Impact of the Malaysian Airline Loss to the Company - Research Proposal Example

Impact of the Malaysian airline loss to the company Contents Introduction Flight 370 a Malaysian airline flight disappeared on Saturday, 7th march 2014 en route to Beijing, the capital city of china. The flight departed from Kuala Lumpur in Malaysia. The voice contact from the flight was last made at 01: 19MYT when it was above the China Sea a few minutes after takeoff. The flight then disappeared from the traffic control radar. Malaysian military radar however continued to track the flight until 02: 15 MYT above the Andaman Sea. The Boeing 777-200ER was carrying two hundred and twenty seven passengers together with twelve crew members. The passengers were from fifteen countries in the world. The search of the flight took a long period of time and so much capital was spent in the search. Most of the passengers in the flight were Chinese and the company took care of the family member’s expenses that travelled all the way to wait for the news concerning the search. The company personnel reacted to the loss based on several theories (Malaysian Airlines, 2014). The stakeholder’s theory was one of the theories that can be utilized in analyzing the loss both to the company and the country at large. The search which began on October last year will cost 52 million Australian dollars. The loss of the flight is considered the most expensive and largest in the history of aviation all over the world. According to legitimacy theory the Malaysian airline services company has a mandate of making voluntary environmental and social disclosures to the stakeholders and the community with a mandate of fulfilling the available unwritten social contract. Stakeholder’s theory on the hand can be used to analyze the possible loss the reaction of the company toward the loss experienced. Despite the company focusing on the shareholders, it was forced to change its tradition and be responsible towards other stakeholders such as the communities, the bodies, the customers and other stakeholders (Phillips, 2011). The case i) Context The Malaysian airline MH370 was carrying two hundred and twenty seven passengers together with the crew from Kuala Lumpur airport on its way to china. The slated arrival time was estimated at 6. 30 A.M. the flight went out of the radar eight hours after departure time. many countries were provided assistant to the search including Australia and the united states of America (Mohammad, 2010). The length of time taken to search the flight has been too long and the amount of money spent being too much for the company. Other expenses of the company have involved accommodating the family members during the search period with an intention of maintaining its previous image. The Malaysian airline services announced the disappearance of flight MH370 one hour after the expected arrival time in Beijing China. On 24th march the prime minister of Malaysia announced that the flight must have ended in the middle of the Indian Ocean. The sudden loss of the flight from the radar and lack of communication with the pilot led to the disappearance of the plane. ii) Data The company utilized a number of channels to relay information pertaining to the disappearance of the flight. Malaysian airline announced the loss of the flight through the media on 8th march. According to the time news, seventy million US dollar had been utilized in the search process in June of the last year. The flight search begun last year on October and is estimated at 52 millions Australian dollars. During the disappearance of the flight the Malaysian airline services was in a crisis to reduce cost in order to compete favorably with other emerging carriers that were of low cost. The Malaysian airline is said to have booked loses of RM 2.5 IN 2011, RM433 in 2012 and RM 1.17 in 2013. The company continued to encounter loses in the first quarter of last year at around RM433.4 million and RM 307.04 million after the loss of Flight MH370. The stock of the company has continued to decline by around 80% and the company has a challenge of repairing its image and the government has to give support to ensure it returns to profitability (Ramage, 2014). The company offered compensation of around two thousand US dollars to the family and promised to add an extra 3,000 dollars when wreckage of the flight is traced. Absence of evidence targeting the loss of the flight has raised various questions regarding the payment and compensation as per the insurance companies. The passenger’s next of kin are entitled to the capital in cases of a crush and the amount of money awarded varies from country to country. Several media channels around the world aired news concerning the loss of the flight. The company cared for and accommodated the family members of the victims as per the news released on March nine. iii) Methodology The loss of the flight impacted negatively toward the Malaysian airline services in terms of reputation and damage. Previously, Malaysian airline was struggling on ways to cut cost in order to compete favorably with other carriers that were of low costs. Despite all these objectives, the company was continuing to encounter a lot of losses for three consecutive years. The company was able to take action and mitigated on the crisis that was encountered. One of the strategies employed by the company entailed providing the information to the public regarding the loss of the flight and the action that were being taken. The company went ahead to accommodate the family members as they waited for the news pertaining their loved ones. The company spent a lot of capital to help in search of the lost flight. The company accepted responsibilities toward the loss as a way of reconstructing its image. The action of the company revealed that shareholders were not the only ones considered in cases of crisis emergence. The stakeholder’s theory employed by the company focused on all the stakeholders of the company and not only the shareholders.(McLean, 2014). Although the tragedy led to achievement of losses for the company, Malaysian Airline Company ensured the family members were initially compensated as they wait for the recovery of the flight MH370. The company ensured the family members were well accommodated during the search period and were assigned to medical practitioners to take care of their health. Findings Despite the financial and reputational damage brought forward by the disappearance of the flight, the company was able to mitigate the crisis in a better way. The disappearance of the flight was announced one hour after the estimated arrival time in Beijing. The company continued to inform the public on the action they were taking towards recovering the flight through the various media channels. Questioned presented by the families were answered and the company decided to accommodate the family members as they waited for the news regarding the disappearance of the flight (Sinclair, 2014). Several analyses were made on the possible cause of the flight disappearing from the radar. The search for the flight took a long time and much capital was spent in the activity. Australia is one of the country that has taken part in the search and it was estimated that the search which begun on October last year could take around 52 million Australian dollars. Most of the passengers in the flight were Chinese (Lu and Abeysekera, 2014). The company together with the country addressed the issue by taking proactive measures. They accepted negotiations with the Chinese government and coordinated with many government agencies regarding the search. Malaysian Airline Company provided the family with the necessary help regarding the loss of their loved ones. The company arranged for families to travel to Kuala Lumpur and provided them with medical services, food and loading. The family also received counseling services from the trained care givers. The compensations to the family members were never given in full and the next of kin were promised full compensation when the flight is recovered (Heath, 2013). Despite some media speculation concerning the way the company was able to deal with the crisis, Malaysian Airline Company dealt well with the situation and people were informed about every action that was taking place concerning the plane. Conclusion Malaysian Airline Company was able to deal with the crisis in a more effective manner based on Benoit’s crisis management technique. He came up with a number of ways that a company can employ in dealing with crisis (Tihany et al, 2012). The company employed compensation technique in dealing with the situation. The company accepted responsibility for the crisis being a way of reconstructing its image. The company compensated the family members in two phases with the last phase to be made when the flight is recovered. The company acted in a number of ways in favor of the family members and the customers. A lot of money was spent on search mission that incorporated a number of countries with sophisticated technologies such as Australia and the United States of America. The approach showed that the company was more concerned with the customers and other stakeholders of the company and not necessarily the shareholders. References Heath, R. L. 2013. Encyclopedia of public relations. California: SAGE Publications. Kelly, J. 2014. Beyond whoop whoop Lu, Y. and Abeysekera, I. 2014. Social and environmental disclosure in chinese firms. NY: Routledge. Malaysian Airlines, 2014. Malaysia airlines mh370 flight incident - mh370 press conference on 18 mar. [Online]. Available at http://www.malaysiaairlines.com/mh370. [Accessed 16th December 2014]. . McLean, H.2014. Clock is ticking on Malaysian Airlines in crisis management. Mohammad, K. 2010. Positive accounting theory and science. Journal Of Centrum Cathedra, 3(2), pp.136-149. Phillips, R. A. 2011. Stakeholder theory.Massachusetts: Edward Elgar Publishing. Ramage, S. 2014. Airport at Kuala Lumpur. Criminal Law News, (66). Sinclair, P. 2014. The search for MH370. New Zealand International Review, 39(6), 2. Tihanyi, L., Tihanyi, L., Devinney, T. M., Devinney, T. and Pedersen, T.2012. Institutional theory in international business and management. London: Emerald Group Read More