Malaysia Airlines SWOT Analysis

{ Posted on Feb 22 2011 by adam | 8,257 views}

Malaysia Airlines is government owned organization which is flag holder of Malaysia. It has different ports and hubs from where it operates all its flights. It has its presence in several different countries. Now moving toward the SWOT analysis of Malaysia Airlines following were the major points which came in front.

Strengths

• Biggest strength of Malaysia Airlines is that it has been successful in continuing non-stop flights from several different cities all around the world.

• Due its high dividend of 2% amounting to RM15, 400,000 in last year and it’s still improving so the company is gaining popularity among shareholders as well (Spence, 1974).

• The company focuses on strong branding which has made it to enter very restricted markets as well thus it is a huge strength of this company.

• Total revenue of Malaysia Airlines has been increased by 15% which has been its biggest strength this year.

• Cargo and passengers revenue has also been increased by 34% and 15% respectively which is again very big strength for the company (Miller and Franco, 1961).

• Another major strength of Malaysia Airlines has been its quality distribution system which has proved to be most efficient in last many years.

Weaknesses

• Malaysia Airlines exercised a financial restructuring which resulted badly and thus company bared huge costs of that which was the biggest weakness it ever had.

• While looking the financials and capital structures of Malaysia Airlines we came to know that Annuity system of the company is weak which leads its profits down at many positions (Schiller, 1984).

• Company has proved itself very sensitive to Equity markets, which is not a good sign because it lowers the Earning per share thus creating unsatisfied shareholders.

• Operating profits of the company are lowering day by day due to which weak operating performance of the company is getting more severe.

• Financial ratios like net profit margin has seen a decline from 24 to 18 and then 16 last year which is getting to bring more severe results for the firm if not controlled. 

Opportunities

• Emerging new markets and expansion of businesses especially airlines in foreign markets has given a huge opportunities to Airlines to exaggerate their businesses.

• Strong and steady growth of annuity markets are giving huge opportunities to company to extend their business (Fama and Michael, 1983).

Threats

• In financial and equity markets recovery is seen, which is a good sign for financial performance of Malaysia airlines and other companies as well.

• Malaysia Airlines is focused at generating a tough brand name but faces the threat of a constant low interest system.

• Due to huge competition and pricing pressures on the company it is becoming a threat that company will have to lower its prices to extreme levels (Jensen, 1986).

• Estate tax regulations are also a big threat for Airlines and other taxable organizations.

• Intense competition in life insurances has also made the survival of Airlines harder. 

 

References

• Fama, Eugene F. and Michael C. Jensen, (1983), Separation of Ownership and Control, Journal of Law and Economics, 26, 301-325.

• Jensen, Michael C., (1986), Agency Cost of Free Cash flow, Corporate Finance, and Takeovers, The American Economic Review, 76, 323-329.

• Schiller, Robert J., (1984), Stock Prices and Social Dynamics, Brokkings Papers on Economic Activity, 457-510.

• Spence, Michael, (1974), Competitive and Optimal Responses to Signals: An analysis of efficiency and distribution, Journal of Economic theory, 7, 296-332.

• Miller, Merton H. and Franco Modigliani (1961), Dividend Policy, Growth, and the valuation of shares, the Journal of Business, 34, 411-433.

• Malaysia Airline, Returns & Profits. (2010). http://www.eturbonews.com/1442/malaysian-airline-returns-profit-2007-exceeds Accessed: 22 Feb 2011.

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