Measuring Customer Expectations Of Service Quality In Malaysian Airlines Limited

Factors Influencing the Market Position of Malaysian Airlines Limited

Discuss about the Measuring Customer Expectations of Service Quality.

Malaysia airlines Limited has grown remarkably to achieve its current market share. The company was born on 12^th October 1937 operating as Malayan Airways Limited, ten years later the company took to the skies with the first commercial flight as a national airline. With the formation of Malaysia the company duly changed its name to Malaysia Airlines Limited. The company would later change its name to Malaysia-Singapore Airlines in 1965 when Singapore divorced from Malaysia. In 1972, the founding partners of the airways parted ways consequently necessitating change of name. The company achieved a milestone in 2012 when it acquired its first airbus A380-800 scheduling its route for London with the new airbus A380. A year later the airline became a fully paid up member of the prestigious One World Alliance. The airline is now connected to over 850 destinations in 150 countries across the world. The company also boasts of lengthy record of excellence, amassing in its ranks over 100 global awards in the last one decade.

In 2014 the already financially stricken airline suffered double tragedy when flight MH370 on way from Kuala Lumpur to Beijing disappeared with 239 passengers and crew onboard. Only a few fragments have washed up, off Africa’s coast. Barely four months later, flight MH17 exploded mid-air killing all 298 people aboard. The two disasters consigned the airline to possible bankruptcy. Customers deserted the national carrier with poor public confidence levels affecting its profitability potential. The experienced a massive 60% drop in its Chinese market, a key component of its profitability model left the career on the brink of collapse(Hussain, 2015). The government stepped in to rescue the company, pumping billions of dollars to keep it afloat. The company continues to emerge from the shackles of these disasters to chart its recovery.

The sustainability of Malaysian Airline depends on a number of factors that provide a critical role in ensuring it returns to profitability. This is more notable after the disappearance of flight MH370 that dented public confidence in the airlines. Consequently, the already struggling company lost revenues and accrued major expenses that negatively affected it survivability(Razali& Vrontis 2010). The following factors were singled out as having great influence on the efforts to reverse its declining fortunes.

The aviation industry has continues to embrace technology. The implications of the ever changing technologies mean that keeping abreast with the latest technology will go a long way to influence the market position of Malaysia airlines. Some of the more notable technological changes in the aviation industry include the emergence of the internet of things (IoT). Essentially this technology allows various electronic devices that are fitted in a plane or any other system to communicate with each other without any help of a host computer(Vrontis et al 2010). The industry has been active in gathering data related to this kind of technology long before airlines decided what to do with the emerging technology. Today this technology is used in the maintenance and repair of the plane. MROs are in a position to communicate with sensors using tablets allowing them to scan the aircraft systems easily and to notice the components that may require repair or replacement. The technology can also communicate with suppliers allowing them to identify parts whose life is nearing expiry (Fu et al 2010). This has led to improved efficiency.

The Importance of Technology in the Aviation Industry

Drones have also come into extensive use. Due to embedded sensors in almost all areas of the aircraft the drones are used by MROs to pinpoint components or systems immediately. They can visually identify areas in need of replacement. They are now being used to check for lightning damages to commercial planes.

State-controlled Malaysia Airlines is one of the oldest carriers in Asia. Like its major rivals Singapore Airlines and the Cathay Pacific, the airlines are battling intense competition from the latest generation of low-cost airlines in the region(Lau& Tong 2008). The increase in low cost carriers such as Air Asia and Lion Air has put pressure on the profitability margins of Malaysia airlines pushing revenue per passenger low. This in part is due to overcapacity in theregion unlike what is forecasted in the global industry. Two weeks after a twin disaster of flight MH370 and Boeing 777 in Ukraine struck the company has overcome the real risk of bankruptcy. However the strategy of scaling back by cutting down on unprofitable orlow income routes has exposed the airline vulnerable to tough competition from the budget carriers. In a broader sense, the emerging power of the Chinese aviation industry is likely to eat further into the traditional routes dominated by Malaysia airlines(Chesbrough 2007). China continues to modernize and increase its fleet of commercial airlines, tapping into the booming, travel-hungry middle income. Aviation industry has become a top priority for Chinese authorities seeking to stump their increasing global influence supported by a strong economy. Furthermore, the company recently unveiled a strategic alliance with the emirates airlines allowing Malaysia carrier to piggyback onto approximately ninety of the Emirates ‘global routes.

Airline industry remains a highly competitive industry and customers form the most important factor of the traveling process. Besides improving the quality of service and the safety aspect, customer satisfaction ranks highest on priority list(Tolpa 2012). The change in taste can take the form of personnel interaction with customers or simply the kind of seat a customer is allocated on the flight. While business class passengers have become accustomed to full-flat beds, passengers in the economy class have had few innovations to cheer about(Beh 2010). The improvement in the in-flight entertainment such as on-board Wi-Fi has gone a little way providing a welcome distraction. The seat continues to dominate discussions about the economy class. Several initiatives have been attempted to increase the comfort of the dreaded middle seat.  A few airlines such as Bombardier’s C series aircraft feature a 3-2 configuration of seats with the middle seat being expanded slightly. The airline has reported positive feedback from passengers using seat(Lazzarini 2015). A better design of themiddle seat will be an important change in pursuit of customer satisfaction. Other companies have come up with a whole new idea designed to speed up boarding and increase legroom in the economy class. The isle seat can slide over the middle seat to increaseaisle space. The overall effect is that all passengers have an arm rest while at the same time adding a few inches of width to the middle seat.

Globalization of Markets and Competition

Information technology revolution has had direct influence on the aviation industry job and labor market.  Most jobs that were done manually have been automated rendering some employees redundant (Hodgsonet al 2015). New technologies complement employ sensors that complement non-routine and social tasks which improves productivity. These changes mean that low skill jobs have stagnated and shrunk in numbers while high skill jobs have become more rewarding which has gone to increase the gap between wage equality. The advances in artificial intelligence have further compounded computerization of jobs as they can now perform cognitive functions. The worry is that in future even the high skill jobs are likely to be overtaken by machines. Considering the fact that aviation industry is one of the most proactive sectors in absorption of technology, it means that the effect of technology in influencing management decision is critical. Studies in the US and Europe suggest that most jobs are at risk of digitization(Bowen 2016).  Airlines management must factor the need for automation in the design of jobs. However, research also shows that only 9% of jobs across the twenty oneOECD countries are automatable. This implies that the threat of automation on jobs is a bit overestimated(Lonbani et al 2016).  Job design in the aviation industry continues to be influenced by the ever-changing technologies and more specifically automation.

The ability of an organization to provide quality products and service will directly affect its success in the increasingly competitive industry of aerospace. These products must meet customers changing tastes and preferences. The Aerospace Quality Management System Standards have been developed to serve as the basis upon which industry standards are measured. Any airline that strives to achieve the highest standards must ensure it complies with the latest guidelines(Santos& Alvarez 2007). The AS 9100, AS 9110 and AS 9120 stipulates generally accepted international best practices while addressing manufacturer’s unique needs. AS9100 for instance focuses on key areas of safety, product conformity, and airworthiness and reliability in the airspace. The AS 9110 on the other hand, covers control of air repair schemes, skills and qualifications of MROs and configuration management. The AS 9120 was designed to cover distributors of aerospace items. It seeks to addresses such aspects as chain of custody, control and availability of records(Saunila et al 2014). The general implications of these standards are to ensure safety in the aviation industry, promote interoperability of parts and support profitability in the industry. Malaysia airline has to adopt the latest standards in order to gain public confidence(Osman 2009). This is more critical for Malaysia airline considering the recent mid- air disasters of the recent past that have grossly dented public confidence in its safety standards.

Improving Customer Expectations of Service Quality

Global manufacturing in the aerospace industry has seen marked expansion. The new trend of high production levels of over one thousand aircraft per year is likely to continue into the near future. This is informed in part due to the rapid growth and expansion of the Chinese aviation industry (Yu et al 2016). Boeing for instance warns a tender in 2017 to supply 140 planes to China alone. This demonstrates the industries high demand for new aircraft. This in effect translates to increased global production to meet this demand. Asia in particular continues to experience rapid growth in the aviation industry effectively putting pressure on manufacturers of planes such as Boeing and airbus to increase their production levels. However, in spite of their best effort production has not been able to meet the surge in demand for aircraft. The best-placed airlines are those who manage their supply chain effectively placing their orders early enough to avoid undercapacity when the aging fleet inevitably is retired from service (Krishnan et al 2016). Globalization has had a positive impact on the production of parts for planes. It means that parts can now be manufactured virtually everywhere at a lower cost unlike in the past where most parts were centralized in the US and Europe. The entry of china as a major player in the industry has had a positive impact on manufacturing of aircraft parts.

The concept of supply chain management (SCM) integrates economic, social and environmental factors that directly affect the operations of a company (Tseng& Geng 2012). Broadly speaking these factors can be categorized as buyers, competitors, suppliers, substitutes and threats within the aviation industry.In the case of Malaysia Airline, environmental factors will include it entails control of raw materials from the point of origin to where such materials will be consumed. A well-managed supply chain will ensure that Malaysia Airlines offers smooth operations to its customers and plays a significant role in the overall achievement of stated company goals. For a company to evolve, it must have astrong supply chain system that has its roots in the market identifying the kind of products and services that customers prefer(Brandenburg et al 2014).It is important to examine the airline’s SCM in light of Porters five factors that have direct influence on its ability to sustain profitability

The number of passengers using Malaysia airlines dropped significantly after the sad events of flight MH370 on the 8^th march 2014 when the plane disappeared from the skies. The company recorded a net loss of approximately $138m in the first quarter compared to $78m the previous year. Buyers or passengers in this matter shied away from boarding the career’s planes in fear of possible disaster. As if predestined by fate, the company suffered a second crash four months later compounding the already scared passenger outlook(Tseng& Chiu 2015). The company therefore lost most of its buyers. A low number of buyers have direct bearing on the rate of buying and selling in the market. To sustain itself, the company resorted to cutting down on the number of its workforce. In addition to that, the airline launched price offers and promotion in a bid to retain and attract new customers.

With shrinking numbers post 2014 disasters, the supply side only focused on the need to keep the existing fleet in the operation. There was no motivation in buying new aircraft since the passengers had greatly deserted the company. Attention lay on the supply of key components to keep the company running. Jet fuel in this case formed the supply side of the equation. However the pricing model for jet fuel is set by the government and the airline nor other suppliers of fuel have much influence.

As the ailing national career continues in restructuring its processes, the available substitutes include railway system, waterways and the road network. Because of speed vis-à-vis cost, air transport continues to attract most interest and remains the preferred mode of transport(Pearson et al 2015). There is little or no pressure at all on the air sector from the potential substitutes. In effect, substitutes have no power to influence the airline industry.

The main threats facing Malaysia come from regional low-cost careers operating similar routes along with the national career. Malaysia’s Air Asia, Indonesia’s Lion Air and Singapore’s Tiger Air offer a direct threat to the sustainability model of the national career. These new entrants leverage on their lower operating costs as compared with Malaysia airline. The reaction of the flag career to dwindling passenger numbers was to cut its global seat capacity by 18%.  This has given the competitors penetration point.

Following the mysterious disappearance of flight MH370, the company was battered with a lot of negative publicity. Consequently the company lost its main revenue channels(Bamber et al 2013). The market value of the company dropped by around 36% as at July 2014 compared with the previous year forcing the company to pull out of the stock market. Passengers simply walked away from the career after many negative reporting regarding the cause of the disaster. In the months after the accidents, the company appointed a new chief executive officer, Mr. Mueller to guide in the restructuring process. The new CEO has a history of turning around ailing firms toward profitability having successfully guided Aer Lingus from possible collapse.

The first line of focus by the new boss was to downsize the working force by third. The idea was informed by the need to reduce the overall expenses of the company(Parasuraman 2017). Furthermore, the management cut down on the number of routes that were economically not viable. The new CEO has changed the top management of the company bringing in fresh ideas to drive the restructuring process. In the recent past, the airline has started selling off certain assets as part of re-organization steered toward raising its working capital. To address the apparent skill gap, the airlines has lined up ventures with established international organisations aimed at providing necessary training and specific skillset. The company recently announced the appointment of new Head of Revenue Management and Head of Engineering. All these are geared toward changing the fortunes of the airline not only from the point of view of employee performance but also the public perception(Sengpoh 2015). In addition to these appointments, the company also announced the launch of management trainee system to create a pool of talent which will take over future leadership of the company. The trainees would be assigned and rotated in the various departments of the airline to offer them practical exposure to the various functional processes of the company and to inspire passion.

Malaysia airlines operate commercial flights across six continents. It has a well-designed service system tailor made to meet the different layers of its target market. The Golden lounge refers to the airlines most prestigious airport lounge designed to cater for its First Class, Business class, and Enrich Platinum and Enrich Gold passengers (Doganis 2009). These lounges have been constructed around the world in a bid to attract high end customers. They also serve as a platform to offer exciting and quality services that exceeds customer expectations. The lounges offer multiple services such as acting as business centers, food catering children care points and extended slumber rooms(Doganis 2009). Besides its own lounges qualified passengers have been offered privileges at lounges operated by Malaysia airline’s business partners elsewhere in the world. The national career launched its regional lounge in 2008 at Kuala Lumpur International Airport with a focal view on the front-end passengers.

The airline received the World’s Best Cabin Crew award for 2012, claiming the prestigious service delivery award for the eighth time since 2001. Besides the high end lounges for first class and the business class, Malaysia airlines also operate economy class on all its aircraft. It is only on the Airbus A380 that first class services are offered.

On the airbus A380, the airline prides itself in offering the widest fully first class type of seat among the world’s commercial planes. It also comes with semi-enclosed suites with a 23-inch flat screen TV (See & Rashid 2016). The business class comes with configured seats in a 2-2-2 layout fitted with heating power and a USB port. There is also a television set and in the case of the Boeing 737-800 the seats have a reclining ability. Lately the company provides seats designed by Thompson Aero, equipped with fully lie-flat capability. The seats in the economy class feature a 33-34 inches and generally smaller width compared to business and first class (See & Rashid 2016). They have no personal TV although the overhead TV can serve all passengers on board. The company received the Best Economy Class award in 2010. The airline also offers in-flight entertainment across all its classes.

Conclusion

Malaysia airlines profitability model is greatly influence by the ever-changing technology in the aviation industry. The rise of low-cost regional careers such as Lion Air and Air Asia pose a serious challenge in its bid to recover from the consequences of 2014 air disasters. Customer perception index of the airline suffered post-2014 and this had a negative bearing on the economic viability of the flag career. The restructuring of the company and its success will depend on a number of factors that may be beyond its control. All efforts should be made to recover the lost important routes especially in the China markets.

The reorganization of processes at the airlines demands proper understanding of all stakeholders in terms of their role in achieving turnaround objective. Therefore the airlines must organize future and regular meetings to communicate new strategies. Employees will also give new ideas that will help in turning round the airline. Employees who come into contact with passengers are best placed to understand customer expectations. Their ideas will go a long way in helping the top management draft appropriate policies. Furthermore, the company should continue to suspend such routes that may not be economically viable and concentrate on the more profitable routes. The new management should consider engaging the media in to inform the public on positive changes that are taking root in the company. This will help change the negative public perception that arose following the 2014 air crash of its two flights.

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