Why Malaysia Airlines’ Future Looks Doubtful

March 8th, 2015 marks the one-year anniversary since Malaysia Airlines Flight MH370 mysteriously disappeared over the South China Sea. Departing from Kuala Lumpur International Airport, the Boeing 777, carrying 227 passengers and 12 crewmembers, was scheduled to land in Beijing Capital International Airport. Shortly after MH370’s disappearance, the Malaysian government provided little to no information to the families affected and to the public. If Ho Chi Minh Air Traffic Controllers (ATC) had operated according to protocol, then they should have alerted Kuala Lumpar ATC within the first five minutes of realizing that Flight MH370 had failed to check in with Vietnamese ATC; instead, 20 minutes passed before this critical information was relayed. After this initial confusion, several hours had elapsed before any Kuala Lumpar ATC released a distress signal.

This lack of communication and evasive stance set the tone for the search effort and the disclosure between the government and grief-stricken families who are still left with no answers. According to the Malaysian Department of Civil Aviation, the search will continue through 2015; yet one year later, this claim provides little consolation to families.

MAS, in fact, has an excellent safety record; prior to Flight MH370, MAS had not had a fatal crash in more than two decades. This clean record, however, has not deterred people from taking action based solely on Flight MH370 and Flight MH17, which was shot down by a missile over Ukraine in July 2014. Anger, skepticism, and fear over the airline’s competency and safety have lead to a decrease in ticket sales. Into the summer of 2014 following MH17 crash, MAS’ weekly ticket booking declined 33%. This has only exacerbated MAS’ financial difficulties faced in 2013, prior to the two disasters. MAS announced a $97 million loss for the April to June quarter following Flight MH370’s tragedy. Prior to 2014, MAS, which was Asia’s premier airline, experienced fierce competition from AsiaAir, resulting in a cumulative loss of $1.3 billion—MAS has not made a profit since 2010.

MAS has evidenced that it cannot compete with cheaper, discount airlines at the rate they are continuing their business. It is essential that MAS restructure their business plan, removing full-service options; rather, MAS offering shorter, regional flights with attractive discounts would be more appealing to the public.

The greatest obstacle that MAS faces, however, is the public’s perception of the brand. Horrific tragedy, unanswered questions, unclear communication, and unstable finances, all of which are highlighted by the media, scar MAS’ brand. All of these changes are not happening rapidly, and MAS’ corporate culture is hindering their ability to move forward. Their company landscape does not reflect international attitudes. The overall work culture and dynamic is conservative and incredibly structured. The hierarchy of command, defined by the Power Distance Index—explained below— is the foundation of every tiered group of individuals in corporate Asian companies.

In Malcolm Galdwell’s Outliers, this cultural dynamic is investigated as he analyzes flight disasters, comparing transcripts of pilots and first officers between Asian airlines and American airlines. What he found was that the conversations between American pilots were direct and assertive, while Asian first officers often relied on mitigated speech, which is using indirect and non-confrontational language to a superior. This dichotomy of culture has negative and positive impacts. As Galdwell suggested, the firm approach Americans use may be perceived as disrespectful. However, the subtle, diluted linguistic approach Asian cultures employ have detrimental effects when it comes to leading and taking control in times of stress between subordinate employees and their superiors.

Dutch psychologist, Geert Hofstede, describes the “Power Distance Index” (PDI), which “expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally”. Predictably, Asian cultures have a very high PDI. As people lower in a company are hesitant to speak up, superiors are equally as likely to be subtle and indirect in divulging important information. This is evident through the government and MAS’ lack of transparency with the public and bereaved families.

This pervasive dynamic conflicts with MAS’ need to rebuild their image as they attempt to regain customer’s confidence. Can MAS regain its footing while still maintaining its cultural practices and dynamic?

Ismat Sarah Mangla from International Business Times suggests, “Malaysia Airlines should take its cues from Air New Zealand and Virgin Atlantic, which both experienced turbulence…Virgin framed the changes as a position of strength”. It was acknowledged that MAS has a much wider gap to fill, as they reposition their place in the airline industry. Shashank Nigam, CEO of the aviation-marketing firm SimpliFlying, believes that MAS should leverage their customer base to “do the evangelizing [for MAS]” as he asserts, “Brand affinity is something that needs to be done organically”.

The future of Malaysia Airlines looks uncertain. In November 2014, Khazanah Nasional, a Malaysian wealth fund supporting MAS, announced a $1.8 billion restructure plan for the next five years. Additionally, it will reevaluate European and Middle Eastern flights if those flights do not substantially contribute to MAS’ profit. This financial assistance will only be beneficial if a more assertive business model is employed. MAS provides a learning opportunity for other leading companies in the airline industry.

Frances Ingham, Director General of the Public Relations Consultants Association warns that completely rebranding MAS too quickly can be detrimental and could be subject to even greater backlash: “By trying to distance itself from the tragic events too quickly, Malaysia Airlines may be perceived as attempting to disassociate itself from any responsibility for them”. MAS must strategically rebrand itself to grow a stronger company but also with acute sensitivity towards the tragedies.

Recovering from physical and financial catastrophes under close scrutiny from the media requires a herculean effort; the only question is whether MAS is capable of moving forward.

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