As I elaborated during the Leadership Transformation Conference, there are 4 key questions related to business transformation: 1. What does strategy mean? 2. What is the purpose of strategy? 3. What does transformation mean and 4. When does one transform?
My assertion is that when the only basis of competition is price, it is clearly time to transform.
The heart of strategy is uniqueness & sustainable advantage, all with the goal of maximizing “share of profit.” When competition boils down to price, it sends a clear signal that from the consumers point of view, the product or service has no uniqueness or differentiation for which the consumer is prepared to pay a different price for.
In the case of MAS, today, as part of their Five Star Value Carrier Strategy, they announced their new fare structure. What is so interesting is that unlike the LCC approach of pricing seats based on availability, MAS has created 4 distinctive products ; each with its own proposition and hence the customer now has a basis to trading off one proposition against the other.
Tuesday December 16, 2008
MAS announces four new economy options
By LISA GOHKUALA LUMPUR: Whether you’re a student on a shoestring budget or travelling with your family, Malaysia Airlines has widened the choice with four new economy fare options.
Budget travellers planning their trips well in advance and travelling light, will be happy with the MHlow fares seats discounted from 70% off the full fare. On the other hand, families going on shopping holidays may prefer the MHsmart seats, with discounts from 20%. This fare allows for a higher baggage allowance at 25kg per person.
MAS managing director/chief executive officer Datuk Seri Idris Jala said the four MH Value Fares – MHlow fares (20kg baggage allowance), MHbasic (20kg), MHsmart (25kg) and MHflex (25kg) – were specifically designed for specific passengers.
“We made it with different travellers in mind,” he told a press conference after making the announcement for the domestic sector here yesterday.
The MH Value Fares for the international sector will be launched in February next year.
MHflex are full fare seats, while MHsmart seats will have discounts from 20%, MHbasic (discounts from 50%), and MHlow fares (discounts from 70%).
A check on http://www.malaysiaairlines.com showed that a one-way air ticket from Kuala Lumpur to Kuching costs RM114 on MHbasic, RM304 (MHsmart) and RM379 (MHflex) before taxes.
Travellers, however, have to book their MHlow fares tickets at least a month in advance, while MHbasic and MHsmart tickets will have to be booked more than 14 days and more than seven days before travel respectively.
The different fares also have different purchase requirements and benefits.
“This is not a promotion. It is what we’re embarking on from now on,” Idris said.
When asked how seats would be allocated for the different fares, he said it would be based on past passenger preference.
“There are no specific seats allocated for each fare. It will change according to the market demand, such as when it is peak period or non-peak period.
“Non-peak period will obviously see more low fare seats,” he said, adding that MAS would review the prices daily on a flight by flight basis.
On a separate issue, Idris said MAS had no plans to abolish the fuel surcharge.
Let’s see how it works out for MAS.
BTW MAS has shown that it is clearly more than a one trick pony. Its turnaround has not just been from selling its HQ building, which in $ the proceeds of the sale would last no longer than 3 month cash burn. MAS has turned simply because they have gone back to the fundamentals of good business – do the things that make money, and stop doing the things that loose money. I would not be surprised at all, that today MAS knows, before each and every flight departs, if that flight will make money or if it will loose money.
More importantly, MAS knows it cannot be everything to everyone. It only needs to cater to a finite number of customers that give it a minimum of 70+% load factor on every flight. MAS has learned a key concept of strategy – that making trade-off’s is a critical essence of strategy.
I am sure that MAS is not crying because I now fly Firefly for domestic travel and Emirates for international.