Wednesday 26 November 2014

What now for Malaysia Airlines?

Can the airline survive after a second major disaster, and the loss of 537 lives, in less than five months?

Published 18/07/2014 | 11:12

KUALA LUMPUR, MALAYSIA - JULY 18:  Malaysian Airlines cabin crew walk past a sign at Kuala Lumpur International Airport Terminal 1 on July 18, 2014 in Putrajaya, Malaysia. Air Malaysia flight MH17 travelling from Amsterdam to Kuala Lumpur has crashed on the Ukraine/Russia border near the town of Shaktersk. The Boeing 777 was carrying 280 passengers and 15 crew (Photo by Rahman Roslan/Getty Images)
Malaysian Airlines cabin crew at Kuala Lumpur International Airport

As authorities rush to piece together the final moments of MH17, Twitter users are already talking about a "curse". Can the airline survive?

To lose one flight cruising at high altitude is a disaster.

To lose two is unthinkable.

At least, that was the case until yesterday afternoon at around 16.15 GMT. That was the moment contact was lost with Malaysia Airlines MH17, after the plane was apparently struck by a surface-to-air missile at 33,000 feet. All 298 passengers and crew on board were killed.

Last March 8th, flight MH370 - also a Malaysia Airlines flight - had disappeared less than an hour after take-off from Kuala Lumpur. The fate of the flight remains a mystery, the search continues for its wreckage, and 239 passengers and crew are presumed dead.

In total, the tragedies have resulted in the loss of 537 lives.

Malaysia is stunned. Its airline is stunned. Friends, families and relatives of the dead are shell-shocked and potential passengers are already talking about the "curse" of Malaysia Airlines.

Shares in the airline fell by up to 18% on news of the disaster.

"The brand is incredibly damaged," says David Holohan, an aviation analyst with Merrion Stockbrokers in Dublin.

"In the immediate term, I'd expect a decline in demand. People get nervous. That's the way with any airline... and it will likely reverberate for some time."

Questions were immediately raised as to why the airline was flying over a conflict zone in the first place, although it later emerged that the route had been declared safe by the International Civil Aviation Organisation. Pilots had received no instruction to deviate, the airline said.

At the time MH17 was struck down, a Singapore Airlines SQ351 and Air India AI113 were just 25km away, according to flight tracking app, Flightradar24.

Some Twitter users suggest the airline suffered spectacular "bad luck".

Either way, it now faces a challenge for its very survival.

Even before MH370 went missing, the airline had struggled with financial problems - losing some $1.3 billion over the past three years. As we published, its stock was down 35% this year.

Before the latest disaster, Prime Minister Najib Razek was rumoured to have plans to privatise the carrier, whose labour costs are protected by powerful unions, in an attempt to stem losses. 

Now that its legacy has been shattered by two of the worst aviation disasters this century, however, something more dramatic may be required... such as a merger or rebranding.

"A rebrand could very well be a short-term solution," David Holohan says.

"Anyone typing Malaysia Airlines into a search engine is going to come up with these disasters. But it would be a costly solution, and and the reality is that while changing a name can be beneficial, the airline will face challenges no matter what happens."

malaysia4.jpg
While the MH17 and MH370 disasters were clearly very different, and it may yet emerge that Malaysia Airlines had nothing to do with either, its future hangs in the balance.

In 1996, Trans World Airlines flight 800 crashed into the sea near New York. 230 lives were lost. Five years later, the carrier filed for bankruptcy.

This morning, Malaysian Transport Minister Liow Tiong Lai gave a press conference at which he was asked about the airline's future.

"That will be a separate issue," he said

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