Malaysia Airlines

035SMU
MALAYSIA AIRLINES: CULTURE TRANSFORMATION WHILE

FLYING THROUGH TURBULENCE
Can Malaysia Airline Berhad (MAB) survive? This was the airline stricken by two major tragedies,
the mysterious disappearance of flight MH370 and the downing of flight MH17 within a short span
of four months in 2014. Such devastation would have bankrupted any airline, and MAB was
particularly vulnerable as it has been battling financial difficulties since 2011.
Fast forward to 2023; the year had just begun with a bang at the Human Resources (HR) department
of MAB, loud enough to reverberate throughout the organisation. On January 17, 2023, Dato’ Mohd
Khalis Abdul Rahim, Group Chief Human Capital Officer, was at the gala dinner officiated by the
Minister of Human Resources to receive the highest level of the national award – the Human
Resource Development Award (HRDA) – for demonstrating excellence in human capital innovation
and transformation. Khalis joined MAB in 2018 and led the three-year Culture Journey (2018-2021)
to restore pride and purpose to a highly demoralised and disillusioned workforce exhausted by the
airline’s persistent struggle to stay afloat.
More of a maverick than an average run-of-the-mill HR executive, Khalis adopted a different

approach to many management gurus. Instead of relying on transformation theories and templates,
he emphasised winning the hearts, souls, and minds, of the employees. To that end, he introduced
creative initiatives such as singing songs to lift the morale of the staff at MAB. These efforts,
including the singing of Malaysia’s national anthem at the company’s townhall and the composition
of a corporate song, the MH Song, were well-received by employees. Other popular initiatives, such
as the ‘Winning with MH Passion’ neurolinguistic programming workshops, and the Lean & Agile
upskilling programme, as well as organisational support for employee well-being during the COVID-
19 pandemic, were also introduced at this time.
By 2021, the Culture Journey was beginning to bear fruit, as evidenced by metrics such as improved
employee engagement scores, customer satisfaction index, net promoter score, and on-time
performance. MAB was ramping up its engine to take flight towards achieving profitability again. In
addition to the changes on the human resources front, massive efforts were invested into resetting
the airline’s balance sheet through debt restructuring and the divestment of A380 aircraft during the
pandemic. By early 2023, MAB was in its strongest financial position in years.
Even as the airline’s trajectory pointed toward recovery, there was still a long way to go. As a result,
celebrating small wins, and bigger wins like the HRDA, was important. Now that Khalis had
demonstrated the management maxim ‘culture eats strategy for breakfast’ at MAB, the next question
was how to sustain the revitalised culture in the longer term to soar on the tailwinds of increased air
travel in the post-pandemic skies.
This case was written by Dr. Fermin Diez, Professor Michael R. Bashshur, and Dr. Cheah Sin Mei at the Singapore
Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and
other identifying information to protect confidentiality.
Copyright © 2023, Singapore Management University Version: 2023-05-29
This document is authorized for use only by MIKHAIL ARON QUIZAN GORRE in [1232_ACYMAG2_K31] - MANAGEMENT ACCOUNTING 2 at De La Salle University, 2024.
SMU-23-0008 Malaysia Airlines
The National Carrier
In 1947, Malayan Airways Limited flew the first commercial flight in Malaysia, carrying five
passengers on board a twin-engine aircraft from Singapore to the country’s capital, Kuala Lumpur.
Since then, the airline had undergone a few name tweaks. When the Federation of Malaysia
comprising Malaya, Singapore, Sarawak, and Sabah (formerly North Borneo) was formed in 1963,
the airline was renamed Malaysian Airways. The national carrier underwent another name change in
1972 when Malaysia and Singapore (which gained independence in 1965) decided to establish their
own carriers and became Malaysia Airline System (MAS). In 2014, MAS was dissolved and replaced
with Malaysia Airlines Berhad (MAB) the following year.
Operating from its home base at Kuala Lumpur International Airport, the airline took to international
skies in 1960 and landed in its first destination in Hong Kong. Two decades later, the flag carrier
with aircraft bearing the wau bulan (a traditional Malay kite) logo was flying across the globe to
European and Oceania cities, in addition to Asia, covering more than 40 destinations. By the 2020s,
the airline added the Middle East to its stopovers, thus extending its coverage to more than 50
destinations worldwide.
The full-service carrier offered tiered cabin classes (first-class suite, business class, and economy
class), in-flight entertainment, dining, shopping, and check-in and cabin luggage services. Wi-Fi
service was available on board A350 and some A330 flights.1 The female cabin crew donned the
iconic sarong kebaya uniform, which was designed to project the image of Malaysian Hospitality, a
style of service meant to set the Southeast Asian country apart from other travel destinations (refer
to Exhibit 1 for photographs of the aircraft and cabin crew uniforms).
The Years of Turbulence
The Ups and Downs
The seed of the flag carrier’s financial troubles was sown before the turn of the century when the
airline was flourishing. In 1994, a businessman by the name of Tan Sri Tajudin Ramli borrowed
heavily from several banks to buy a controlling stake of 32% in the airline.2 He then became the
CEO of MAS. The subsequent 1997-98 Asian Financial Crisis hit the airline hard, and it suffered
huge losses of RM 255.7 million (US$67 million) in the fiscal year ending 2000.3 By 2001, MAS
was on the brink of bankruptcy. That prompted Tajudin to divest his shares to the government – a
transaction that raised some eyebrows. The market price at that time had dropped to RM 3.68
(US$0.97) yet he managed to sell his shares at the same price at which he had bought them, RM 8
(US$2.10) per share, amounting to RM 1.79 billion (US$471 million).4
1
Malaysian Airlines Berhad, “Wi-Fi on Board”, https://www.malaysiaairlines.com/sg/en/experience/inflight-offerings/wifi-on-
board.html, accessed May 2023.
2
Leslie Lopez, “Malaysia Tycoon Dismisses Idea He Can't Run Two Companies”, Wall Street Journal, February 3, 1997,
https://www.wsj.com/articles/SB854911313344977500, accessed May 2023.
3
Ram Anand, “The 21 Years of Mismanagement that Brought MAS to its Knees”, The Edge Markets, May 27, 2015,
https://www.theedgemarkets.com/article/21-years-mismanagement-brought-mas-its-knees, accessed March 2023.
4
Ibid.
2/16
MAS became the state carrier after Khazanah Nasional Berhad, Malaysia’s sovereign wealth fund,
bought a major stake of 69%.5 In the hands of the government, the airline fell into a profit-loss cycle
over the following years. In 2002, its loss ballooned to RM 2.2 billion (US$869 million).6 The airline
managed to recover to some extent by discontinuing unprofitable international routes in 2003.
However, rising fuel prices in 2005 helped lead to another loss-making year. In response, a
turnaround plan was launched by then-CEO Idris Jala in 2006 and the airline posted a net profit of
RM851 million (US$255 million) in the following year.7
In 2009, a new CEO, Azmil Zahruddin, took over and launched the second turnaround plan. The
airline delivered a full-year profit of RM237 million (US$77 million8) in 20109. But this was to be
its best performance for the upcoming decade. Thereafter, in 2011, MAS plunged into even deeper
losses, posting a historic low of RM2.5 billion (US$789 million). 10 Again, the airline chose to
withdraw from non-lucrative routes and managed to return to profit in 2013 (refer to Exhibit 2 for a
timeline of the airline’s key events).
The Legacy Twin Disasters
2014 was the annus horribilis for MAS. In what has been described as “the greatest aviation mystery
of all time”, on 8 March 8, 2014, the Beijing-bound MH370 went off the radar of air-traffic
controllers shortly after it took off from Kuala Lumpur. 11 Without sending any distress signal, the
Boeing 777 jetliner carrying 239 passengers and crew simply disappeared. 12 Investigations
suggested the aircraft veered off its planned flight path and would have run out of fuel and crashed
into the Indian Ocean, southwest of Australia. Massive search efforts, including the deployment of
special ships, underwater drones, and sonar equipment continued until early 2017, combing an area
of over a hundred thousand kilometres. More than a year after the mishap, debris from the plane was
still reportedly washing ashore on African beaches and islands, but the passengers and crew of
MH370 remain missing to this day.
MAS suffered another terrible blow four months later. Still reeling from the disappearance of MH370,
flight MH17 was downed over Ukraine in an incident that shocked the world. En route from
Amsterdam to Kuala Lumpur on 17 July 2014, the Boeing 777-200 widebody aircraft carrying 298
passengers was flying over eastern Ukraine.13 Investigations concluded that pro-Russian separatists
fired a Russian-owned missile that destroyed the plane, but Russia denied responsibility.14
5
Takashi Nakano, “Malaysia’s State and Budget Airlines Confront the Same Crisis”, Financial Times, November 11, 2020,
https://www.ft.com/content/e4dcad15-c4be-4a68-94a2-c76147aa8de5, accessed March 2023.
6
Siew Mung Tan, “The Struggle to Keep Malaysia Airlines Flying”, Financial Times, August 12, 2019,
https://www.ft.com/content/0c52aace-b9c4-11e9-8a88-aa6628ac896c, accessed March 2023.
7
Ibid.
8
RM1=US$0.324 as of December 2021, https://www.xe.com/currencytables/, accessed March 2023.
9
Rahimi Yunus, “MAG To Be Nimble or Fail Turnaround Again”, The Malaysian Reserve, May 19, 2021,
https://themalaysianreserve.com/2021/05/19/mag-to-be-nimble-or-fail-turnaround-again/, accessed March 2023.
10
Siew Mung Tan, “The Struggle to Keep Malaysia Airlines Flying”, Financial Times, August 12, 2019,
11
Adrian Horton, “‘The Greatest Aviation Mystery of All Time’: What Really Happened to Flight MH370?”, The Guardian, March 6,
2023, https://www.theguardian.com/tv-and-radio/2023/mar/05/flight-mh370-what-happened-mystery-netflix-documentary, accessed
March 2023.
12
BBC, “Missing Malaysia Plane MH370: What We Know”, January 17, 2017, https://www.bbc.com/news/world-asia-26503141,
accessed March 2023.
13
BBC, “MH17 Ukraine Plane Crash: What We Know”, February 26, 2020, https://www.bbc.com/news/world-europe-28357880,
14
Ibid.
3/16
While some airlines avoided the conflict zone where MH17 was downed before the incident, other
major airlines (for example, Lufthansa and Singapore Airlines) flew through the same area, as there
had been no warnings from aviation authorities to avoid the airspace. Ukraine airspace, up to 9,750
metres in that area, was closed, but MH17 was flying 1,000 metres above the out-of-bounds space.15
MH17 was a case of being at the wrong place at the wrong time.
Failed Turnarounds
Following the twin tragedies, MAS’s share price plunged by 35% in that fateful year. 16 Many
questioned whether MAS could survive. Apart from the poorly-received public response to the
MH370 incident, the struggling airline was beset with a slew of other difficulties, including high
operating costs, volatile fuel prices, weak foreign exchange rates, frequent leadership turnover, a
bloated workforce, stiff market competition, political interference, and powerful unions.
Domestically, the national carrier faced intense competition from low-cost rival AirAsia, which grew
to become the largest airline in Malaysia by fleet size and destinations in 2022. 17 While MAS
struggled to turn itself around, AirAsia (rebranded as Capital A Berhad) entered the price-sensitive
Malaysian market with lower airfares in 2001 and expanded rapidly in the following two decades.
Two other low-cost carriers, Batik Air (formerly Malindo Air) and MYAirline also joined the white-
hot, but already saturated, market. Internationally, MAB was being challenged in the full-service
market by cash-rich carriers such as Emirates, Qatar Airways, and Singapore Airlines as they
competed to dominate the lucrative long-haul routes between Europe and Asia-Pacific.
In the aftermath of the two disasters and the domestic and international competition, the government
mulled several options, including yet another name change. Nationalistic sentiments were, however,
against removing the country’s name from the airline. Khazanah eventually decided to nationalise
MAS by buying the remaining 30.6% of minority shares at RM 1.38 billion (US$431 million) and
rebranding it to MAB in 2015.18
Along with the dissolution of MAS, the Malaysia Airlines Employees Union (MASEU) was
disbanded. This was another massive change for employees of the airline as unions had been a
powerful force in the organisation until that point. Months earlier, MASEU, the largest of all unions
in the organisation, had called for then-CEO, Ahmad Jauhari Yahya, to step down or face a strike.
Representing some 13,500 MAS employees, the influential union had been successful in blocking
the merger of MAS with AirAsia in 2011.19 Other worker unions included the National Union of
Flight Attendants Malaysia, Malaysia Airlines Employees Union Peninsular Malaysia, and the
Malaysia Airlines Pilot Association.
15
Tania Branigan, “Can Malaysia Airlines Survive MH17 Disaster?”, The Guardian, July 18, 2014,
https://www.theguardian.com/world/2014/jul/18/malaysia-airlines-survive-mh17-disaster-mh370-disappearance, accessed March 2023.
16
Ibid.
17
Mark Finlay, “The AirAsia Group Wants To Change Its Name To Capital A”, Simple Flying, January 5, 2022,
https://simpleflying.com/airasia-name-change/, accessed March 2023.
18
Shannon Teoh, “Malaysia Airlines To Slash 6,000 Jobs And Cut Routes As Part of Major Revamp”, The Straits Times, August 29,
2014, https://www.straitstimes.com/business/companies-markets/malaysia-airlines-to-slash-6000-jobs-and-cut-routes-as-part-of-major,
19
Today Online, “No Room for Staff Unions as MAS ‘Reboot’ Takes Off in September”, May 27, 2015,
https://www.todayonline.com/business/management/no-room-staff-unions-mas-reboot-takes-september, accessed March 2023.
4/16
Following the nationalisation, amid the many changes was a new five-year recovery plan, a radical
restructuring including a high-profile retrenchment of its CEO and nearly one-third of the airline’s
workforce, about 6,000 jobs. Christoph Mueller, a turnaround veteran with a reputation for saving
Aer Lingus, an Irish airline, was appointed as the first foreign CEO of MAB in 2015. After only a
year, he resigned, citing personal reasons. Replacing Mueller was Peter Bellew, an Irish citizen and
former director of Ryanair, a budget carrier. Bellew also quit unexpectedly after a year and returned
to Ryanair. With the departure of the two foreign-born CEOs, it was decided that the leadership baton
be handed back to the locals.
The Culture Journey: “People Are Our True North”
On the Road to Restructuring (Again)
Khalis joined MAB in January 2018, just a month after his boss, Executive Director and CEO Captain
Izham Ismail, took the helm in December 2017. While Izham was a lifer, spending his entire pilot
career of over 40 years with the airline, Khalis was new to the industry, bringing with him extensive
human capital management experience from his previous tenure at Telecom Malaysia and Colgate-
Palmolive.
Once on board, both executives knew they had to rebuild the corporate culture. “Morale was rock
bottom. They [the employees] didn’t have a genuine purpose or objective. People would go to work
like robots”, said Izham.20 Similarly, Khalis observed that the employees appeared defeated and
crestfallen, “They were playing safe, and not playing to win. Everybody feared losing their jobs.
They were just taking care of their own home turf.” There was clearly need for a culture overhaul,
which prompted Izham to prioritise MAB’s employees, as he believed culture was shaped by people.
The Culture Journey (2018-2021), an initiative to transform MAB’s corporate culture, was launched
as a key part of Izham’s Long-Term Business Plan (LTBP), a strategic blueprint aimed at resetting
the embattled airline’s balance sheet. Encapsulated in the catchy slogan “people are our true north”
(referring to the beliefs, values, and principles that truly define an individual), Izham hoped to realign
the organisation’s culture with its renewed purpose.
The Maverick
Fixing the ailing culture was a daunting but urgent job. The massive task of restoring pride and
purpose in “a very tired, fearful, and disillusioned workforce” was laid before Khalis, who recalled,
“I decided that if I fixed this, the rest would fall into place”.21
As he set out on the Culture Journey, Khalis decided not to hire external consultants. He believed
that management consultants typically recommended transformation roadmaps accompanied by
theories, templates, and best practices, and he was wary of the potential pitfalls of such cut-and-paste
20
Ena Gill, “Rising to a New Horizon: A New Journey Begins”, Malaysia Aviation Group, 2022, p.74.
21
Neelanjana Mazumdar and Shivangi Sharma, “Focus on Productivity, Not Just Performance: Interview with Dato’ Mohd Khalis
Abdul Rahim, Malaysia Airlines”, HR World South-East Asia, August 22, 2022,
https://hrsea.economictimes.indiatimes.com/news/industry/focus-on-productivity-not-just-performance-interview-with-dato-mohd-
khalis-abdul-rahim-malaysia-airlines/93659999, accessed March 2023.
5/16
approaches. The ‘people agenda’ he had in mind was focused on empathy and on the soul of the
organisation. More of a maverick than a cut-and-dried conformist, Khalis likened his approach to
that of an artist, “It’s like you have a canvas, and you can paint it with a shade of this colour and
some of the other colours”.
In a move perceived by his boss as “insane” (but not totally unexpected of a maverick), he took the
unconventional path of bringing in an Ustaz, an Islamic religious teacher. The job of the Ustaz was
not about conducting prayer sessions, but to walk the shop floor, and chatting with the staff. Khalis’
instructions to the Ustaz were, “Don't talk about religion but talk about being thankful that we are
still around in the company. The message should be general and cut across all religions.” Urging the
staff to count their blessings that they still had a job while others had been forced to leave, Khalis’
intention was to appeal to their akhlak (an Arabic term for spirituality and a sense of duty).
The award-winning and certified HR professional22 went on to create another ‘first’ – suggesting
mass singing of Malaysia’s national anthem, Negaraku, at the company’s townhall. Khalis recalled
his idea was not readily accepted at first. “We don’t do that here”, he was told. But he soon proved
his critics wrong. At a subsequent townhall, the acapella singing of the anthem, even without playing
a music video was nothing short of emotional, so much so that the simple rendition was powerful
enough to raise goosebumps in some of the audience. Sensing the strong feeling of solidarity, Khalis
reinforced his message to the staff, “Now you know why you guys are here. We are the national
carrier, and we represent the country”.
The MH Song
Upping the ante, Khalis proposed having their very own corporate song. Knowing that most
Malaysians love to sing, he quipped, “They will never let go of the microphone at karaoke23 if they
get hold of one!” Upon obtaining Izham’s ‘green light’ to proceed, he engaged Faizal Tahir, a
recognised Malaysian singer-songwriter, to compose a new song, and gave him the opportunity to
speak to every rank and file who was keen to contribute. Seeing the famous artiste’s appearance at
their workplace was enough to get the staff excited and create hype and anticipation.
Khalis was clear about what he wanted the corporate song to be – a melody crafted at a key that
everyone could sing and lyrics that resonated with everyone. It had to instil a sense of belonging and
shared purpose and inspire employees to live up to the organisation’s values – genuine, efficient, and
progressive. Being very personally involved, Khalis refined the first version of the lyrics to better
reflect the spirit of the airline and even emphasised specific words and phrases (such as “together we
stand strong”) to strengthen the delivery of the core message (refer to Exhibit 3 for the lyrics of the
MH Song).
In September 2018, the MH Song was launched with much fanfare. It was not long before it took on
a life of its own and went viral among employees. Izham called it Khalis’ song but to Khalis, it was
MAB’s anthem and value call. Concurring, Nik Naquin, a cabin crew said,
22
In 2017, Dato’ Khalis Rahim was named one of the 100 Most Influential Global HR Professionals at the World HRD Congress. In 2013,
he won the Chief Human Resource Officer of the Year and the HR Leadership Award at the 21st Global HR Excellence Awards.
23
Karaoke is a kind of entertainment originating from Japan where people sing along to recorded music using a microphone.
6/16
This song means so much to me, giving me hope that one day Malaysia Airlines will shine
bright again, leaving a five-star impact on people around the world. It is all about us, who we
are, and who we can be! It is a very inspiring song that makes us want to strive and fight for
the country.24
The song was introduced as part of a larger initiative to rally employees to work as one family by
breaking down silos and bringing people together. Silo mentalities were a common problem in large
organisations, and in MAB, Khalis observed distinct sub-cultures that were segregated according to
job categories such as pilots, cabin crew, and engineers. Commenting on the purpose of the corporate
song, he said,
My goal was to make the team realise that everyone from all levels and subsidiaries has a role to
play in making things better. They must be reminded that we are all in an interdependent
ecosystem.25
Winning with MH Passion
Singing was only one of the means of engaging with employees. Khalis’ employee engagement
strategy was based on a simple mantra, “First and foremost, I need to win the hearts of the people.
Once I win their hearts, I will start to win their souls, and then I will win their minds”. He believed
that as an external hire without baggage from the past if he played his cards right, people would be
more willing to open up. They did.
Beginning in 2018, in another effort at engagement, a series of workshops were conducted, called
‘Winning with MH Passion‘, a neuro-linguistic programming (NLP) program. These workshops
attracted about 5,000 employees. Some employees who participated described the experience as a
“healing catharsis”.26 They shared that they felt like they were getting a new lease of life as if being
handed a life jacket in a near-death encounter. Sharmini, Ratnasingam, Senior Manager, Culture &
Engagement, a 33-years veteran at MAB, said,
It was incredibly successful. With most motivational programmes, you are energised for a week
or two and then you tend to slip back to your baseline behaviour. But this programme unleashed
something that was already in us. Maybe it was something that had been suppressed and was just
waiting to be released. Whatever it was, people were energised. We started seeing stories coming
in – of people volunteering to try different ways of getting things done to solve issues. Suddenly
people were proud of the country, and of the airline.27
Lean and Agile
In 2019, the “Lean & Agile” training programme was introduced to encourage staff to ‘do more with
less’. Upskilling and reskilling were the airline’s strategic responses to meet changing skill demands
in an increasingly competitive aviation industry. For example, in-house subject matter experts in the
finance discipline conducted training for non-finance colleagues. Sessions were recorded and
24
Ena Gill, “Rising to a New Horizon: A New Journey Begins”, Malaysia Aviation Group, 2022.
25
Ibid.
26
Ibid.
27
Ibid.
7/16
uploaded to the company’s training portal, which was accessible round the clock in order to
disseminate the training as widely as possible.
The lean-agile approach was not new in the industry; Khalis and another colleague had experienced
a similar programme at their previous companies. Khalis explained the objective of introducing the
concept to MAB, “When people are cross-functional, they can switch roles from one to another. The
ability to multitask not only enhances an organisation’s overall capabilities but also adds
tremendously to the career potential of the individual”.
The Rise of a New Dawn
In 2018 and 2019, MAB began to make its renewed ascent. The Culture Journey was starting to bear
fruit – inertia was shaken off while positive vibes were turned on; silos came crumbling down while
collaborations were ramped up. The mindset change of the staff was evident to Norhayati Hanapiah
(Yati), General Manager of Culture and Human Capital Governance, “Ever since we played
Negaraku, created the MH Song, and carried out the ‘Winning with MH Passion’ programme, we
have been able to connect with our people through their hearts and there has been a discernible change
in mindset”.28 These positive outcomes were a total contrast with previous restructurings that were
purely financial.
The numbers painted a clearer sky after the stormy past. Improvements in service quality, punctuality,
and baggage management were reflected in tangible metrics of the Customer Satisfaction Index, Net
Promoter Score, On-Time Performance29, and mishandled baggage index (refer to Exhibit 4 for the
improvement in key performance indicators). The situation was starting to look rosy… and then the
pandemic came.
Navigating the Headwinds
Battling the COVID Storm
At the onset of the COVID-19 outbreak, air traffic came to a near standstill as jurisdictions around
the world shut their borders and imposed lockdowns on their cities. The airline industry was, without
a doubt, one of the hardest-hit sectors. In Malaysia, passenger traffic plummeted by 64% in 2020,
causing severe liquidity pressure on the airlines, airports, and throughout the aviation value chain.30
“All airlines are bleeding by the minute and burning cash”, commented a former aviation regulator
executive.31 Contributing to that haemorrhage was RM 294 million (US$72 million32) in refunds to
28
Ibid.
29
Net Promoter Score is an indicator of customer loyalty and brand sentiment, while On-Time Performance refers to the flight arrival or
departure within 15 minutes of schedule.
30
International Civil Aviation Organization, “High-Level Conference on COVID-19”, October 12 – 22, 2021,
https://www.icao.int/Meetings/HLCC2021/Documents/Statements/Malaysia_Statement_01_en.pdf, accessed March 2023.
31
Rahimi Yunus, “MAG to be Nimble or Fail Turnaround Again”, The Malaysian Reserve, May 19, 2021,
https://themalaysianreserve.com/2021/05/19/mag-to-be-nimble-or-fail-turnaround-again/, accessed March 2023.
32
RM1=US$0.247 as of December 2020, https://www.xe.com/currencytables/, accessed March 2023
8/16
passengers for flight cancellations.33 To add salt to the wound, planes were grounded but continued
to incur storage and maintenance costs. Analysts estimated the parking fee for a plane at a remote
location at US$50,000 a year34; multiply that by a few dozen planes and the sum could be substantial.
As the pandemic continued, MAB’s debt crisis deepened, amounting to more than RM 15 billion
(US$3.7 billion) in liabilities and RM 10 billion (US$2.5 billion) in debts. Like most airlines, MAB
both owned some aircraft outright and leased others. It leased from major aircraft leasing companies
such as AerCap, Avolon, BBAM, and others, and soon began to struggle with repayments. MAB
began negotiations over debt restructuring with aircraft operating lessors, aircraft finance lessors,
spare engine lessors, aircraft manufacturers (such as Airbus and Boeing), maintenance service
providers, creditors, and government-related entities. In February 2021, it reached a bilateral
agreement to reset lease rents to market rates, along with deferred payments.35 The recapitalisation
process was completed via UK court approval because MAB’s leases were governed by English law.
Izham acknowledged that the failure to restructure would have meant insolvency for the 73-year-old
national carrier.
In mid-2021, MAB decided to retire all six Airbus A380 aircraft that it had purchased at an estimated
US$240 million36. Izham explained, “If you look at future aircraft technologies, it is all about twin-
engine and long-range. So, if you want to be competitive, you cannot put an A380 in play because
the operating cost is high. At the end of the day, it comes down to profit and loss”.37 After futile
attempts to resell the superjumbo jets in a second-hand market during the pandemic, the return of the
jets to the aircraft manufacturer was eventually completed in end-2022, realising substantial cost
savings for the airline.
All On Board Together
On the financial front, the airline fought a gruelling battle to survive “the worst economic downturn
since the Great Depression”38, while on the employee front, it had to address the evolving needs of
its workforce during a time of high uncertainty. It first gave an assurance of no retrenchment,
followed by the implementation of unpaid leave and differentiated salary cuts, ranging from 10 to
50% for selected groups other than the lower-income employees. Throughout the process, the key
intent was to demonstrate that the airline would look after its people during challenging times.
The crisis also provided an opportunity for the airline to realign its rewards structure with the market,
including resetting the compensation policy for pilots and replacing the overtime scheme with a
productivity efficiency incentive for the engineering and maintenance teams.
33
Adam Aziz, “Malaysia’s Aviation Industry Heading for RM13b Loss This Year — Wee”, The Edge Markets, July 21, 2020,
https://www.theedgemarkets.com/article/malaysias-aviation-industry-heading-rm13b-loss-year-%E2%80%94-wee, accessed March
2023.
34
Mike Cherney, “Planes Grounded by Covid-19 Largely Avoid the Junkyard—for Now”, The Wall Street Journal, June 4, 2021,
https://www.wsj.com/articles/planes-grounded-by-covid-19-largely-avoid-the-junkyardfor-now-11622799001, accessed March 2023.
35
Malaysia Airlines Berhad, “Malaysia Aviation Group Successfully Completes Recapitalisation”, February 22, 2021,
https://www.malaysiaairlines.com/us/en/news-article/2021/mag-completes-recapitalisation.html, accessed March 2023.
36
Joanna Bailey, “Malaysia Airlines To Retire Airbus A380 Fleet By End 2022, So Why Are They All Still Flying?”, Simple Flying,
August 16, 2022, https://simpleflying.com/malaysia-airlines-airbus-a380-still-flying/, accessed March 2023.
37
Kang Siew Li, “Malaysia Airlines Sticks to End-2022 Timeline to Sell its A380 Fleet”, The Edge Markets, June 23, 2022,
https://www.theedgemarkets.com/article/malaysia-airlines-sticks-end2022-timeline-sell-its-a380-fleet, accessed March 2023.
38
Gita Gopinath, International Monetary Fund, “The Great Lockdown: Worst Economic Downturn Since the Great Depression”, April
14, 2020, https://www.imf.org/en/Blogs/Articles/2020/04/14/blog-weo-the-great-lockdown-worst-economic-downturn-since-the-great-
depression, accessed March 2023.
9/16
Internal communication became even more important, especially during the lockdown periods, when
employees worked from home. Quarterly townhall sessions continued to be held but were shifted to
virtual mode. These acted as a two-way channel for the management to provide updates and for staff
to voice concerns or ask questions. The company was also on the lookout for staff who might need
mental health support and conducted two annual rounds of a Depression Anxiety Stress Scale survey
in 2020 and 2021. Despite only a small number of staff rating themselves as severely depressed, it
was significant enough to warrant attention from the management. In response, MHeart, a mobile
app with a holistic well-being programme that offered support for both mental and physical health,
was launched.
Apart from leveraging conventional communication mediums, the culture transformation team
tapped internal influencers to help drive messages home. A pertinent example was its vaccination
campaign. MAB achieved its goal of attaining 100% vaccinated status for its operating pilots and
cabin crew by the end of August 2021, thanks in part to a pool of influencers. In this respect, Yati
said, “If the message to get vaccinated came from us, it would seem like an instruction. Coming from
them, it is seen as being cool.”39
The Silver Lining
Amid the gloom and doom during the pandemic years was a glimmering glow of light – MAB, which
had been operating at negative cashflow even before the crisis, achieved positive cashflow from
October 2021. This was followed by a positive EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization) of RM 433 million (US$98.6 million40) for the fiscal year ending
31 December 2021, which represented a marked improvement, as reduced losses by 60% compared
to 2020, when its EBITDA was negative RM 1,761 million (US$434 million).41
According to Malaysia Aviation Group (MAG), the parent company of the airline, its improved
performance was due to the latest round of restructuring:
The restructuring the Group undertook in 2021 gave MAG the opportunity to holistically repair
its balance sheet and address decades-long legacy issues, resulting in a reduction in the
Group’s liabilities of over RM 15 billion (US$3.6 billion), and eliminating RM 10 billion
(US$2.4 billion) in debt. Lower operating costs from its cost savings/avoidance initiatives
across the Group as well as lower leasing cost post its successful restructuring further
contributed to the improved performance in 2021.42
While MAB ended that year on a relatively high note, its path to recovery had to take yet another
detour upon the eruption of the Ukraine-Russia war in February 2022. Escalation in direct operational
expenses, of which fuel costs constituted 45%43, put a damper on hopes of breaking even. Due to the
39
Ena Gill, “Rising to a New Horizon: A New Journey Begins”, Malaysia Aviation Group, 2022.
40
P Prem Kumar, “Malaysia Airlines CEO: Ukraine War Hampering Return to Profit”, Nikkei Asia, June 6, 2022,
https://asia.nikkei.com/Editor-s-Picks/Interview/Malaysia-Airlines-CEO-Ukraine-war-hampering-return-to-profit, accessed March 2023.
41
Malaysia Airlines Berhad, “MAG’s Performance Improved by 60% YoY on the Back of a Successful Restructuring and Stronger
Cargo Performance Despite 70% Capacity Reduction in Passenger ASK YoY.”, April 21, 2022,
https://www.malaysiaairlines.com/my/ms/news-article/2022/malaysia-aviation-group-annual-performance.html, accessed March 2023.
42
Ibid.
43
P Prem Kumar, “Malaysia Airlines CEO: Ukraine War Hampering Return to Profit”, Nikkei Asia, June 6, 2022,
https://asia.nikkei.com/Editor-s-Picks/Interview/Malaysia-Airlines-CEO-Ukraine-war-hampering-return-to-profit, accessed March 2023.
10/16
disruption in global supply, oil prices skyrocketed to around US$150 a barrel in mid-2022, far
exceeding the airline’s original budget of US$80.44 Like any other commercial airline, MAB was
vulnerable to fuel price spikes and exchange rate volatility, explained Izham,
One US dollar movement in fuel will impact Malaysia Airlines [by] RM 32 million (US$7
million), while a 10-cent movement in the foreign exchange [rate] would impact close to RM
100 million (US$23 million) in profit and loss.45
Taking to the Skies Again
In April 2022, in a move welcomed by the aviation and tourism industries, Malaysia reopened its
international borders fully after two years of travel restrictions. With a fleet of 74 aircraft comprising
over 20 wide-body Airbus jets and over 40 narrow-body Boeing planes, MAB took to the
international skies again.46
By the end of that year, the aviation sector made a strong recovery with passenger traffic of about 42
million in the first ten months of 2022, surpassing the figures of the previous two years combined.47
Malaysian Aviation Commission, the civil aviation regulator, as well as other industry analysts,
predicted robust recovery in 2023, lifting hopes for MAB to achieve breakeven in the same year.
In early 2023, MAB was in its strongest financial position in years. But while its trajectory toward
recovery was in the right direction, the airline was not yet in the clear. The path ahead to rebuilding
its reputation, recapturing market share, and positioning itself as a premium airline in the eyes of
travellers was still long and arduous.
Nevertheless, winning the 2022 national HRDA was an affirmation of the success of Khalis’ human
capital development effort, an integral part of the Culture Journey. Saying that ‘culture had eaten
strategy for breakfast’ at MAB was not too far off the mark. But how could the revitalised culture be
sustained in the longer term as the company navigated the post-pandemic world?
44
Ibid.
45
Ibid.
46
Kang Siew Li, “Malaysia Airlines Sticks to End-2022 Timeline to Sell its A380 Fleet”, The Edge Markets, June 23, 2022,
https://www.theedgemarkets.com/article/malaysia-airlines-sticks-end2022-timeline-sell-its-a380-fleet, accessed March 2023.
47
Malaysian Aviation Commission, “Malaysia Charts Highest Air Passenger Traffic Post Pandemic”, December 19, 2022,
https://www.mavcom.my/en/2022/12/19/malaysia-charts-highest-air-passenger-traffic-post-pandemic/, accessed March 2023.
11/16
EXHIBIT 1: MALAYSIA AIRLINE AIRCRAFT AND CABIN CREW UNIFORM
Source: Malaysian Airline Berhad, “Our Story”, https://www.malaysiaairlines.com/hq/en/about-us/our-

story.html, accessed March 2023.
12/16
EXHIBIT 2: A TIMELINE OF KEY EVENTS IN MALAYSIA AIRLINE’S HISTORY (UP TO 2017)
Year Key Event

1947 Incorporated as Malayan Airways Limited
1963 Rebranded as Malaysian Airways
1972 Became Malaysian Airline System after Malaysian Airways was split into two
companies (the other was Singapore Airlines)
2002 Accumulated losses amounting to RM 2.2 billion (US$579 million) since Asian
Financial Crisis in 1997
2006 Launched the first business turnaround plan
2007 Posted a net profit of RM851 million (US$241 million)
2009 Launched the second business turnaround plan
2011 Appointed Ahmad Jauhari Yahya as the CEO;
Reported the biggest loss of RM2.5 billion (US$811 million) in the company’s
history
2014 The disappearance of MH370 and the downing of MH17; Ahmad Jauhari Yahya
Launched another turnaround plan and nationalised the airline via Khazanah, the
sovereign wealth fund
2015 Appointed a new CEO, Christoph Mueller, a turnaround veteran;
Retrenched 6,000 employees after Mueller said the airline was “technically
bankrupt”
2016 Appointed Peter Bellew as CEO after Christoph Mueller resigned
2017 Appointed Izham Ismail, a longtime pilot with the airline as CEO after Peter Bellew
left
Source: Siew Mung Tan, “The Struggle to Keep Malaysia Airlines Flying”, Financial Times, August 12, 2019,
EXHIBIT 3: MH SONG LYRICS
Original (in Malay): English translation:
MH identiti kami MH is our identity

Ikhlas dan tulus di hati..Oh Oh Oh Genuine sincerity from the heart
Menjadi matlamat kami This is our aspiration
Ribut badai kami harungi Together we'll brave the storms

Langit cerah kita hargai...Oh Oh Oh Soaring high towards clearer skies
Semangat terus memberi Passionately giving our all
13/16
Kami bawa harapan bangsa, We carry the hope of the nation

Terbang megah ke langit tinggi Flying proudly in the skies
Membawa Malaysia ke persada dunia Bringing Malaysia to the world

Bersatu teguh berdiri bersama Together we stand strong
(Bangkit) Harapan membara (Rise up) Let hope light our way
(Bangkit)Menuju jaya (Rise up) Towards success

(Bangkit) Menuju jaya (Rise up) Towards success
MH teras kami MH is our guide

MH laungan kami MH is our call
MH lahir di hati MH comes from our hearts
*(Bermulanya di sini) x 2 (It begins with us) x 2
Indah tampan kerana budi True beauty is from within

Nilai murni dipandang tinggi...Oh Oh Oh Staying true to our values
Cara kita hari-hari The way we live
Kami bawa harapan bangsa We carry the hope of the nation
Terbang megah ke langit tinggi Flying proudly in the skies
Membawa Malaysia ke persada dunia Bringing Malaysia to the world

(Bangkit)Menuju jaya (Rise up) Towards success

Hormat-menghormati Respecting each other

Cara keluarga MH That’s the MH Family way
Bangkit, bangkit Bersama Rise up, rise as one
Kami keluarga MH We’re MH Family
Hormat-menghormati Respecting each other

Cara keluarga MH That’s the MH Family way
Bangkit, bangkit Bersama Rise up, rise as one

14/16
MH teras kami MH is our guide

MH laungan kami MH is our call
MH lahir di hati MH comes from our hearts
Bermulanya di sini It begins with us
Source: Ena Gill, “Rising to a New Horizon: A New Journey Begins”, Malaysia Aviation Group, 2022.
EXHIBIT 4: MAB’S KEY PERFORMANCE INDICATORS (2018-2022)
15/16
Source: Ena Gill, “Rising to a New Horizon: A New Journey Begins”, Malaysia Aviation Group, 2022.
MAG, “A Study on Industrial-Organisational Psychology on MAG Culture Transformation”, March 9, 2023.
16/16

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MALAYSIA AIRLINES: CULTURE TRANSFORMATION WHILE

More of a maverick than an average run-of-the-mill HR executive, Khalis adopted a different

Copyright © 2023, Singapore Management University Version: 2023-05-29

The National Carrier

The Years of Turbulence

The Ups and Downs

The Legacy Twin Disasters

The Culture Journey: “People Are Our True North”

On the Road to Restructuring (Again)

Winning with MH Passion

Lean and Agile

The Rise of a New Dawn

Navigating the Headwinds

Battling the COVID Storm

All On Board Together

The Silver Lining

Taking to the Skies Again

EXHIBIT 1: MALAYSIA AIRLINE AIRCRAFT AND CABIN CREW UNIFORM

Source: Malaysian Airline Berhad, “Our Story”, https://www.malaysiaairlines.com/hq/en/about-us/our-

EXHIBIT 2: A TIMELINE OF KEY EVENTS IN MALAYSIA AIRLINE’S HISTORY (UP TO 2017)

Year Key Event

EXHIBIT 3: MH SONG LYRICS

Original (in Malay): English translation:

MH identiti kami MH is our identity

Ribut badai kami harungi Together we'll brave the storms

Kami bawa harapan bangsa, We carry the hope of the nation

Membawa Malaysia ke persada dunia Bringing Malaysia to the world

Bersatu teguh berdiri bersama Together we stand strong

MH teras kami MH is our guide

Indah tampan kerana budi True beauty is from within

Membawa Malaysia ke persada dunia Bringing Malaysia to the world

Bersatu teguh berdiri bersama Together we stand strong

Hormat-menghormati Respecting each other

Hormat-menghormati Respecting each other

Kami keluarga MH We’re MH Family

Bersatu teguh berdiri bersama Together we stand strong

MH teras kami MH is our guide

EXHIBIT 4: MAB’S KEY PERFORMANCE INDICATORS (2018-2022)

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