Founded 1947 / 1972

Malaysian Airline System (MAS; Malay: Sistem Penerbangan Malaysia; branded as Malaysia Airlines; (Malay: Penerbangan Malaysia MYX: 3786 as Malaysian Airline System Berhad) is a major airline operating flights from Kuala Lumpur International Airport and from secondary hubs in Kota Kinabalu and Kuching to destinations throughout Asia as well as a handful of destinations in Europe and Oceania. Malaysia Airlines is the flag carrier of Malaysia and a member of the Oneworld airline alliance. The company's headquarters are located on the grounds of Sultan Abdul Aziz Shah Airport in Subang, Selangor, Greater Kuala Lumpur. In August 2014, the Malaysian government's sovereign wealth fund Khazanah Nasional—which then owned 69.37% of the airline—announced its intention to purchase remaining ownership from minority shareholders and de-list the airline from Malaysia's stock exchange, thereby renationalising the airline.

Malaysia Airlines owns two subsidiary airlines: Firefly and MASwings. Firefly operates scheduled flights from its two home bases Penang International Airport and Subang International Airport. The airline focuses on tertiary cities. MASwings focuses on inter-Borneo flights. Malaysia Airlines has a freighter fleet operated by MASkargo, which manages freighter flights and aircraft cargo-hold capacity for all Malaysia Airlines' passenger flights. Malaysia Airlines also provides aircraft maintenance, repair and overhaul (MRO),[5] and aircraft handling services to other companies.

The airline began as Malayan Airways Limited and flew its first commercial flight in 1947. A few years after Singapore's independence, the airline's assets were divided in 1972 to form Singaporean flag carrier Singapore Airlines and Malaysian flag carrier Malaysian Airline System.[6] Its logo is the wau bulan, a traditional Malaysian kite design.

Despite numerous awards from aviation industry, such as the five-star rating from Skytrax (2005-7, 2009, 2012–13; one of just seven airlines in the world with this rating in 2013)[7] and recognition from the World Travel Awards as the leading airline in and to Asia (2010–11, 2013),[6] the airline struggled to cut costs to compete with new, low-cost carriers in the region since the early 2000s.[8] In 2013, the airline initiated a turnaround plan after large losses beginning in 2011 and cut routes to prominent, but unprofitable, long-haul destinations, such as the Americas (Los Angeles and Buenos Aires) and South Africa.[9] Malaysia Airlines also began an internal restructuring and intended to sell units such as engineering and pilot training.[9]

In 2014, Malaysia Airlines lost two aircraft—Flight 370 and Flight 17—in 131 days with a combined 537 passengers, exacerbating the airline's financial troubles and leading to the renationalisation of the airline. Prior to 2014, MAS had one of the world's best safety records—just two fatal accidents in 68 years of operation,[10] including the hijacking in 1977 of Flight 653 that resulted in 100 casualties.

In 1947, the airline began as Malayan Airways, being renamed Malaysian Airways after Malaysia gained independence. After that, it changed its name once more to Malaysia-Singapore Airlines. MSA ceased operations in 1972, and two airlines were born — Malaysian Airline System(MAS) and Singapore Airlines(SIA).

An Airspeed Consul, the first aircraft type operated by Malayan Airways.
Malaysian aviation history[edit]
Scheduled air passenger and mail services in Malaya commenced in 1937 when Wearne's Air Service (WAS) commenced operating services between Singapore, Kuala Lumpur and Penang. Wearne's Air Service was started by two Australian brothers, Theodore and Charles Wearnes.[11] The service commenced as a thrice weekly flight between Singapore and Penang The first flight, using an 8-seater de Havilland DH.89A Dragon Rapide took place on 28 June 1937[12] This inaugural flight departed Singapore from the then brand-new Kallang Airport, which had just opened earlier in the same month on 12 June[13] Later a second D.H.89A enabled the expansion to daily services as well as the addition of Ipoh as a destination. The WAS services ceased with the onset of the World War II Japanese occupation of Malaya and Singapore.

Beginnings[edit

An MSA Boeing 707 at Zürich-Kloten Airport. (1972)

An initiative[14] by the Alfred Holt's Liverpool-based Ocean Steamship Company, in partnership with the Straits Steamship Company[15] and Imperial Airways, resulted in the incorporation in Singapore on 12 October 1937, Malayan Airways Limited (MAL). But the first paying passengers could be welcomed on board only some 10 years later. After the war, MAL was restructured to include just the partnership of Straits Steamship and Ocean Steamship. The airline's first flight was a charter flight from the British Straits Settlement of Singapore to Kuala Lumpur, on 2 April 1947, using an Airspeed Consul twin-engined aircraft.[16] This inaugural flight on the "Raja Udang",[17] with only five passengers, departed Singapore's Kallang Airport and was bound for Kuala Lumpur's Sungai Besi Airport. Weekly scheduled flights quickly followed from Singapore to Kuala Lumpur, Ipoh and Penang from 1 May 1947 with the same aircraft type.[18] The airline continued to expand during the rest of the 1940s and 1950s, as other British Commonwealth airlines (such as BOAC and Qantas Empire Airways) provided technical assistance, as well as assistance in joining IATA. By 1955, Malayan Airways' fleet had grown to include a large number of Douglas DC-3s, and went public in 1957. Other aircraft operated in the first two decades included the Douglas DC-4 Skymaster, the Vickers Viscount, the Lockheed L-1049 Super Constellation, the Bristol Britannia, the de Havilland Comet 4 and the Fokker F27. Over the next few years, the airline expanded rapidly, boosted by post-war air travel demand when flying became more than a privilege for the rich and famous. By 12 April 1960, the airline was operating Douglas DC-3s, Super Constellations and Viscounts on new routes from Singapore to Hong Kong, and from Kuala Lumpur to Bangkok via Penang. Flights were also introduced from Singapore to cities in the Borneo Territories, including Brunei, Jesselton (now Kota Kinabalu), Kuching, Sandakan and Sibu.

With the delivery of an 84-seat Bristol Britannia in 1960, the airline launched its first long-haul international flight, to Hong Kong. When Malaya, Singapore, Sabah and Sarawak formed the Federation of Malaysia in 1963, the airline's name was changed, from "Malayan Airways" to "Malaysian Airways" (though still abbreviated to MAL). MAL also took over Borneo Airways. In 1966, following Singapore's separation from the federation, the airline's name was changed again, to Malaysia-Singapore Airlines (MSA). The next year saw a rapid expansion in the airline's fleet and routes, including the purchase of MSA's first Boeing aircraft: the Boeing 707s, as well as completion of a new high-rise headquarters in Singapore. Boeing 737s were added to the fleet soon afterward.

Incorporation[edit]

Boeing 737-200 of MAS at Brunei International Airport in 1987.
The differing needs of the two shareholders, however, led to the break-up of the airline just 6 years later. The Singapore government preferred to develop the airline's international routes, while the Malaysian government had no choice but to develop the domestic network first before going regional and eventually international. MSA ceased operations in 1972, with its assets split between two new airlines; Malaysian Airline System (MAS), and Singapore Airlines.

With the Singapore government determined to develop Singapore Airlines' international routes, it took the entire fleet of seven Boeing 707s and five Boeing 737s, which would allow it to continue servicing its regional and long-haul international routes. Since most of MSA's international routes were flown out of Singapore, the majority of international routes were in the hands of Singapore Airlines. In addition, MSA's headquarters, which was located in Singapore, became the headquarters of that airline.

The initials MSA were well regarded as an airline icon, and both carriers tried to use them. Malaysian went for MAS by just transposing the last two letters and choosing the name Malaysian Airline System, while Singapore originally proposed the name Mercury Singapore Airlines to keep the MSA initials,[19] but changed its mind and went for SIA instead. Acronyms for airline names later became less fashionable, and both carriers then moved on to their descriptive names.

Expansion[edit]
Revenue Passenger-Kilometers, in millions
Year Traffic
1975 1633
1979 2825
1981 4290
1990 11909
1995 22558
2000 37939
Source: Air Transport World

Malaysia Airlines DC-10-30, a backbone for the medium-long haul expansion of the airline from 1976 to March 2000.
Malaysian Airline System took all domestic routes within Malaysia and international routes out of that country, as well as the remaining fleet of Fokker F27's. It began flights on 1 October 1972 and soon expanded, including introducing flights from Kuala Lumpur to London.[20]

In that year MAS operated flights to more than 34 regional destinations and six international services. In 1976, after receiving its DC-10-30 aircraft, MAS scheduled flights reached Europe, with initial flights from Kuala Lumpur to Amsterdam, Paris and Frankfurt.

An economic boom in Malaysia during the 1980s spurred growth at Malaysia Airlines. By the end of the decade MAS was flying to 47 overseas destinations, including eight European destinations, seven Oceania destinations, and United States destinations of Los Angeles and Honolulu. In 1993 Malaysia Airlines reached South America when the airline received its Boeing 747 aircraft. MAS became the first airline in Southeast Asia to serve South America via its flights to Buenos Aires, Argentina. Malaysia Airlines also flew to Mexico City between 1994 and 1998 with fifth-freedom rights to carry passengers between Mexico City and Los Angeles, en route to Kuala Lumpur.

First period of unprofitability[edit]
Prior to the Asian Financial Crisis in 1997, the airline suffered losses of as much as RM 260 million after earning a record-breaking RM333 million profit in the financial year 1996/1997. The airline then introduced measures to bring its P&L back into the black. For the financial year 1999/2000, the airline cut its losses from RM700 million in the year 1998/1999 to RM259 million. The airline plunged into further losses in the following year, however, amounting to RM417 million in FY2000/2001 and RM836 million in FY2001/2002. With these losses, the airline cut many unprofitable routes, such as Brussels, Darwin, Madrid, Munich and Vancouver.

The airline recovered from its losses in the year 2002/2003. It achieved its then-highest profit in the year 2003/2004, totalling RM461 million.

Second period of unprofitability[edit]

Regional services flown by Fokker F50s, such as this one, were once operated at a substantial loss.
In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases.[21]

The Government of Malaysia appointed Idris Jala as the new CEO on 1 December 2005, to execute changes in operations and corporate culture. Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometre ("ASK") via poor yield management and an inefficient route network. Under the leadership of Idris Jala, Malaysia Airlines launched its Business Turnaround Plan in 2006, developed using the Government-linked company (GLC) Transformation Manual as a guide.

The most substantial factor in the losses was fuel costs. For the period, the total fuel cost was RM3.5 billion, representing a 40.4% increase compared to the same period in 2004. Total fuel cost increases comprised RM977.8 million due to higher fuel prices and another RM157.6[21] million due to additional consumption. In the third quarter, fuel costs were RM1.26 billion, compared to the RM1.01 billion in the corresponding period in 2004, resulting in a 24.6% increase or RM249.3 million.[21]

Another factor for the losses was poor revenue management. MAS substantially lagged its peers on yield. Some of this gap was due to differences in traffic mix,[22] with less business traffic to and from Malaysia than to and from Singapore, but much of it was due to weaknesses in pricing and revenue management, sales and distribution, brand presence in foreign markets, and alliance base. Malaysia Airlines has one of the lowest labour costs per ASK at USD0.41, compared to other airlines such as Cathay Pacific and Singapore Airlines at USD0.59 and USD0.60[22] respectively. Despite low labour costs, however, the ratio of ASK revenue to this cost was, at 2.8, much lower than Singapore Airlines, where the ratio is 5.0, and slightly higher than Thai Airways[22]

There are other factors listed in the Business Turnaround Plan of Malaysia Airlines, all leading to the net loss of RM1.3 billion in the year 2005.

Recovery from unprofitability[edit]

The former Bangunan MAS in Kuala Lumpur once served as the company headquarters
Under the various initiatives, launched together with the Business Turnaround Plan, Malaysia Airlines switched from losses to profitability between FY2006 and FY2007. When the Business Turnaround Plan came to an end, the airline posted a record profit of RM853 million(USD265 million) in 2007, ending a series of losses since 2005. The result exceeded the target of RM300 Million by 184%.[23]

Route rationalising was one of the major contributors to the airline's return to profitability. Malaysia Airlines pared its domestic routes from 114 to 23, and also cancelled virtually all unprofitable international routes. Apart from that, Malaysia Airlines also rescheduled all of its flight timings and changed its operations model from point-to-point services to hub and spoke services.

Additionally, the airline started Project Omega and Project Alpha to improve the company's network and revenue management. Emphasis has been placed on six areas: pricing, revenue management, network scheduling, opening storefronts, low season strategy and distribution management.

Malaysia Airlines has been involved in discussions for new aircraft purchases, using its cash surplus of RM5.3 billion to eventually purchase narrow-body aircraft and wide-body aircraft.[24]

Despite these achievements, critics continue to deride the carrier for lagging behind its competitors in the region. This notion is not helped by the fact Malaysia Airlines has not made substantial investments in customer service, especially compared to Thai Airways or Singapore Airlines.

On 22 December 2009, Malaysia Airlines announced the purchase of 15 new Airbus A330 aircraft, with options for another 10. Expected to be delivered between 2011 and 2016, they are intended to operate on medium-haul routes to eastern Asia, Australia, and the Middle East. The airline's plans are to run Airbus A380 planes, which were introduced into service in 2012, on long-haul routes, A330s on medium-haul routes, and Boeing 737 aircraft on short-haul routes. Under this plan, it is unclear where Boeing wide-bodies currently in the fleet would fall.[25]

Third unprofitability[edit]
Malaysia Airlines recorded a stunning net loss of MYR2.52 billion for the full year 2011, which was the largest in its company history, due to rising fuel costs and mismanagement.[26] A major restructuring to the Board of the Company saw the appointment of a new Group Chief Executive Officer. Ahmad Jauhari Yahya was appointed as Group CEO in September 2011. One of the first initiatives to stop the losses was a rationalisation of the network. The company suspended services to Surabaya, Karachi, Dubai, Dammam[27] and Johannesburg in January 2012, and ceased flights to Cape Town, Buenos Aires as well as Rome in February 2012.

Business Turnaround Plan[edit]
On 28 February 2013, Ahmad Jauhari Yahya, Group Chief Executive Officer of Malaysia Airlines, reported a net profit of RM51.4mil for the fourth quarter, reversing the net loss of RM1.3bil a year earlier. MAS' improved financial performance last year was mainly attributable to its route rationalisation programme, which saw an overall 8% reduction in available seat kilometre (ASK). This was matched by a marginal 1% reduction in revenue to RM13.76bil in 2012 and seat factor holding at 74.5%. The reduced ASK also helped MAS register a corresponding 14% decrease in expenditure.[28]

2014 aircraft losses[edit]
Further information: Malaysia Airlines Flight 370 and Malaysia Airlines Flight 17
In 2014, Malaysia Airlines lost two Boeing 777 aircraft within 131 days, with a total of 537 passengers and crew lost. Flight 370 disappeared in an unknown location (most likely in the Southern Indian Ocean) on 8 March with 239 persons aboard, leaving little evidence behind; no debris from the plane had been found.[29][30] Flight 17 crashed near Donetsk in eastern Ukraine on 17 July with 298 passengers and crew, after it was believed to have been hit with a surface-to-air missile.[31]

Malaysia Airlines was struggling to cut costs to compete with a wave of new, low-cost carriers in the region when Flight 370 vanished on 8 March 2014 without a distress signal. Malaysia Airlines lost RM443.4 million (US$137.4 million) in the first quarter of 2014.[32] The second quarter—the first in the aftermath of Flight 370's disappearance—saw a loss of RM307.04 million (US$97.6 million), which represented a 75% increase over losses from the second-quarter of 2013.[33] Malaysian Airlines has not made a profit since 2010.[33] In the previous three years, Malaysia Airlines had booked losses of: RM1.17 billion (US$356 million) in 2013, RM433 million in 2012, and RM2.5 billion in 2011.[34] Industry analysts expect Malaysia Airlines to lose further market share and face a challenging environment to stand out from competitors while addressing their financial plight.[34] The company's stock, down as much as 20% following the disappearance of Flight 370, had fallen 80% over the previous five years, which contrasts with a rise in the Malaysian stock market of about 80% over the same period.[35]

A month after the disappearance, Malaysia Airlines' chief executive Ahmad Jauhari Yahya acknowledged that ticket sales had declined but failed to provide specific details. This may partially result from the suspension of the airline's advertisement campaigns following the disappearance. In China, where the majority of passengers were from, bookings on Malaysia Airlines were down 60% in March.[35] Mr. Ahmad stated in an interview with the Wall Street Journal that the airline's "primary focus...is that we do take care of the families in terms of their emotional needs and also their financial needs. It is important that we provide answers for them. It is important that the world has answers, as well."[34] In further remarks, Mr. Ahmad said he wasn't sure when the airline could start repairing its image, but that the airline was adequately insured to cover the financial loss stemming from Flight 370's disappearance.[34][32] In August, the airline warned of poor second-half earnings, citing a 33% decline in average weekly bookings following the loss of Flight 17.[33] Media reported that some flights were largely empty and that the airline had slashed prices well below competitors on several important routes.[35][36][37]

Following the loss of Flight 17, there was a spike in resignations from flight crew. In a statement regarding the issue, Malaysia Airlines stated, "Following the MH17 incident, there was a spike in crew resignations, but the number [by late August had] decreased to routinely expected levels. Many cited family pressure as the reason for their resignation due to the MH17 and MH370 tragedies."[38] While there have been claims that as many as 500 cabin crew have resigned,[38] Malaysia Airlines has stated that only 186 cabin crew had resigned between January and July 2014, which is less than 5% and below industry norms.[38]

Renationalisation[edit]
Even before the crash of Flight 17, many analysts and the media suggested that Malaysia Airlines would need to rebrand and repair its image and/or require government assistance to return to profitability.[39][40][41][42][43] On 8 August, trading in the company's stock was temporarily suspended when Khazanah Nasional—the majority shareholder (69.37%)[44] and a Malaysian state-run investment arm—requested that MAS's Board of Directors undertake a selective capital reduction exercise (e.g. buyback or cancel stock of other shareholders);[45] Khazanah announced it will spend 1.38 billion ringgit (US$431 million; 27 sen per share) to compensate minority shareholders (a 12.5% premium of 7 August closing price).[46][47][48] At the time, Khazanah Nasional did not announce much about its plans for the airline except that the airline had “substantial funding requirements”[46] and that a “comprehensive review and restructuring”[46] was needed.

On 29 August, Khazanah released a report—Rebuilding a National Icon: The MAS Recovery Plan[49]—which outlines their plan for the restructuring of MAS and the process of completing the takeover. About 6,000 jobs (about 30% of MAS's workforce) will be eliminated and the carrier's route network will be shrunk to focus on regional destinations rather than unprofitable long-haul routes.[50] Khazanah plans to de-list the airline from Malaysia's stock exchange by the end of 2014 and plans to return it to profitability by late 2017, re-listing the airline by 2018 or 2019.[50] On the business/legal side, Khazanah intends to transfer the relevant operations, assets, and liabilities of Malaysian Airline System Berhad into a new company (no name given in documents) by July 2015.[49]:2

Corporate information[edit]
Malaysia Airlines is listed on the stock exchange of Bursa Malaysia under the name Malaysian Airline System Berhad. The airline suffered high losses over the years due to poor management and fuel price increases. As a result of financial restructuring (Widespread Asset Unbundling)[21] in 2002, led by BinaFikir, Penerbangan Malaysia Berhad became its parent company, incorporated in 2002, in exchange for assuming the airline's long-term liabilities. On the operational side, the Government of Malaysia appointed Idris Jala as the new CEO on 1 December 2005, to execute changes in operations and corporate culture. Under his leadership, Malaysia Airlines unveiled its Business Turnaround Plan (BTP) in February 2006, which identified low yield, an inefficient network and low productivity (overstaffing).

Boeing 747-400 9M-MPD of Malaysia Airlines in the special "Hibiscus" livery, taking off at Heathrow Airport.
Following the Widespread Asset Unbundling (WAU) restructuring of Malaysia Airlines, Malaysian Government investment arm and holding company, Khazanah Nasional's subsidiary, Penerbangan Malaysia Berhad [51] is the majority shareholder with a 52.0% stake.[51] After Penerbangan Malaysia Berhad, the second-largest shareholder is Khazanah Nasional, which holds 17.33% of the shares. Minority shareholders include Employees Provident Fund Board (10.72%), Amanah Raya Nominees (Tempatan) Sdn Bhd (5.69%), State Financial Secretary Sarawak (2.71%), foreign shareholders (5.13%)[51] and Warisan Harta Sabah (2.4%). It has 19,546 employees (as of March 2007).[52] The Malaysian government reported that the government's holding company, Khazanah Nasional is keen on selling shares of Malaysia Airlines to remain globally competitive in an industry that is fast-consolidating.[53]

Head office[edit]
The airline has its headquarters and registered office on the third floor of Administration Building A at Sultan Abdul Aziz Shah Airport in Subang, Selangor, in Greater Kuala Lumpur.[54] The head office is located near Terminal 3 of the airport.[55]

Previously the airline headquarters were on the third floor of the MAS Administrative Complex at Subang Airport,[56][57] in Subang.[55] Prior to the construction of the Kuala Lumpur MAS headquarters, the airline rented space in the UMBC headquarters.[58] The airline had a permanent corporate headquarters in the Bangunan MAS,[59] a 34-36 story[55][58] building it owned along Jalan Sultan Ismail,[58] in the Golden Triangle.[55] The airline occupied 20 stories in the building.[55] The building was built for RM88mil. In 2005 The Star said that the building was "reported to be worth between RM300mil and RM350mil".[58] At one time before 2005 the airline chairperson, Raja Tun Mohar, made an oral promise to Tun Abdul Razak of the Government of Malaysia that the airline would not sell its headquarters.[58] The airline had 600 employees in the building.[55]

In 2006,[55] the airline moved its head office from the Kuala Lumpur building to the former headquarters in Subang,[55] to reduce inefficiencies and generate cash.[60] Channel News Asia stated that the airline had been "forced" to sell the former headquarters.[61] Idris Jala, the managing director, said that the sale could net RM3bil. In the event it did not, the airline would try to rent out the floors it occupied. The first phase was scheduled to occur from January to March of that year, with the chairperson, executive director, managing director, company secretary, corporate communication officer, and finance communication officer moving to the Subang facility. In June 2006, Phase II was planned as a move for the distribution, marketing, and sales divisions of the company, to Administration Block Three.[55]

Around 2007 Permodalan Nasional Berhad purchased Bangunan MAS from the airline. The new owners planned to remodel the building, by installing a five star hotel apartment block and upgrade the offices to Grade A++.[62]

The airline planned to relocate its headquarters from Sultan Abdul Aziz Shah Airport to Kuala Lumpur International Airport in Sepang, Selangor in Greater Kuala Lumpur in February 2012.[63]

Subsidiaries[edit]
Malaysia Airlines has diversified into related industries and sectors, including aircraft ground handling, aircraft leasing, aviation engineering, air catering, and tour operator operations. It has also restructured itself by spinning-off operational units as fully owned subsidiaries to maintain its core business as a passenger airline. In 2013, Malaysia Airlines has 28 subsidiaries, with 25 of them fully owned by Malaysia Airlines