Losses of Malaysian Airlines
Introduction
According to Shalini and Jyoti (2014), Malaysian airline has been experiencing slow growth of the business despite initiating new plans to assist in its development. The Malaysian airline business’s inability to grow questions the government whether they should permanently close the firm. Since the first collapse of the flight in the Indian Ocean year 2014, the government temporally closed the business and later reopened it. Since then, the company performs poorly compared to the other aviation airlines such as Qatar and Lufthansa airways. Despite the airline allowance to operate its business again, profits made are still elusive; hence the Malaysian government thought of exiting its operations in the aviation industry. They reasoned that the Philippines and Japanese airlines independently rose back after selling them to a private company; hence, they thought the idea would work for Malaysian airlines.
The event that led to Loss/ closure of Malaysian airline
The collapse of Malaysian Airlines (MH).
MH 370 was scheduled for its international flight from Kuala Lumpur to Beijing but collapsed and disappeared in the southern region of the Indian Ocean. Since then, the disappearance of the plane leaves questions on what happened to the aircraft. The majority do not know the cause for its collapse because it left Kuala mediain good state but could not reach scheduled destinations. People assume that change in weather led to its destruction (Trinanes et al., 2016). However, the information appears skeptical because the flight was never found for further research concerning its collapse. The disappearance of the plane caused financial problems to the business that led to its closure. The economic issues occurred because the airline spent too many finances trying to research the disappearance of their flight. Similarly, there was a need to compensate families who lost their loved ones.
Political, social critics.
Lack of proper information about the disappearance led to critics from the local communities, which destroyed the business image. The business started experiencing a reduction of customers, which reduced finances gained by the company. Similarly, the government’s decision on Malaysian Airlines (MH) contributed to its losses (Hazis, 2015). Temporally banning operations of the airline for several times reduced profits gained by MH. Despite the problems encountered by MH, lack of support from the government to rebuild its image led to more losses. Even after the ban, most customers lowered their trust with the business due to the scandals experienced before. Later, the airline offered low fares to customers aiming at regaining its image, which led to incurring severe losses.
Economic Cultural Factors
During the ban, the majority of employees resigned, reasoning that the business’s inactivity will result in reduced wages. However, the need to retain employees forcefully made the airline continue offering payments despite reducing the market for their services. Continuous financial outlets than inlets led to the losses encountered in the business. According to the cultures of any airline business, lack of operations requires the management to refund tickets to clients who did not receive services (Liang & Shiau, 2018). Unlike the standard refunds where charges are included to re-issue or cancel a ticket, the mistake done by the airline recommends free returns. The process of offering free returns lowered profits as no finances were gained.
Technological, legal and environmental factors
Since 2013, the group financial performance of Malaysian airlines has reduced due to the inferior technical aspects they used. In terms of fuel, the airline consumed more due to the types of engines they used. Therefore, more finances were incurred for fuel compared to the amount of revenue gained. An increase in expenditure rate contributed to making more losses as more market challenges mounted, yet the number of buyers reduced (Singh et al., 2018). If only the airline constructed their aircraft in a way that allowed less fuel consumption, fewer financial problems would be incurred. In terms of environmental factors, changes in weather cause a delay of flights to an extent some client’s requests for refunds. Flight cancellations dissatisfy customers who may end up not purchasing tickets from the same airline in the future. Such problems result in loss of market, a contributing factor that led to the closure of MH.
Unsuccessful Business Responses
After the loss encountered by MH, the management introduced shareholders to participate in funding the business whose plan failed. The company still faced losses and did not stop the government from temporally closing the firm (MULRENAN, 2014). The intervention of shareholders did not change the MH market because they planned to finance the business, which appeared unattractive to consumers. Lack of returns contributed to the withdrawal of shareholders with fear that their investments would yield no profits. The actions taken by the business appeared unsuccessful many times as continuous experiencing crisis chased away the shareholders leaving the company with problems.
Recommendations
According to the above crisis experienced by the MH business, proposals require the firm to intervene with crisis management organizations and lawyers for assistance to deal with problems. Contribution to crisis firms provides insurance policies that protect a business from experiencing severe losses. If a future crisis occurs, the insurance organizations compensate for the loss on behalf of the airline. With improved technology, it is recommended that the airline observe the emerging trends to participate in fair competition. As a result, the airline would be able to regain the market and successfully continue its operations.