Double Disasters Taint Malaysia Airlines
Created: 07/18/2014 5:44 AM KSTP.com Passenger wait at the departure hall at Kuala Lumpur International Airport, in Sepang, Malaysia, Friday, July 18, 2014.
Photo: Photo: AP/Vincent Thian
Hit by two astonishing tragedies in quick succession, the Malaysia Airlines brand may become the airline industry's equivalent of asbestos or News of the World: toxic to the public and, experts say, impossible to redeem.
Malaysia Airlines Flight 17 was downed over eastern Ukraine on Thursday with 298 people aboard by what American intelligence authorities believe was a surface-to-air missile. Just four months earlier, a Malaysia Airlines jetliner carrying 239 people disappeared about an hour after taking off from Kuala Lumpur. The jet has still not been found, a source of profound unease for travelers and the aviation industry.
"I can't comprehend of anything they can do to save themselves," said Mohshin Aziz, an aviation analyst at Maybank in Kuala Lumpur, Malaysia.
"Perception-wise it really hits home," Aziz said. "It's very difficult to fight against negative perception."
Even before the Flight 370 mystery, state-owned Malaysia Airlines was in serious financial trouble. In an industry infamous for impoverishing shareholders and irking customers, Malaysia Airlines had long stood out for its years of restructurings and losses.
The Flight 370 disaster along with the often erratic response of Malaysia Airlines and the Malaysian government deeply scarred the carrier. Now, the once proud national airline is facing the unthinkable again.
University student Dayne Rodgers, waiting for a flight to Brisbane, Australia at Incheon International Airport in South Korea, said even very cheap fares might not convince him to fly with Malaysia Airlines.
"I don't know if my Mum would let me," he said.
Already losing about $1.6 million a day, there will be "no miracles" for Malaysia Airlines, said Aziz, the Maybank analyst. Before the Ukrainian disaster, his opinion was the airline didn't have the capacity to survive beyond a year.
The airline's share price plummeted 11 percent Friday. Ukraine has accused pro-Russian separatists of shooting down the plane flying from Amsterdam to Kuala Lumpur. The rebels denied it.
Unlike Flight 370, the responsibility for which is pinned with Malaysia Airlines, the second disaster appears largely beyond the airline's control. It may, however, face questions about why it continued with flight paths over eastern Ukraine, which is the heart of a violent rebellion against Kiev, when some airlines were circumventing the country. The flight route was declared safe by the International Civil Aviation Organization.
For air travelers in Asia, who have a multitude of options thanks to a budget airline boom, the latest incident will make the Malaysian carrier even less attractive. Its brand in the rest of the world, where it became known largely because of the Flight 370 mystery, is now even more closely associated with the worst fears of fliers.
Josh Gokul, a 25-year-old Australian student on a layover at Incheon, said he had flown with Malaysian Airlines before and its service was "fantastic."
But he is now "very hesitant" about using the airline. "Flying is scary enough."
Within Malaysia, the shock is palpably raw.
"I was stunned," said 48-year-old shopkeeper Reezal Mohamed. "It's unbelievable."
Malaysia Airlines has been in the red for the last three years. Last year, its losses ballooned to 1.17 billion ringgit ($363 million), nearly three times larger than its 433 million ringgit loss in 2012.
As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.
For some travelers, the airline's poor financial health is more concerning for the future than the two disasters.
"Last time I saw them, the plane was almost empty and so I suspect, probably losing a lot of money," said tourist Ricky Leong as he checked in for a Malaysia Airlines flight from Hong Kong to Kuala Lumpur. "They're not going to maintain their fleet and there's going to be issues in the future."
After the disappearance of Flight 370, the biggest backlash emanated from China because its nationals were the majority of passengers on the flight. Hopes for a recovery in that crucial market might now be set back.
Tongcheng Network Technology, which operates the Chinese ticket booking website ly.com, suspended all flight ticketing and hotel bookings involving Malaysia Airlines after Flight 370 vanished.
"Now there's this plane crash, we would be very unlikely to consider resuming it in the future," said the manager of its public relations department, who only gave her surname, Zhang.
Crisis and risk management expert Kuniyoshi Shirai at A.C.E. Consulting in Tokyo said Malaysia Airlines must take dramatic steps such as replacing top executives in response to the disaster, which he blamed partly on the airline for flying over war-torn eastern Ukraine.
"Otherwise, you cannot regain the trust of either consumers or investors," he said.