New Marketing Plan for Malaysian Airline Berhad

TABLE OF CONTENTS

SUMMARY

1. INTRODUCTION

2. VISION AND MISSION STATEMENT

3. CORPORATE OBJECTIVES

4. CURRENT MARKETING PLAN

4.1. Target market and Positioning

4.2. Marketing Mix

5. PROPOSED MARKETING OBJECTIVES

6. OUTLINES OF POSSIBLE STRATEGIC ALTERNATIVES

6.1. Market Development

6.2. Market Penetration

6.3. Diversification

7. NEW LOW COST CARRIER IN AUSTRALIAN MARKET

7.1. Target market

7.2. Marketing mix

8. IMPLEMENTATION PLAN

9. CONCLUSION

RECOMMENDATION

REFFERENCES

APPENDICES

Appendix 1

Appendix 2

Appendix 3

TABLE OF FIGURES

Figure 1: Australia’s Top 10 foreign carriers ranked by seat capacity on 07/2015 and 08/2015

Figure 2: The airlines that visitors use to travel from Malaysia to Australia

Figure 3: Malaysia Airlines annual passenger number to/from Australia and average seat load factor between 2006 and 2016

Figure 4: Weekly Household Income in Australia from 1994-95 to 2015-16

SUMMARY

In modern life, people have many means of transportation to travel from one destination to another. One of the most effective way is travelling by air with the limited time and more convenience. Besides, the increasing utilization of airplanes brings the benefit for economy and tourism of every country. Among various airlines, Malaysia Airlines Berhad (MAB) which is owned by Malaysia government is considered to be one of the best full-service carriers especially in Asian region. This report creates the new marketing plan for MAB, the largest airlines in Malaysia. Depending on the information from MAB annual report and some official websites, an overview of the vision, mission and corporate objectives are illustrated clearly. Through the analysis of the MAB current marketing plan, this paper indicates the future marketing objectives and discuss about some Ansoff’s strategic alternatives including market penetration, market development and diversification. After that, a new low cost carrier focusing on Australian market is assessed as the best plan to rebuild the customer network and increase the profit for medium and long haul flights. By applying some marketing theories, a new 7P of marketing mix and implementation plan with the budget schedule are released in detail. From this report, some recommendations are given to gain the customer loyalty and bring MAB to become the top five-star airline over the world.

INTRODUCTION

In the globalisation, airlines play a vital role on transporting people for long distances. Thanks for the development of airlines industry, people can travel easily and it contributes positively to the economy of each country. Malaysia Airlines Berhad (MAB) is a flag carrier of Malaysia with the proud history as an outstanding brand and warm hospitality. It aims to provide excellent service and keep cost effective to earn the profitability and enlarge the market. The airline was founded in the year 1930 in Singapore and the first flight flew in 1947 (Malaysia Airlines, 2018). Then the airline was renamed as Malaysia Airline Berhad on the 1^st September 2015 after Malaysian Airline System (MAS) had ceased operation (Centre for Aviation, 2018). Currently, the aircraft operates from the Kuala Lumpur International Airport as its hub to around 50 destinations across the world including Asia, Australasia, Africa, Americas, Europe and the Middle East. MAB belongs to the Malaysia Aviation Group which has two other subsidiaries such as regional low-cost carrier Firefly and regional carrier MASwings. Today the company has a fleet of around 79 aircrafts with around 14,000 employees. The purpose of this report is to suggest a new marketing plan for MAB to recover from two tragedies in 2014. Based on the vision and mission statement, MAB indicates its objectives to operate effectively. Through the review of the existing marketing plan with SWOT analysis, Porter’s Five Force Model and marketing mix, the marketing objectives and some new strategic alternatives are illustrated clearly. Thanks to Ansoff’s strategies, the launch of new lost cost carrier targeting to Australian market is chosen as a method for promoting MAB’s brand. Subsequently, new marketing mix and implementation plan are described in detail to enhance the understanding about the importance of marketing plan in regaining market share and ensuring the customer satisfaction in airline industry.

VISION AND MISSION STATEMENT

MAB’s vision is to become “An Airline of Excellence” which offers the best to its passengers in terms of safety, comfort, punctuality. The purpose of MAB Board of Director is to create a unique airline renowned for its personal touch, warmth and efficiency. Besides, the mission statement of the organization including:

• Turn MAB to be one of the leading carriers in the airline industry and continue remaining as the World’s five-star value carrier.
• Produce the great profitability, create the customer loyalty and deliver consistently the customer satisfaction.
• Strengthen MAB’s status in the national and global market.
• Place people first and increase the position of employer and create value for shareholders.
• Build the recognition of “Malaysian Hospitality” service.

CORPORATE OBJECTIVES

• Use Porter’s generic strategies to increase the competitive advantages and promote its brand over the market with differentiation strategy. It helps MAB to be known as a convenient and well equipped airline locally or internationally.
• Apply the differentiation strategy to compete with other airlines over the world by supplying a unique offering to meet customer requirements. MAB ensures to offer high quality product, good distribution network, maintain a well-maintained modern fleet, excellent in-flight service and airport facilities. MAB perform the differentiation by using highly modern technology compared to the other similar airlines.
• Focus on increasing the image as “Malaysian Hospitality”, offers its customers with flexible and customized services.
• Plan, implement, monitor the responsibility to generate revenue and grow the market share and meet profitability targets.
• Understand market trend and develop new potential market and product for MAB.
• Build trusted, strategic relationships with partners, develop a understanding of MAB weaknesses and challenges to propose the valuable strategies.
• Assess the current MAB’s products to feedback to the improving process of production and suggest solutions for improvement of the product or pricing offering.
• Abide by legal requirements and operations in the most efficient manner.
• Position as benchmark in the aviation industry, obtain the five star rating by Skytrax by 2018.

CURRENT MARKETING PLAN

Target market and Positioning

Depending the SWOT analysis (detail on Appendix 1) and Porter’s Five Environmental Force Model (detail on Appendix 2), MAB determines its potential customers for its operation:

• The primary target is business travellers as they are the most frequent buyers, most loyal and are willing to pay the extra money than the average travellers. The typical business travellers are between 30-49 years old from upper middle class.
• The secondary market is leisure visitors who are sensitive to price. The types of travellers vary widely in their demographics and education who always looking for a good deal.
• Australian male and female at age of 25-50 with high income.

Positioning: MAB positions its service as high safe and high quality airline in the aviation industry.

Marketing Mix

a. Product

MAB is a full-service carrier which brings the hospitality experience. MAB offers tickets for three types of class:

• First Class offers a premium experience with flat-bed seats, entertainment options, platinum lounge, internet connectivity. The passenger will be offered 50 kilos for checked baggage.
• Business Class – Golden Club Class is ideally for frequent flyers, offers special lounge service, in-flight services, communication via flight phone and over 100 hours of on-demand entertainment. The passenger will be offered 40 kilos for checked baggage.
• Economy Class for less outstanding services, comfortable seats and warm meals at affordable prices for customers. The passenger will be offered 30 kilos for checked baggage.

b. Price

MAB pricing strategy is based on the differentiation with the high quality services offered to distinguish itself with other airlines. According to Porter (1980), differentiation involves making company’s service different from and more attractive than its competitors. As MAB offers full service flights, its airfare is generally higher than low cost carriers. Customers can buy ticket including added service with no hidden charges. The pricing policy equals to the value provided by company. MAB offers economy, medium-value, premium pricing strategy to adapt to demand of customer and maintain the high standard, hence MAB becomes the competitive airline especially in Asian market.

c. Place

MAB operates from its home base of Kuala Lumpur International Airport and a secondary hub of Kota Kinabalu (Centre for Aviation, 2015). It operates on international and domestic routes providing access to 150 countries through global alliance Oneworld (Oneworld, 2017). MAB also uses code sharing arrangement to provide service in 90 destinations across Asia, Africa, the Americas and Middle East (Oneworld, 2017).

The conventional distribution strategy for MAB is using third party sales and travel agencies through its global distribution systems. The MAB marketing team works with the support of travel agents in London, Malaysia and Asia hence there is recovery on all the routes (Bellew, 2017). MAB increases direct sales via its website and online purchase via online partners which increase the competitive advantage and reduce distribution cost. In terms of online sales partnership, MAB strengthens the relationship with existing partners like Expedia, Travelocity, Orbitz and builds new networking to improve the online distribution strategy. Apart from conventional and online strategy, MAB celebrates Malaysia Airlines Travel Fair (MATF) to excite customers. MAB also participates Malaysian Association of Tour and Travel Agents (MATTA) which is held in March and September annually to offer great fares for travellers (Lesley, 2016). The multi-channel distribution strategy is designed to provide easier way for accessing to MAB tickets and improve the choice of customers.

d. Promotion

Along with some traditional forms of media like televisions, magazines, press, MAB explores Search Engine Optimization (SEO) on Google, subscribes pay-per-click advertising and direct mails. MAB invests in social media marketing on Facebook, Twitter, Instagram. A mobile application is created to help customers to make reservation easily. It also undertakes sales promotion activities by offering discounts on certain travel routes during the year. As a part of customer retention strategy, MAB offers a frequent flyer program to its regular customers.

Sponsorship is a common strategy applied by MAB to increase the awareness of customers. MAB sponsors some major events like Liverpool Football Club, music festivals. MAB also raises fund for charity campaign, community service to promote for its brand. In 2016, MAB announced a four-year sponsorship for the country’s Olympic divers, Pandelela Rinong and Nur Dhabitah Sabri to support for the next Olympics in Tokyo 2020 (Malaysia Airlines, 2016).

e. People

MAB understands that people are most important for its business. MAB employs professionals from various countries for the smooth functioning of the airline. Further, MAB invest heavily in the training for their employees as they are responsible for the passenger safety. MAB established MAB Academy in 2017 to train the employees and develop aviation professionals to create the culture of ‘Malaysian hospitality’ in their employees (Malaysia Airlines, 2017).

f. Process

MAB is effective in processing service to its customers. The process involves making reservation for the flight using the airline website, agents or through other dealers. After that the flight information is given to the customers. The passengers are required to arrive at the airport and they can use the lounge facilities at the airport in case of first class or business class reservations. The flight offers baggage checking, meals and in-flight entertainment as other full service carriers.

g. Physical Evidence

The Physical Evidence plays a major role to provide a tangible proof of the service quality. On the ground, the physical evidence includes the reservation website, tickets, the brand logo, the customer service, lounge and restroom while the in-flight facilities include the aircrafts, the seats, cleanliness of the place, the uniform of the employees. The airline’s fleet consists of six Airbus A380-800’s, 15 Airbus A330-300’s, and 54 Boeing 737-800’s with the replacement of Airbus A350 XWB from the end of 2017 (Malaysia Airlines, 2018). MAB also offer extra legroom on aircraft for increasing the customer’s comfort. MAB upgraded its Airbus A330 business class with the spacious fully lie-flat seats in 2016 which bring more space for work, play and sleep (Flynn, 2015).

PROPOSED MARKETING OBJECTIVES

• Improve direct sales by 50% through MAB website and become profitable airline in 2019.
• Increase safety measure to “win back customer”, rebuild the trust from customer and improve the customer experience.
• Maintain the excellent workforce, especially the cabin crew, build a strong relationship with alliances and other business partners to be ranked in top 5 best airlines in 2019.
• Improve the customer satisfaction of 95% in 2019 and have 75% of repeat customers in 2019.
• Increase market share by 20% through providing high levels of service quality and ensuring greater efficiency in operations.
• Start offering different service on the new destinations. MAB needs to introduce new low-cost carrier for medium and long-haul flight to adapt the customer’s need and compete with other low-cost airlines.
• Focus on offering the intangible service to its passengers and offering additional service like hotel, car rental, holiday packages and other services on the ground and in the air.

OUTLINES OF POSSIBLE STRATEGIC ALTERNATIVES

Market Development

MAB is expected to introduce three to four new routes a year to expand new market. According to Izham (2018), MAB will introduce more different destinations based on its existing segments. Moreover, MAB needs to distribute their basket equally, not only in Australia, Europe but also focus on China. The airline can consider China as a great potential by offering reduced hotel rates, hiring more Chinese-speaking staff on board, changing to Chinese flavour inflight menus. With the growing middle class and economic among Asian countries, tourism in Malaysia can also double with the big part come from China. Besides, another way to develop market is that MAB can expand to other target customers to compete with other airlines (Shaw, 2016). MAB needs to offer attractive fare package for corporate company on short haul or long-haul holidays. This strategy plays an important role on the expansion of target market to increase competitive advantage of MAB. However, to explore new market, MAB needs to do research to understand the customers’ demand which can waste time and money. By conducting online survey via website, social network, email, MAB can collect information easily to create new marketing plan. MAB also can collaborate with local government to offer discounts for local activities when passengers travel with MAB. It is effective way to increase the awareness of MAB and promote the local tourism.

Market Penetration

In market penetration strategy, MAB tries to expand sales based on existing markets. Ansoff (1980) stated that market penetration is a strategy to use its existing services in current market. In Australian market, only MAB is full service carrier which can bring passengers to Malaysia comparing with two other low cost carriers like AirAsia, Malindo Air. Moreover, MAB is still assessed as one of the top ten foreign carriers in Australia market.

Figure 1: Australia’s Top 10 foreign carriers ranked by seat capacity on 07/2015 and 08/2015

(Source: CAPA – Centre for Aviation, 2015)

However, flights from Australia only had the big capacity during the peak summer (40,104 seats on 07/2015 and reduced to 23,378 seats on 08/2015). Therefore, MAB can still remain its position as full-service carrier by investing more in the promotion program during low season such as advertising, sales promotion to increase seat occupancy rate and reduce the operating cost for building good core competencies. Besides, MAB can also decrease the ticket price to attract more customers from competitors. By increasing distribution channels especially via online booking websites or social network, passengers can aware of MAB easily. MAB is the first airline in Asia to allow users to book flights and process payments through Facebook Messenger. Johnson & Scholes (2002) argue that the market penetration strategy is the least risky since it leverages the firm’s existing resources and capabilities. Hence, MAB can compete with other airlines by improving service levels, punctuality, ratio of delivery of bags and the quality for food to satisfy the customers. MAB is not considered as a budget airline or a luxurious one, it is in the premium category (Ismail, 2017). For example, to travel from Malaysia to Australia, MAB is the second most popular airline comparing to Air Asia X.

Figure 2: The airlines that visitors use to travel from Malaysia to Australia

(Source: Tourism Australia, 2017)

There was 25% of visitors choosing MAB to travel from Malaysia to Australia, therefore, repositioning the brand, launching new promotions to gain market share and accordingly, increase revenue is necessary to penetrate the market (Kotler, 2000). By focusing on advertising, sponsorship, MAB can build the loyalty from customers.

Diversification

In diversification strategy, MAB tries to grow its market share by introducing new offerings in new markets. It is the most risk strategy because it requires both new product and market development (Johnson & Scholes, 2002). MAB is expected to launch a low-cost carrier targeting Australian demand. The rising cost of living and multiculture in Australia has shown new potential customers which can be exploited. Today, Australia has five low-cost carrier options for overseas travel which is Jetstar, Scoot, AirAsia X, Indonesia AirAsia and Cebu Pacific (Ironside, 2017). With the lower value of the Australian dollar, Australian raises the interest with low cost airlines. According to Christian (2017), price is still the largest factor in choice of travel. Besides, MAB just has regional low cost carrier well-known as Firefly, the launch of new budget airlines serving medium and long haul routes at very low price with providing only the basics of service is necessary to increase the popularity of MAB. MAB increases the diversification by focusing on the different target market and explore more new destinations in Australia such as Perth, Tasmania. Because AirAsia X has a leading 59% of nonstop seat capacity from Australia to Malaysia compared to 35% for MAB, MAB low cost carrier can help airlines to regain more market share.

Figure 3: Malaysia Airlines annual passenger number to/from Australia and average seat load factor between 2006 and 2016

(Source: CAPA – Centre for Aviation & Australia BITRE, 2017)

According to Centre for Aviation & Australia BITRE (2017), the airline carried 1.4 million passengers to and from Australia in 2014 but this number reduced to 900,000 passengers in 2016 because both MAB and AirAsia pursued significant expansion in the Australia-Malaysia market. However, according to Centre for Aviation (2018), iin August 2018, AirAsia X’s capacity will drop to 50%, therefore, the new launch of MAB low cost carrier is essential to gain more share market in Australia. To build the trust from customers, the low-cost airlines of MAB need to pass the International Air Transport Association Operational Safety Audit (IOSA) for excellent safety record. The investment in new aircraft also helps MAB to expand routes from some other major destinations in Australia to Asian countries.

NEW LOW COST CARRIER IN AUSTRALIAN MARKET

Target market

MAB considers to use diversification strategy in Ansoff’s strategies through establishing low cost carrier to new segment in Australia. By analysing the PESTLE model in Australian market (details on Appendix 3), a new target market is chosen:

• Australian male and female at age of 20-50 with middle and low income.
• Group at working age (15-55) on middle class.
• Australian families who are value-conscious, and senior citizens who has most time to travel.
• Leisure travellers wanting travel at a cheaper rate.
• Fly to international routes for business purposes under a small budget.
• Students who seek for low price ticket.

Marketing mix

Product

The core product of MAB low cost carrier is that it provides low cost transportation for middle class and lower class customers so that they can also experience flight journey. MAB low cost carrier offers three types of fare including:

• Starter Fare with additional fee for 7kg of carry-on luggage, additional extras of baggage (15-40kg), seat selection, pre-purchased meals and entertainment.
• Starter Plus with a 60-day check-in, additional free for 20kg checked baggage, extra legroom, priority boarding and reserved standard seating.
• Starter Flexible Plus offer the option to be flexible tickets, optional airport check-in with priority lane access at the airport.

The augmented product including online booking function, variety of meal options, in-flight entertainment, mobile ticket is added with extra fee to increase the product’s value. MAB low cost carrier provides free travel protection against lost baggage and insurance coverage to commuters to make them feel safe during flights. By bringing more choice for customers at the lowest price, MAB can adapt to the real demand of passengers and attract more Australian travel through MAB.

Price

MAB low cost carrier uses cost leadership strategy to suit their class of customers. According Murphy (2017), Australian is almost from working class, hence they tend to look for cheap price tickets. With the introduction of services of low fares, most people that can only afford to travel once could travel up to three times with their cheaper fares. This service adapts to the guests who do not need for meals, frequent flyer miles or airport lounges in exchange for fares up to 80% lower than those currently offered with equivalent convenience. It offers reasonable price tickets while ensuring the convenience and comfort of the customers. MAB low cost carrier will be successful in retaining customer loyalty because the passengers are guaranteed of their money’s worth. It will help to attract huge sales and provide more revenue. MAB low cost carrier’s flight tickets can range from 250 Ringgit (AUD85) to 1450 Ringgit (AUD500) while its additional services such as in-flight meals range from 10-40 Ringgit (AUD4-15), additional baggage costs 20-70 Ringgit (AUD7-25) and in-flight entertainment ranges from 30-40 Ringgit (AUD10-15). But those fares are as baseline as you get including a seat allocated by the airline and only 7kg of carry-on baggage and not a gram more. Other “add-ons” ranged from comfort packs of a blanket and pillow, Wi-Fi, seat selection.

Distribution

MAB low cost carrier targets to some major destinations in Australia such as Sydney, Melbourne, Perth, Adelaide, Darwin, Tasmania with the same frequent density with MAB full service carrier. MAB operates over 40 weekly flights to Australia for low cost carrier including almost flights to two main cities like Sydney, Melbourne. All the flights are from the carrier’s main hub in Kuala Lumpur. Besides, MAB low cost carrier sells its product through three main channels including online sales, retail sales and resellers. Tickets are available at ticketing agencies, where the agents help the customers choose the best of flights and offers for them. MAB low cost carrier establishes sales office in Sydney airport, Melbourne airport and some main road of major Australian cities to support customers in buying tickets. Bookings are available to be made on internet in several languages. It will reduce maintenance cost of stores, reach more to audience and bring the convenience for customers. Thus, internet services are the most sort for buying tickets. Company’s own website or third-party websites are used to distribute MAB ticket. Booking services are also available through SMS and apps. Besides, the information and updates about flights are available through SMS. Offline and online travel agents also offer attractive tour packages and arrange the most suited plans for the travellers.

Promotion

MAB releases ticketless system that allows customers to purchase their ticket online at a discounted rate. They also have a scheme of group discounts and this helps to get more target market, especially internet based customers. MAB low cost carrier uses many media channels like TV, print, online advertisement to market its service. MAB low cost carrier sponsors the Australian rugby team and cricket team, the main sports of Australia to power brand recognition. It supports for same sew marriage and LGBT community through campaigns which gains positive image amongst the people. MAB also works with flight centre in Australia because one in ten low cost carrier passengers book ticket through Flight Centre (Flight Centre, 2017). Some promotion programs such as selling first 1,000 seat each quarter at half price, discounting for travel solo or with their loved one, discounting for traveling sharing the flying moment in Facebook, Instagram with hashtag #The Best Moment with MAB Low Cost Carrier are applied to raise the customer awareness and rebuild the trust from customers. MAB collaborates with hostel, cheap accommodation booking online to make deal for budget holiday travellers. Because Australian travel most from September to December, MAB releases discounted ticket between February and August to promote the demand. Besides, MAB can give free meals and luggage fare to students and the elderly in Australia for the first time travelling with MAB low cost carrier to bring the excellent experience for the passengers. MAB releases a new TV commercial, passes the message across all social media platforms as well as billboard on big cities or near stations to attract customers. The campaign will be expanded around Australia to bring the recognition of MAB low cost carrier to the Australian communities.

Physical evidence

MAB low cost carrier’s physical evidence can be divided into ground and in-flight facilities. The ground environment includes booking office, baggage facility system, website. In-flight service is the most important function which has direct affect to customers. MAB still uses Boeing 737-800 and A330-300s for low cost carrier to increase the safety for customers. With more hi-tech facilities like offering virtual reality and augmented reality for in-flight entertainment and upgrading the massage seat system, customers prefer this flight while travelling to and from Australia. The cleanliness of the flight and the employees’ official uniform are also considered to increase the brand image. The customers will have the same experience when travelling with MAB low cost carrier comparing to MAB full service. The airline has to ensure the best in-flight facilities that match world class standards.

People

MAB low cost carrier prouds of itself in providing the best of service, hence it pays more attention to the flight attendants who will become the face of MAB. The flight attendants are trained to have knowledge about Australia’s lifestyle and attitude. Moreover, all the staff is properly trained in terms of safety measures and actions to be taken during emergencies. MAB offers training programs to its employees, where employees are checked upon physical, mental and cognitive scale of judgement, so that they can take decisions at critical times. Being an international service, a diversified peer group is presented to support for flight attendants to ensure that the Malaysian Hospitality is a part of their body. The most important aspect of safety in an airline is the professionalism of the pilots, engineers and crew (Chirstian, 2018). MAB ensures to choose the right people in its organisation depending on their capabilities. Although customers do not expect luxurious service or high treatment, employees of MAB still offer high level of service quality with cheap fares and on-time performance of the flights along medium and long routes.

Process

The travellers can book the tickets online or offline, through various channel available. After booking, the ticket is generated via email and other information like boarding and timings or cancellations are updated through the SMS. The process of MAB low cost carrier involves the effective reservation system, the facilities provided in the airport, baggage handling and check in process. For Starter Plus and Starter Flexible Plus, passengers are given the priority in transferring baggage. In the flight, attendants care for the comfort level of the travellers. The customer data bases are maintained and the regular customers are identified to be given discounts. MAB establishes dedicated customer care team to resolve customer complaints between one to twenty-four hours of request. They believe customers are key to their expansion and growth, and hence the effective process is built to satisfy all targeted customers.

IMPLEMENTATION PLAN

In order to increase the recognition of new low-cost carrier, the company needs to develop an implementation plan to boost sales and recover its reputation. Implementation plan means the actual steps the company will take to promote its business (Umble, Haft & Umble, 2003). The implementation phase of the marketing plan ensures the marketing activities happen in the correct time. MAB has a new vision in Australian market which is focus on satisfying customers at low price. Therefore, it is necessary to create a new slogan like “Safest and Cheapest” to achieve the new goals with strategic plan. MAB will conduct some specific actions to raise the customer’s awareness of new MAB product to all customer segmentations and rebuild the trust from customers. Firstly, MAB will invest in upgrading website to operate new low-cost carrier, recruit and train employees to increase their knowledge about new product of MAB. Secondly, MAB will perform some promotional mix such as advertising, direct marketing, sale promotion, public relations and personal selling especially in Australian market. When Australian travels via MAB, the tourism in Malaysia can be promoted, therefore, the government plays an important role on raising fund for MAB to research and develop new low-cost carrier to some new routes in Australia. Moreover, the most popular month for travel in Australia is from September to December because it is the summer in Australia (Flight Centre, 2017). Hence, MAB has plan to launch promotion programs between January and August to increase the demand.