Air Crashes Mission Impossible in Malaysia

When airlines are in trouble, they call Christoph Müller to the rescue. The German turnaround expert now has the herculean task of breathing life into Malaysia Airlines.
Christoph Müller has a lot on his plate.

Christoph Müller has one of the hardest jobs in airline industry. He has to save Malaysia Airlines, perhaps the most notorious air carrier in the world, from financial ruin.

The 54-year-old veteran turnaround specialist from the western German city of Wuppertal has his work cut out. When Mr. Müller took over as chief executive officer in March of 2015, Malaysia's flagship carrier was facing an existential crisis unparalleled in the history of aviation.

Within the space of five months, the airline lost more than 500 passengers in two separate incidents. In March of 2014, flight MH370 disappeared over the Indian Ocean en route to Beijing, with no trace of the aircraft or its 239 passengers.

The families of MH370's Chinese passengers filed a lawsuit on Monday, seeking damages from Malaysia Airlines as well as the manufacturers of the aircraft and its engine, Boeing and Rolls Royce, and the German insurance company Allianz.

I would say there's no longer a danger to the life of the company, but the patient still has many serious illnesses all at once. Christoph Müller, CEO Malaysia Airlines

"It's not like other accidents, which are slowly but steadily forgotten," Mr. Müller told Handelsblatt in an interview. "Every time there's a new search alert, the subject is brought up again. It's having a very strong impact on our sales in certain markets because people are simply concerned."

Just as Malaysia Airlines was recovering, flight MH17 was shot down over eastern Ukraine in July of 2014, killing all 298 passengers on board. Though other airlines were operating over the same region, many blamed Malaysia Airlines for flying over a warzone.

Given the tremendous damage to its public image, Mr. Müller is trying to re-brand Malaysia Airlines. In September, he quietly launched a new company and the airline may soon get a new name.

"A final decision hasn't been made," Mr. Müller said. "I would say the name has to reference Malaysia. Our reason for existing is to be Malaysia's national airline and we want that to remain so."

 

Reputation damage after lost planes.

 

The problems at Malaysia Airlines, however, began long before the twin tragedies of 2014. From 2001 through 2014, the airline suffered RM 8.4 billion ($2 billion, €1.8 billion) in net adjusted losses.

Malaysia's flagship carrier had invested heavily in ferrying passengers from Europe to Australia. But rivals from the Persian Gulf - Etihad, Emirates and Qatar Airways - have cut into that business.

"It would be wrong if we were simply to choose a new name and new logo, without making any substantial changes," Mr. Müller said.

And the changes have been substantial. Mr. Müller mailed pink slips to 30 percent of Malaysia Airlines' workforce, and the remaining 14,000 employees are receiving new non-union contracts. Now he wants to slash the air carrier's suppliers by 90 percent from 20,000 to 2,000.

Mr. Müller has also shifted the airline's focus from the once profitable European-Australian routes to emerging economies in Asia, with a major focus on China. The ongoing search for MH370 is being staged from Perth, and Malaysia Airline's business in Australia has taken a major hit.

China, however, has surpassed Germany as the number one tourism exporter. And Mr. Müller believes Malaysia, with its large Mandarin and Cantonese-speaking populations, is an ideal vacation spot for China's burgeoning middle class.

"We've created a new company, our employees have new contracts and there's a completely new management," Mr. Müller said. "Fundamentally, more is new than old and we will offer our passengers a noticeably new product over the next 18 months."

Even with these drastic changes, Mr. Müller still faces strong headwinds. Malaysia is an oil producing country, and the collapse in petroleum prices has devalued its currency, the ringgit, by 25 percent.

"That means I have to complete my task with a lot less money than planned," Mr. Müller said.

And additional help from the Malaysian government is unlikely. Kuala Lumpur has already injected RM 6 billion into the struggling airline through its sovereign wealth fund Khazanah. With oil prices in the tank, Malaysia's budget is under too much pressure to offer additional aid, Mr. Müller said.

Though the challenges are immense, Mr. Müller can draw from his experience. During his previous post at Aer Lingus, he managed to turn the struggling Irish air carrier around by expanding transatlantic flights. British Airways bought Aer Lingus last year for €1.36 billion.

But Mr. Müller has also experienced failure. His first assignment as a chief executive was at the Belgian airline Sabena, a struggling air carrier which ultimately filed for bankruptcy.

In the case of Malaysia Airlines, Mr. Müller sees light at the end of the tunnel.

"I would say there's no longer a danger to the life of the company, but the patient has many serious illnesses all at once," the chief executive said. "I'm optimistic: it's going to work."

 

Mathias Peer is a freelance correspondent for Handelsblatt, based in Bangkok. To contact: [email protected]