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.

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.