Why Malaysia Decided to Stop Flying from Kl to Paris and Kl to Amsterdam in January 2016

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A:

Decision making

British Airways used to suspend their flight services to Kuala Lumpur in 2001 after global as global travel slowed after September 11th tragedy in Washington. British Airways (BA) has resume daily direct flights from Kuala Lumpur to London from May 27, 2015 after British Airways re-starting the route in response to high commercial demand from customers that has been demanding for direct flight from Heathrow, London to Kuala Lumpur, which opens up new connecting routes around the region.

The reason British Airways fly back to Malaysia because of they are drawn to Malaysia current economy. The strength and vibrancy of the air travel market between the United Kingdom and Malaysia will bring positive impact of great proportions to both countries from economic, political, social and cultural standpoint.

Strategy

As Malaysia are growing in economy wise, it became increasingly important and have a huge market, explains that there were about 460000 passengers flying the Kuala Lumpur-London per annum. There are strong demands for the route from business and leisure customers alike, eager to explore the huge commercial opportunities Malaysia offers, as well as offering stunning places to visit and explore for holiday makers.

By flying from Heathrow to KLIA, they believe KLIA will add value and enhance British Airways huge global network. This area of the world is very important to British Airways given the increasing traffic volume as the world is moving to the East. Asia-Pacific will be more and more important for the global aviation sector.

Most of major airline companies in the world are tied under partnership. Both British Airways and Malaysia Airlines are tied in alliance under the same partnership which is called OneWorld services. By allowing consumers to use their miles/points to travel on partner airlines, these partnerships give consumers more destination options to various exotic locations. The benefit to customers by choosing the airline within the same alliance is that it will lower their cost. Other than that, it will improve their network of reward especially if they travel frequently throughout the year. Choosing airlines within the same alliance will lower your costs and improve your network of rewards, especially if you travel often throughout the year.

Kuala Lumpur International Airport is the world’s largest aviation hub not currently served directly by British Airways, and a major centre for OneWorld airlines. Malaysia also has a rapidly growing economy focusing on international trade. Malaysia economy offers fantastic opportunities for UK business, while holiday-makers can enjoy some stunning destinations around the country and beyond.

As our analysis, below, highlights BA will not just be competing with Malaysia Airlines on the route but other operators which provide a one-stop strategy, most notably the major Gulf carriers which have a convenient transit option via hubs in Dubai, Abu Dhabi and Doha. Although demand levels declined in the late 2000s, MIDT data shows a renaissance over recent years with an estimated 310,000 bi-directional O&D passengers flying between London Heathrow and Kuala Lumpur in 2013, up 20.2 per cent on 2012, when a larger 34.1 per cent growth was record on 2011 demand levels.

Although Malaysia Airline also flying to the same destination, collaborative efforts can be pursued but one should not just be seen as a competitor to another, considering both are members of the One World Alliance.

QUESTION 3

Q: After restructuring, Malaysia Airlines decided not to fly to Amsterdam and Paris in January 2016. Analyse the decision making.

A:

Decision Making

Why Malaysia Airlines decided to stop flying from KL to Paris and Kl to Amsterdam in January 2016 because of alliance and code sharing agreement. OneWorld member and Qantas partner Malaysia Airlines will stop flying to Amsterdam and Paris next year and instead leverage its existing partnerships with Koninklijken Luchtvaart Maatschappij (KLM), flag carrier airlines of the Netherland and British Airways, as well as signing a new codeshare deal with Emirates. With the end of flying to Europe, MAS will begin to focus on regional flying and flying wholly within the Asia Pacific and Middle East. Their most medium haul routes are between 3000 and 5000 miles. European and Asian carriers have struggled to make money on routes after Middle East carriers with lower cost and newer fleets aggressively expanded flying between the regions. Most carriers has reduced flying but still the remaining services are loss making.

Strategy

Code sharing is an aviation business arrangement where two or more airlines share the same flight. Sharing means each airline publishes and market the flight under its own airlines designator and flight number as part of its published timetable or schedule. Malaysia Airline and Emirates Airline have signed a deal to expand a partnership. The two airlines has signed a code share deal that will allow Malaysia customers to book routes to Europe with Emirates while in exchange, Malaysia will offer Emirates passengers connection within Asia Pacific region. Malaysia Airline can sell codeshare flights on Emirates flights at a low enough prices that will keep their frequent flyer keep flying with them and thus in turn allowing Malaysia Airlines to intake revenues for flying passengers on Emirates metal instead of their own. People will now buy tickets of MAS to reach these final destination and MAS will take back market share in terms of ticket sales.

Amsterdam-bound passengers will be funnelled onto KLM, a codeshare partner of Malaysia Airlines which flies non-stop from Kuala Lumpur at a similar time of the cancelled MH service. Travellers bound for Paris could instead fly with Malaysia Airlines to London Heathrow on the Airbus A380 and then connect with OneWorld partner British Airways to complete the final leg of their journey.

Reason why they do alliance and code sharing is to reduce cost of sales office, maintenance facilities, operational staff, investment and else. If MAS still fly from Asia to Europe, MAS will face a huge loss. This decision making done by MAS Chief Executive Officer, Christoph Muller is to avoid loss causes by low flying cost, reduce in world oil price and open new route by Middle East airline. Competition will get keener with Emirates-MAS deal, as player like air Asia and Malindo Air will