Malaysia Airlines offloads key routes to Emirates

The tie up between Malaysia Airlines (MAB) and Emirates is an interesting one. On the one hand, there must be money to be made from these routes otherwise Emirates wouldn’t touch them and the cost to Emirates will be minimal because they are flying all these sectors anyway.

MAB will still be able to show it offers flights on the CDG – KL route but in reality it will be an Emirates flight that goes via DXB. As a result, MAB will lose a substantial source of foreign currency and the carriers brand as well as the Malaysia brand will be diluted.

At least Malaysia Airlines passengers can use this on flights to Europe
At least Malaysia Airlines passengers can use this on flights to Europe

It’ll also make it harder to sell Malaysia as a location for FDI to European companies because there are limited direct flights (to busy CEOs a 2 hour stopover in DXB each way is an expensive irritant) to the country.

On the other, it makes sense because Malaysia Airlines is now associated with the current poster boy of the aviation business (Sorry SIA) which should benefit the carrier. Although I wonder how this will work once Emirates gets a look at the weak offering MAB is, especially up the front of the bird.

It looks increasingly like Mueller wants to make Malaysia Airlines a small, regional quasi low cost carrier. That’s a tough ask in a market where loyalty is hard to come by. Whichever way you look at it, the brand is being diluted and that’s a costly shame for the carrier and the country.

I suspect there are KPIs involved that focus only on the bottom line and not on building a global brand that flies the flag for Malaysia and helps sell the country as a business and tourist destination. That’s a pity.

The new Malaysia Airlines brand is to be launched this month

We’re into December 2015 and this is an auspicious month. But it is not just auspicious because of the holidays, it will be remembered as the month Malaysia Airlines launched its new brand.

You only need to look at recent images of the Malaysia airlines CEO Christoph Mueller to see how stressful it is cutting 7,000 jobs from a bloated workforce, reducing the number of suppliers from 20,000, (yes 20,000) to an industry average of around 2,500, renegotiating sweetheart deals such as the one with the caterer and changing the focus of the carrier from a global one to a regional one.

The strain is evident on the face of Malaysia Airlines CEO Christoph Mueller
The strain is evident on the face of Malaysia Airlines CEO Christoph Mueller

But there is plenty of good news for Mr Mueller and the industry. Global passenger traffic is up 6% this year and long term, Airbus predicts the Asia Pacific region will lead the world in air traffic by 2034 with 41% of all passengers.

Meanwhile, aviation fuel, which accounts for anything from 40% to 55% of an airline’s operating cost is down more than 40% year on year. And as this saving doesn’t appear to have been passed onto passengers, Malaysia Airlines could make a profit earlier than the predicted 2018.

So with huge reductions in the cost of operations, improved efficiencies and a new brand, things are looking up for MAB. But the road to the new brand has been uneven. Reuters announced in late May 2015 that a new name, livery and rebrand would be unveiled in June 2015. This didn’t happen.

The company did change its name from Malaysia Airline System Bhd to Malaysia Airlines Bhd and this was reported by some quarters as a rebrand but it’s not. It’s actually the company’s fifth name change and besides, the company continues to be known as Malaysia Airlines.

In late July 2015, it was reported that M&C Saatchi had won a four-way pitch to ‘refresh’ the brand and was going to be working on the ‘refresh’ with Prophet, a predominantly US centric brand consultancy with a regional office in Hong Kong.

Only six months earlier, Lara Hussein the head of M&C Saatchi is reported to have said, “I don’t think re-branding is the answer. To change the name, image or logo would appear to be superficial and not trigger any change in perception.” She’s right of course, to change the name, image or logo would be superficial, but that’s not a rebrand.

Most recently, the CEO of Malaysia Airlines stated, “The entire brand needs a ‘refresh’ and will be like a start up with a new culture, values and ideas.” That’s more like it.

He also admitted that the airline had “fallen behind in the past three years and the rebrand would be much more than a new name and coat of paint”. He said the focus would be on ‘making the customer experience change’. OK, now we’re getting somewhere. All the talk of logos, image and refreshes was beginning to concern me.

Let's hope the new cabin upgrades include domestic business class
Let’s hope the new cabin upgrades include domestic business class

According to Mueller, from December 2015 the airline, “will begin installing new cabin seating and improving inflight entertainment, customer service and on time performance. New technology, lounge concepts and catering would be introduced and the uniforms may change.”

Now we’re cooking with gas and I’m excited because this is more like branding and these changes are long overdue. Some of the planes I’ve flown recently, from the B737-800 to the A380 have looked tired and the business class lounge at KLIA is more like a cafeteria.

He’s banking on the new product improvements to renew customer confidence and trust in the brand. But while these upgrades are important, it will take more than a new lounge, new seating and new equipment to revive the brand. After all, these changes will only bring the brand back up to speed with the rest of the industry.

The current snack offering to Malaysia Airlines business class passengers on the A380
The current snack offering to Malaysia Airlines business class passengers on the A380

Branding success in the aviation business comes with a number of small successes at key touch points in the customer journey. And these successes are built on delivering value on the customer’s terms.

Nowadays that journey begins not with an advertisement but with the customer discovering the brand, most often online or, in the case of the lucrative but undervalued existing customer during the relationship that the airline builds with the customer once they have finished their journey.

Emirates A380 business class. It's all about the experience
Emirates A380 business class. It’s all about the experience

At every step of the way, those experiences involve interactions with personnel that know how to represent the brand and deliver that value.

Having been a customer of Malaysia Airlines for over 21 years, and having flown nearly 100 times on the carrier since MH370 I can say, with some authority that the majority of staff don’t understand branding and the role each of them has in the success of the brand.

It’s not their fault because years of mismanagement have inculcated the ‘tidak apa’ (Don’t care) culture across the organisation. It’s not that the airline or its people are bad, it’s just that it has been driven into the ground in an attempt to milk it for every penny. And this has created a sense of every man for himself.

The mismanagement has created an organizational culture that lacks the required values. All of its processes, attitudes and systems have evolved to do the bare minimum required to get by. Recently, in an attempt to try and stem the hemorrhaging with the layoffs and supplier renegotiations, morale has hit rock bottom and the company is hanging even further over the precipice.

So will the rebrand make a difference? We’ll have to wait and see. My concern is that it is going to be advertising and promotion driven. A ‘big idea’ will be created and pushed out across the world in a massive advertising blitz that will make a big splash before being lost in all the noise.

We’ve seen this approach before and it doesn’t work. In an era when delivering value to customers has become the norm, Malaysia Airlines’ seems to be struggling to come to terms with the new branding order.

Numerous personal experiences, countless anecdotes and negative reviews, comments and discussions on and offline talk about the airline not caring or negative interactions with staff.

In an era when customers not companies define brands, and they define those brands based on the economic, experiential and emotional value those brands deliver to them, the rebranding of Malaysia Airlines will be successful only if the firm gets to know its customers and staff are primed to deliver consistent, knowledgeable, exceptional, personalised engagement with each of the very diverse audiences.

It maybe that Mr Mueller doesn’t want to go this route. That the investment will be too much and his ‘start up’ will be a glorified low cost carrier masquerading as a national carrier. The ramifications of such a move on the Malaysia Nation brand will be substantial and only negative. Let’s hope that’s not the plan.

I prefer to remain positive. Today is December 1st 2015. The country and the world is watching and waiting for the new brand. I hope they get it right. My next flight on Malaysia Airlines is on December 8th. I’ll let you know if anything has changed.

The rebranding of MAS has already started and first impressions are good

The new Malaysia Airlines CEO Christoph Mueller has begun the process of rebranding MAS by stating Monday that the carrier is ‘technically bankrupt’ and that a brutal restructuring exercise is the only way forward. He went on to say that the rot had set in years before the mystery of flight MH370 and the tragic one-in-a-billion shooting down of MH17.

Christoph Mueller leading the MAS rebrand
Christoph Mueller leading the MAS rebrand

Of course this is nothing new but by stating what we all know and confidently but empathetically, he has shown us that he is serious and perhaps most important of all, he is prepared to do what no previous CEO has been prepared (or was allowed) to do, namely to do what it takes to rebuild the damaged brand.

He has begun by announcing three high level areas – pillars that will over the next 3 years put Malaysia Airlines back where it belongs, at the top of the Asian aviation business.

Phase one requires massive job cuts to the bloated workforce, new contracts for staff, the renegotiation of supplier contracts (as well as cutting the number of suppliers by 90%), the axing of some international routes and reducing the flight frequency on others, reviewing the 777-200ER fleet and selling off 2 Airbus A380s. MAS thought the A380 could help turn the carrier around and at one stage put in an order for 60 of the mighty jets.

But the huge, fuel guzzling A380 has had mixed reviews from airlines and pilots and rumour has it there has been little interest in the 2 aircraft MAS is looking to sell. I’d be surprised though if they sell off the 777s unless they intend to replace them with more modern, fuel-efficient alternatives.

MAS wants to sell 2 A380s, reducing the fleet to 4 despite once ordering 60
MAS wants to sell 2 A380s, reducing the fleet to 4 despite once ordering 60

Phase two will focus on transforming the carrier and apparently more than 40 areas for improvement have already been identified and the third phase will look at sustaining the new position of the airline.

So although the name hasn’t yet changed, the new Malaysia Airlines Brand is up and running.

Before you can go anywhere with a brand, you need three things. The first is a solid product offering. If you don’t have that, it doesn’t matter how much you spend on selling, marketing or advertising, the brand will not grow. We’ve seen that over the last 5 years as MAS spent more than RM1 billion trying to resuscitate the brand with advertising campaign after advertising campaign without addressing the brand’s structural issues.

Instead of trying to WOW customers with their product, former MAS CEOs cut costs, sold assets and ignored the passenger experience. The very heart and soul of what makes Malaysia unique – its people and the way they are – was ignored and instead cosmetic, shallow clichéd taglines were created and tacked together in a series of immediately forgettable tactical campaigns that did little for the brand.

The second thing you need when building a brand is a CEO who is prepared to look where others prefer not to look, who understands what needs to be done and is prepared to do what it takes and make the tough decisions, even if that means taking apart the existing brand and rebuilding it, brick by painful brick.

And the third key component is people who understand that the organization is the brand and that brand is part of a community. And this community, made up of people within and without the organisation will make or break the new brand. The new team will have to embrace and engage the community and understand that it is the community not the staff who make the MAS brand.

The new culture of MAS must be connected not aloof
The new culture of MAS must be connected not aloof

This team will need to create an environment where people work toward a common, clearly defined organizational goal and not a personal one. Arrogance, ignorance or the ‘tidak apa’ culture will have no place in the new environment. Instead a humble, collaborative, connected and engaged culture based around delivering value, not on the company terms but on the customer terms will be the order of the day.

You’ll notice that I haven’t mentioned anything about the new livery, logo, brand architecture, uniforms, positioning, celebrities, the brand story and so on. That’s because they are irrelevant if the three points above are not addressed first.

Rebuilding the MAS brand was never going to be easy but the early signs are good, long may it continue.

Is this the last throw of the dice for Malaysia Airlines?

Today marks the beginning of a new (and possibly the last) chapter in the life of the national airline of Malaysia. A new CEO Christoph Mueller officially starts work today, 1st May 2015. Many in the aviation business revere Mueller, primarily because he is credited with turning around the Irish carrier Aer Lingus in a stagnant, competitive European market.

MAS is selling it's A380s & rebranding
MAS is selling it’s A380s & rebranding

But his achievements at Aer Lingus will pale into insignificance when he starts peeling back the complicated cultural corporate layers at Malaysia Airlines (MAS).

What was once one of the most respected, envied and profitable carriers in the world has become a mere shadow of its former self. MAS is under fire from domestic and regional LCCs and if it stops flying to Amsterdam, Frankfurt and Paris will only be left with a couple of potentially lucrative long haul destinations servicing the kangaroo route from Heathrow to Australia. And these will come under further pressure with the return of British Airways flights to Kuala Lumpur from Heathrow at the end of May 2015.

MAS is hugely inefficient. It’s annual revenue per employee is down to about RM850 compared with RM1,675 at Cathay Pacific and RM2,250 at Singapore Airlines. MAS has 183 employees per aircraft compared with 138 at Singapore Airlines, 125 at Cathay pacific and 31 at Ryanair. Little wonder then that it has racked up debts in the region of US$2 billion since 2010.

Mr Mueller will no doubt focus on improving that revenue per employee and reducing the number of employees per aircraft. At least 6,000 staff are being offered redundancy and the airline has already announced it is selling all 6 of its Airbus A380s and four Boeing 777-200ER super ranger jets. The good news is that he has the support of the government and fuel prices have plummeted but that’s not enough.

He’ll also need to focus on rescuing the MAS brand and its reputation. And that won’t be easy because despite cutting costs and offering attractive incentives to agents in key markets such as Australia, the carrier is struggling to get bums on seats. And after the tragedies of 2014, years of poor management, low staff morale, and little focus on anything other than advertising, the MAS brand is in free fall.

Carpet bombing consumers with weak advertising will not rebrand MAS
Carpet bombing consumers with weak advertising will not rebrand MAS

Which is why the airline issued a rebranding request for proposals (RFP) a couple of weeks ago. Unfortunately the signs aren’t good that the people responsible for the brand understand what constitutes a brand and what is required to rescue the brand and its reputation.

We weren’t invited to submit a bid so I can’t comment on the contents of the RFP but I understand those invited were only given about two weeks to submit a bid as the deadline for submissions is 8th May 2015 with the rebranding supposed to be launched in July 2015.

Those are insane deadlines which is why cynics in the industry are suggesting the advertising agency tasked with carrying out the rebranding has already been chosen but there is no hard data to back up this claim. Rest assured though that the industry is watching developments carefully and if a certain agency gets the bulk of the work, there will be plenty more accusations ‘flying’ around.

Rumours aside, my worry is that those tasked with managing the rebrand will focus on a new name, new livery, new uniforms, new logos, new signboards and mass advertising creative campaigns but place very little attention on the key areas that need to be addressed, such as the ability to deliver economic, experiential and emotional value to all segments, at every touchpoint, at all times and on customer terms.

The first stage in the rebranding of MAS will require a cultural change that may have to come not just from the airline but the country itself. To rescue the brand MAS must move away from a centralized, top heavy organization staffed by employees trained to do as management says and not challenge questionable decisions.

The firm must move away from an ingrained belief that business is a one off transactional, price driven initiative and that every customer is purely a source of money, irrespective of their relationship with the brand, their influence and their loyalty.

In a social media world, where consumers not companies or advertising agencies define brands, changing the name, logo and livery of the airline and announcing the ‘rebrand’ with a global, one size fits all corporate driven communications campaign will actually have a negative impact on the brand and possibly do more damage than the twin tragedies of 2014, the years of mismanagement and the sweetheart supplier deals have done to date.

Instead the first stage of the rebranding must focus on creating a collaborative, personalised, relationship based, retention driven organization that understands customers and their needs.

Failure to focus on the internal branding first and getting it right will make any other investments an expensive exercise in naive futility. Which will see the end, sadly of a once iconic brand.