It’s been nearly two years since a pair of tragedies hit Malaysia Airlines, which was already bleeding money. The two disappearances of its MH370 and MH17 led an already badly-performing company to the brink of financial collapse. It’s only now, two years later, that the airline reported its first month of profit since before the crash and the stock’s delisting.

Aviation analysts felt Malaysia Airlines was poorly managed for years. The situation was made worse by the two downed planes, resulting in negative international publicity. Most people still remember the accidents to this day. If you posted on social media that you’re taking a Malaysia Airlines flight, a reply along the lines of “you’re brave” would probably follow.

 

Malaysia Airlines’ Turnaround CEO

The long years of poor management saw its end when Christoph Mueller took the helm of the aviation company in 2015 with the goal of turning it around. He previously did the same with Aer Lingus. Mueller acknowledged that the “disasters” hurt the airline’s reputation. But he saw the root causes were unsustainable routes, high operating costs, and outdated information systems.

Known as one of the most effective turnaround CEOs in the industry, Mueller made a series of calls that previous management was unwilling to make. These included the layoff of over 6,000 people (30% of the entire workforce) and retiring a large part of their fleet. Retiring all Boeing 777s was a large part of the turnaround strategy. This was not only because the model is associated with the two disasters, but also because it was one of the least fuel efficient planes the company had.

Mueller’s reaspm for shrinking the size of the business was that if an unprofitable airline is growing, it just meant that its losses are growing. He knew right away that expansion could only happen once Malaysia Airlines was growing again.

 

A Better Quality Airline

Mueller not only decided to shrink the business down to certain routes, but also to improve what’s left of the airline. He implemented changes such as the addition of a new business class with beds, new menus, in-flight WiFi, and refurbished airport lounges. In order to provide the same quality of service across flights and cut costs, the number of suppliers were reduced by more than 75%.

The CEO realized that Malaysia Airline’s safety reputation depended on both the airline’s future operations, and also how the airline dealt with past events. But admitting a lack of knowledge about what happened would have had a negative effect on the company. Mueller increased the efforts for the search in an attempt to improve the company’s reputation. This was despite reports showing that their efforts in the southern Indian Ocean were in vain.

Malaysia Airlines saw a speck of light after years of poor financial performance. With the leadership of its newly appointed CEO, the firm hopes to keep its performance going and aims to break even by 2018.

Mueller announced that he will leave Malaysia Airlines in September due to personal reasons. Nonetheless, he stated the company is back on track.

Because the airline industry is such a major part of the Malaysian economy, the airline’s progress will certainly affect the nation’s investment prospects as a whole.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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