Malaysia Airlines Turned Their First Monthly Profit In Years

Malaysia Airlines probably ranks at the very top of the list of airlines I feel bad for. They were mismanaged for years, and then faced two incredibly unfortunate tragedies when they had two 777s crash just months apart.

While they were already losing hundreds of millions of dollars before their two crashes, that only sent them into a further downward spiral, given the perception people have of the airline (to this day I see people comment “you’re brave” when someone posts a picture of them taking a Malaysia flight).

Malaysia-A380

On the plus side the government finally realized that the losses weren’t sustainable, and that their old leadership team was corrupt and only doing more to run the airline into the ground.

So Malaysia Airlines hired Christoph Mueller, known as one of the most effective crisis CEOs in the industry. He turned around Aer Lingus, which is now once again profitable, and is hoping to do the same at Malaysia Airlines.

He made the tough decisions the previous management team wasn’t willing to make, including huge layoffs and retiring a large part of their fleet, including all of their 777s.

Malaysia-772

After all, when you’re an airline losing money, you want to operate as few flights as possible (within reason) to limit your losses, and not as many flights as possible.

The good news is that it seems like Malaysia Airlines’ efforts are finally paying off. For the first time in years, the airline reported a monthly profit in February, a good sign that revenue is up and costs are down. The airline’s CEO is realistic about their situation and admits they just had a very good month, and that their goal is to breakeven by 2018.

Per the AP:

“Our target is to break even by 2018,” said Mueller, a turnaround veteran hired a year ago under a $1.5 billion overhaul that included cutting 6,000 jobs and axing unprofitable routes.

“For a company that lost 2 billion ringgit ($511 million) just last year, if you are able to break even for a month or so, it means the financial gap between revenue and cost has significantly closed, and that is good news that tells us that we are on the right trajectory,” he said.

Even before the disasters, the national carrier was ailing from mismanagement that saddled it with at least $1.7 billion in losses since 2011.

“The ambition of Malaysia Airlines is to grow again when we can afford growth,” he said. “If you grow as a loss making airline, you just increase the losses.”

Mueller said the following regarding the challenges of stepping into an airline which was previously very bureaucratic:

A year after taking over the job, Mueller said it has been hard work cutting through the corporate culture of a state-owned company where red tape was thick and employees had many “entitlements.”

He said he is fostering a more open working environment in which hierarchies and bureaucracy are being slowly removed.

Employers are encouraged to communicate more freely with each other and to work as a team, he said. While there is still some unhappiness among staff, he said morale is picking up.

Bottom line

I really like Malaysia Airlines, so it’s great to see their (very slow) turnaround. Christoph Mueller is no doubt the right guy for the job, as he did a great job at Aer Lingus, and presumably can do the same at Malaysia. Assuming oil prices don’t increase sharply in the coming years, I suspect his plan will work out well.

It’ll be great when the airline takes delivery of their A350s, which should result in a bit of a fleet refresh, even if they only get a few of them. In the meantime Malaysia Airlines is installing a new business class product on their A330s, which should at least make them more competitive among premium flyers.

Malysia-New-Business-Class-1

Do you think Malaysia’s turnaround plan will work?

Comments

  1. “If you grow as a loss making airline, you just increase the losses.”

    This is the single most important rule in all of aviation management. It should be seared backwards into the forehead of every airline CEO so they see it each time they look in the mirror.

  2. February tends to be heavy travel in Asia due to Chinese/Lunar New Year. I’m not surprised they turned a profit but it may be tougher for the rest of the year and I hope they break even by 2018.

  3. The whole manner in which they handled Flight 370 was horrible. I can’t imagine the rage and pain felt by the survivors of the missing in the wake of how incompetent and insensitive both ML and the Malaysian Government were in their respective roles. No amount of remorse (which is yet to happen) on the part of ML could ever convince me to board one of their flights. Thankfully there is competition.

  4. Turnaround is a win win. You are a genius if successful and the previous management was way too incompetent if you are not.

    It’s hard work and lots of rewards though. So low risk, high reward and hard work.

  5. I’m not sure even Christoph Mueller could fix Air India!

    The Malaysian government is probably giving him more or less free rein to fix the problem at MH since they sunk so much money into nationalizing it. I can’t see India doing the same with AI. The aviation authorities are also a bigger problem in India than in Malaysia.

  6. Wish someone (not this guy) could improve the quality and customer experience of the pile of junk known as AA, UA and DL… easily my three most hated and avoided airlines in the world… (not having flown Air Koryo)

  7. MH looks like it was so similarly run to SAA which is dismal compared to what it used to be. Christoph would have such an uphill battle but I wish his next project was SAA.

  8. Excellent–maybe they won’t lose a plane this month. What a joke–who would fly this airline.

  9. I have flown MA a few times and been impressed with their product, both hard and soft. Last travel was less than a year ago on an A380. Let’s remember that one of their planes was shot down by Ukranian rebels with Russian weapons and military support, in airspace that most airlines considered ‘safe’ at the time. The other flight disappeared, and despite various theories, we still don’t know what happened exactly or why. Frankly, this could happen to any airline, however well or otherwise they were managed. Their handling of the PR over the incident on the other hand was a long way from industry practice. I congratulate all who have worked to turn the airline around – especially crew members who continue to fly having lost colleagues in these tragedies.

  10. The Qantas-like deal they have made with Emirates buys them some time to do a full restructure. Hope it works for them, it’s not a bad airline. The greater challenge would be to try to turn Thai around, although they posted a modest profit as well.

  11. As expected this is nothing but a gimmick by politicians. Is this operational profit or net profit? MH is reduced to a 55 mostly narrow body fleet domestic/regional carrier. Khazana took RM 2.4 Billion charge just for layoffs and set aside USD 1.5 Billion for restructuring. After layoffs it still has 14,000 employees for 55 planes and still holds USD 1.7 Billion debt. Gimmick is Khazana takes a charge while MH shines.

  12. Looks like you are very sure MH370 CRASHED, may I know where did you get that info from?. We Malaysians only know that MH17 was shot down and the debris were found. As for MH370 not a clue. Please take extra precautions when covering a story, do not play spin doctor.

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