Literature Review for Malaysian Airlines Services and Aviation Industry

Literature Review

Global Aviation Industry

The aviation industry has been identified as one of the more intangible service industries (Clemes, Gan, Kao and Choong, 2008) and plays an important role in the global economy (Tiernan, Rhoades and Waguespack, 2008). Flint (2010) has recently summarized that the worldwide aviation industry is expected to generate about US$ 545 billion in 2010, a jump of about 13% from the slump year of 2009.

Over the past decade, the airline industry has been plagued unfortunate incidents. Among them are the terrorist attack on New York's World Trade Centre in 2001, the outbreaks of SARS and foot and mouth diseases and the wars in Afghanistan and Iraq (Air Transport Association, 2002; Clemes et al., 2008). The recent world economic downturn in 2008/2009 has had a great impact on aviation industry, particularly to the market of business travel. According to Flint, (2010), the world airline industry has recorded a devastating loss of US$ 16 billion in 2008 and another US$ 9.9 billion in 2009. The tough situation has forced the airlines around the world to revoke their traditional airline strategy and venture into new alliances and new business models in order to keep its competitiveness. As a result, the aviation industry worldwide experiences an increasing popularity of the low cost airlines. This popularity is magnified with the adoption of deregulation practices in the airline industry by many countries (Saha and Theingi, 2009).

The low cost business model is said to have started by Southwest Airlines in the US in the early 1970s (Rhoades, 2006). The success of this business model has then been the inspiration to other low cost airlines around the world, such as Ryan Air and EasyJet in the UK, Air Asia, Jetstar Airways, Cebu Pacific, and Pegasus Airlines in Asia, as well as Virgin Blue, Qantas Jetstar, and Freedom Air in Oceania. The emergence of low cost airlines in South-East Asia began in early 2000s spurred by the deregulation and liberalization of the aviation industry in the region (Saha and Theingi, 2009). While the traditional full service airlines' business model is based on differentiation strategy (Tiernan et al., 2008), the low cost airlines focused on price leadership (Wen and Yeh, 2010).

Malaysia Aviation Industry

The aviation industry in Malaysia is dominated by two airlines namely Malaysia Airlines (MAS), parent company to MASWING (East Malaysia) and Fireflyz (West Malaysian) and Air Asia. Malaysia Airlines is classified as a full service airline while Air Asia is classified as a low cost airline (O'Connell and Williams, 2005). Malaysia Airlines is the Malaysian's national airline and serve both international and domestic routes across 100 destinations worldwide (including code-sharing flights). It has one of the largest fleet sizes in South East Asia