufacturers address the efficiency of fuel. Malaysia Airlines are becoming more fuel-efficient as newer technology such as lighter aircraft fabricated using complex materials (Dey, 2016). As a part of the overall business planning of Malaysia Airlines, Runway to Success (2016-2020), the Sustainability related the Resource Management that is managed by the Sustainability Office develops plans and initiatives. Strategic plans for Malaysia Airlines are developed with the aim to achieve cost savings, reduction in the carbon emissions and opportunity to promote green value to the airline industry (Hollensen, 2015). The employees of the airline industry adopt responsible environmental behavior in order to promote environmental awareness in the business operations.
Competitive Environment
Using the Porter five force frameworks, Malaysia Airlines determines its competitive strength in the airline industry. By using this framework, Malaysian Airlines identify their threat of new entrants (Ward and Peppard, 2016). The new threat that the Malaysia Airlines face is that they need to focus on international airlines. Two companies are competing against the aircraft manufacturing industry such as Boeing as well as Airbus. As the Malaysia Airlines are choosing the Boeing as their key aircraft, then Boeing has no alternative in order to increase the price of their aircraft (Pearson et al. 2015). The airline industry uses bargaining power of the consumer in order to bargain their price of aircraft. The power of the suppliers is a negative factor for Malaysia Airlines as if is vital to modify an additional aircraft manufacturer such as Airbus as their staffs are knowledgeable with Boeing’s aircraft. (Refer to Appendix 1).
Strategic Groups
Strategic groups classify the companies that are given similar airline services as Malaysia Airlines. Among the five-star airlines company, Malaysia Airlines always offer different places of destinations through the entire world where Air Asia provides with a well-known destination. Air Asia is the low cost carrier that takes the advantage in competition as they can focus on the customers in Asia and go for a cheaper alternative (Malaysiaairlines.com, 2014).
The vision of Malaysia Airlines is to become a global leader in order to create airport cities. The mission of Malaysia Airlines is innovated their travel and sustainable value creation for the shareholders (Malaysiaairlines.com, 2014).
Using the value chain analysis model, the primary income of Malaysia Airlines is based from its logistics services, maintenance of aircraft as well as the development of technology (Christopher, 2016). The airline industry has lower cost structure as well as an increase in the value of outcome product. By increasing a value of the ending products, the airline industry can be able to struggle in the market by accepting the connection between value chain activities (Pearson and Merkert, 2014). Apart from all this, coordination with the customers as well as suppliers can reduce cost and then make a bond with the customers. An improvement over the performance of the Malaysia Airlines helps to achieve as well as gain higher profit in their strategic processes. (Refer to Appendix 2)
The primary and support activities of the Malaysia Airlines are to be discussed as follows:
Primary activities:
Inbound logistics: There are various activities such as material management to receive the materials from the suppliers. From the getting of materials from the suppliers, storing those externally sourced materials and then conducting them within the firm (Pearson, Pitfield and Ryley, 2015). For example, supplier scheduler such as fuel and catering of airlines food.
Operations: It is related to the production of products as well as services. The operations are to be split into various departments within the companies such as aircraft maintenance work.
Outbound logistics: Purchasing of airline ticket involves the activities that can cause a delay in the final service of the customers.
Marketing and Sales: Market research is to be done by the marketing manager to analyze the requirements as well as the demand of the customers for creating awareness among the targeted customers (Khalique and Isa, 2015).
Services: Handling of complaints is done by the airline authorities related to the production as well as an offering of airline services (Pereira and Caetano, 2015). These airlines operations are splitting into various departments into various companies.
Support Activities
Firm Infrastructure: Malaysia Airlines has a flat organizational structure such as planning and controlling system. It consists of finance, legal and other departments.
Human Resource Management: It consists of recruitment of employees based on its high-specialized skills, and the rewarding system is there within the workplace of Malaysia Airlines (Chen, Liu and Guan, 2015).
Product and Technology Development: Marketing testing, research, and development are carried out on other airlines.
Procurement: This department is responsible for purchasing various airlines machinery, equipment that are required for the airline industry (Tan and Yap, 2015). Malaysia Airlines should have better procurement department that can obtain highest quality goods at lowest prices.
Over the five years, Malaysia Airlines plans to revive their airline with around $1.73 billion as well as involved in shrinking the route of the network, selling of aircraft as well as laying off more than third of the person workforce. Malaysia Airlines strategic plans are to do new changes to pick up their competitive position in the market (Malaysiaairlines.com, 2014). The airline company picks in premium travel such as refurbishment of business class with flat bed seats as well as up gradation of flagship golden lounge.
Strategic Option 1: To grow network as well as build capacity
Malaysia Airlines aim to expand new routes as well as raise frequency on the existing routes with enlargement of potential by the following action plans such as:
Identification of high-value codeshare as well as special pro-rate agreement partners
Increase in the agreement with the partners (Mansor et al. 2015).
Performing of disconnect analysis on order to optimize connectivity
Identification of new codeshare as well as SPA agreements to pursue
The Hub and Spoke strategy are used to increase feeder traffic onto the trunk routes of Malaysia Airlines. Additional resources should direct to widen capacity into the core network of Malaysia Airline in China and India that are probable to occurrence higher than average growth in the air traffic (Min and Joo, 2016). In order to acquire their network better, the airline industry should obtain long-range narrow body aircraft in order to function new routes. The airline industry plans to order new planes and its benefits from the fuel efficiency of new jets. The new plane is expected to replace the carrier by the year 2018.
Strategic Option 2: Reduction in structural and operational cost
Malaysia Airlines should reduce its structural and operational cost that enables the airline industry to offer lower as well as competitive fares when it is compared to other airlines. The structural operating cost is to be influenced by a change in the location (King et al. 2015). Operational cost is influenced by a change in the strategy of the workplace. Both the operational as well as recurring cost is reduced with focusing the incentive strategies that can improve the business performance as well as increases in its competitiveness among the other airline industry (Moore-Copple, Climek and Pritchard, 2015). The strategies to reduce both structural and operational cost are a review of suppliers and airline service. Therefore, cost reduction strategies increase the productivity of Malaysia Airlines allowing for strategic reallocation of the resources.
Strategic options 3: Improve over passenger flight services
Malaysia Airlines should plan to launch of new airlines that will set new standards for their product, cost efficiency, operational excellence as well as service quality. These factors should help to improve the passenger flight services, build customer, and brand loyalty (Gosling and Ayres, 2015). Malaysia Airlines should give important information on their websites to give immediate answers to the customer’s queries (Morecroft, 2015). The company should create resources such as blogs, guides, and maps to give information to the customers. The information should be related to airport maps, information of passenger, real time flight status update, information on traffic as well as travel guides. Use of advanced technology also helps to increase the customer experience (Pearlson, Saunders and Galletta, 2016). The technologies such as CRM tools for managing the relationship, marketing tools to engage the customers, Online survey tools in order to measure the satisfaction level of a customer through airline services given by Malaysia Airlines.
Strategic options 4: Improve in environmental sustainability
Malaysia Airlines should modernize their fleets with fuel-efficient aircraft. This employment of new technologies as well as fuel-efficient standards should reduce the emissions of carbon. Installation of winglets should reduce the use of fuel (Wu, 2016). The airline industry should also offer water saving, recycling and carbon offset programs to reduce the emission of carbon. Apart from this, most of the Malaysia Airlines have noise complaints. Therefore, the company should add winglets to their fleet such that they can reduce the noise footprint for the aircraft operations (Slack, 2015). The management team of Malaysia Airlines exposes to significant levels of aircraft noise that has dropped by 97% since 2020. From 2020, the airline industry will cap their emissions as well as growth will be carbon neutral.
The main priority of Malaysia Airlines is to implement their strategies laid out with the turnaround plan to be implemented in the next three years. The strategic implementation plan for the airline industry has taken place under the restructuring plan of Malaysia Airlines (Mellahi and Frynas, 2015). The Malaysian carrier is looking to forward to execute a new passenger service system that can also cut the operational as well as a structural cost of the business. It also drives revenue and extends the customer reach. The strategic implementation project team requires a lot of communication with the experts to explain entire project plan (Morden, 2016). Regarding pricing strategy such as reduction of both structural and operational cost, the airline industry offers cheaper tickets that make the customers travel with the Malaysia Airlines more attractive (Hollensen, 2015). The Malaysia Airlines would serve their markets when the airlines businesses have counterpart to part their strategies to boost their economy. The airline industry should also plan to win customers by delivery of new aircraft by 2020. It will reduce their average age of fleet size from 12.2 years to 7.7 years (Malaysiaairlines.com, 2014).
By implementing the mentioned three strategic options of Malaysia Airlines, the airline industry will try their best to lead in inbound tourism carrier of Malaysia. The fuel savings initiatives that are taken by the Malaysia Airlines are the operational initiatives such as reduction in target gate arrival fuel, an improvement over the efficiencies of fuel and reduction in power units of the mainline (Kotler et al. 2015). The weight reduction initiatives are taken such as reduction of ice boarded on the international flights. The installation of the winglets also results in a reduction in noise. The other fuel savings initiatives are a reduction in over fuel. As the management team of Malaysia Airlines makes a change in their competitive sustainability to increase their competition among their competitors (Pearson and Merkert, 2014).
Strategy |
Duration |
Department |
Option1: To grow network as well as build capacity |
1 year |
|
Identification of high-value codeshare as well as special pro-rate agreement partners |
3 months |
Legal |
Raising in the agreement with the partners |
5 months |
Marketing and Sales |
Performing of misconnect analysis on order to optimize connectivity |
2 months |
IT |
Identification of new codeshare as well as SPA agreements to pursue |
2 months |
Legal |
Option 2: Reduction in structural and operational cost |
6 months |
|
Change in the strategy of workplace |
2 months |
Marketing and Sales |
Review of suppliers and airline service |
2 months |
Marketing and Sales |
Focusing the incentive strategies |
2 months |
HR |
Option 3: Improve over passenger flight services |
1 year |
|
Loyalty program |
2 months |
Marketing and Sales |
Training such as safety recruitment training, ground handling, cabin crew as well as engineering |
3 months |
HR |
Review of the current routes with publishing of updated routes |
4 months |
IT |
Review of fleet management |
3 months |
IT |
Option 4: Improve in environmental sustainability |
6 months |
|
Change in fuel-efficient standards |
2 months |
Sustainability Team |
Reduction in carbon emission |
2 months |
IT |
Reduce the noise footprint for the aircraft operations |
2 months |
Sustainability Team |
The Malaysia Airlines can accomplish benefit if the organization takes after three key procedures, for example, examination, detailing, and execution. With expansion sought after of the clients and enhancing in the flying supplies, individuals are traversing the world. It has lead to an increment in the tourism business (Grant, 2016). The above table shows that the airline industry takes three years to implement their strategic options in their business operations. They can strategically implement their strategies to increase their productivity of their services as well as profitability in their airline business.
Measurement of the new strategies is significant as a expansion of the plan as well as strategy. In order to compute, the achievement of the mentioned strategies, evaluation and control are done based on the annual plan control, profitability control, efficiency control as well as strategic control (Pearlson, Saunders and Galletta, 2016). These strategic plan formulated in this paper to ensure that the Malaysia Airlines is still flying high and becomes the leader in the Malaysia airline industry market.
It is done based on the following such as:
Product: The offering of top of the line, business and economy class seats ought to be followed and checked on quarterly and additionally yearly premise.
Customer: It will be tracked when the customer group contributes the revenue as well as the profitability of the company (Gosling and Ayres, 2015).
Segment: The selling of both long and short haul will be tracked on a monthly and yearly basis (Min and Joo, 2016).
The responsibility of the efficiency control lies with the management as well as marketing controller (Chen, Liu and Guan, 2015). It is done to assess and get better the impact of the marketing expenditures.
The top management, as well as marketing auditor, holds the accountability of the strategic control. It is done to inspect if the Malaysia Airlines pursue its best opportunities within the airline markets and channels (Ward and Peppard, 2016). This approach analyzes as well as a review if the marketing effectiveness, evaluation of the marketing excellence with a review of ethical and social responsibility.
The prime responsibilities for the annual plan control will include the top management as well as middle management of Malaysia Airlines (Hill, Jones and Schilling, 2014). The main motivation behind this yearly arrangement control is to investigate whether the arranged results are accomplished. Portions of the methodologies under this annual plan control are as follows:
Sales Analysis: The report of sales will monitor by quarterly as well as yearly basis. It is done through the market surveys as well as point of sales of the distribution partners.
Market share analysis: It consists of how well the Malaysia Airlines operate within the airline marketplace as compared to their competitors. It will track on quarterly as well as a yearly basis (Shapiro and Varian, 2013).
Financial Analysis: It determines the financial position of the Malaysia Airlines as well as its stability. It will track as well as analyze on a quarterly as well as yearly basis.
Conclusion
It is concluded that in spite of high fuel prices, the competition from the full-service carriers as well as an increase of the low cost regional carriers, the airline industry continues to remain committed to improving as well as grow from the current position. The network expansion strategy of the company is based on strengthening the regional connectivity to grow as well as feed the international network. Malaysia Airlines is focused on ensuring that the upgrade of the products, as well as service standards, translates into improvement, customer loyalty as well as entire revenue performance. Strategic analyses, Porter five forces, strategic implementation, are required to imply with the organization. All these strategies are used for Malaysia Airlines in order to increase their profit as well as cover losses. The strategies are used to deal with the external factors such as competitors as well as policies. It is also concluded that strategic management is not considered as just a strategy, however it also helps to attain success where it is used to examine both strengths as well as weakness, will put Malaysia Airlines at a competitive advantage. In order to implement their strategies, Malaysia Airlines require increasing efficiency in communication, management of resources as well as improving in morale of employee. Leadership also plays a vital role to make Malaysia Airlines to gain success in implementing the identified strategies.
Based on the SWOT analysis, it is clear that if the airline industry continues to follow their business model, then it will be out of cash by a middle of second quarter. The fundamental overhaul is needed to put them back on a path to profitability. It bears more expenditure to get a new fleet, but it would also settle the cost within the long run. The premium carrier states that Malaysia Airlines emphasize commercial functions as well as synchronize operations with similar airline partners. After analyzing the current scenario of the company, stakeholders, consumers as well as business partners of Malaysia Airlines require to take account vital decisions to enhance their growth as well as future success. The International Strategy includes a strategic formulation for the Malaysia Airlines in order to develop a level of competencies as well as potential in the international airline market. Malaysia Airlines adapt to changes to compete in the airline market. Therefore, the airline company takes a strategic change in their state of a division to cope with the external environment of the company. Marketing strategy improvement of the Malaysia Airlines will able to challenge their local airline industry.
From the environmental analysis of Malaysia Airlines; it is seen that the future of the aviation industry is not sustainable. Malaysia Airlines is expected to be sustainable, and its fuel efficiency challenges the industry. From 2020, the airline industry will cap their emissions as well as growth will be carbon neutral. The key driver in their strategic action plan is technology. Modern aircraft enters into the airline fleets that carry them fuel efficiency gains of 20 to 30 percent in their business operations. The role of the advanced technology is the development of sustainable bio-fuels. The support of the Malaysia Airlines gets from the government gives a strong suggestion that the nationwide flag carrier is to be protected. The airline industry is not distracted by its environmental, economic, safety as well as other external factors influences beyond the control of management. It also maintains customer relationships with managing the brand of Malaysia Airlines. From an analysis of the internal as well as external factors of the company, it is identified that there are many consumer touch points as well as opportunity in order to reinforce the brand value as well as customer loyalty.
Malaysia Airlines requires building a strong relationship with their suppliers as well as influences to compete in the changing environment. From the SWOT analysis, it is identified that the airline industry faces many challenges due to the digital world allows to determine the strategies of the brands in each channel. The consumer has a right t o get the best services from the airline industry due to its quality services as well as success to different destinations. It is required to give safe services to the customers with the safety of luggage of the customers. The four of the strategies options that should be undertaken by Malaysia Airlines help them to compete in the market of airlines services. Firstly, the company requires growing their airline network as well as increasing their capacity to give service. Secondly, there is a requirement of reduction of both structural as well as operational cost. Thirdly, there is an improvement over the passenger flight services. Finally, there is an improvement in the environmental sustainability. Due to the implementation of those strategies, the carrier should cut cost as well as drive their revenue. It takes three years to implement the plan in the business operations of Malaysia Airlines.
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