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Saturday, July 19, 2014

MAS’s future hinges on managing bad image, plummeting passenger figures, says WSJ

A Malaysian Airlines (MAS) flag flies in front of the traffic control tower at Kuala Lumpur International Airport in Sepang July 18, 2014. MAS shares fell sharply yesterday on news one of its planes was downed in Ukraine, raising pressure on the state-run carrier to try to restore investor confidence after the second major disaster in months. – Reuters pic, July 19, 2014.A Malaysian Airlines (MAS) flag flies in front of the traffic control tower at Kuala Lumpur International Airport in Sepang July 18, 2014. 
MAS shares fell sharply yesterday on news one of its planes was downed in Ukraine, raising pressure on the state-run carrier to try to restore investor confidence after the second major disaster in months. – Reuters pic, July 19, 2014.The fate of Malaysia Airlines (MAS) now rests on how it weathers through what is expected to be another drop in bookings, say aviation and crisis-management experts in the wake of flight MH17’s crash in eastern Ukraine on Thursday.
In just four months, MAS has lost two planes, carrying a total of 537 people, the biggest casualty toll suffered by any airline over such a short time span, the Wall Street Journal (WSJ) reports.
The downing of the Boeing 777 in eastern Ukraine comes after MAS’s MH370 mysteriously vanished on March 8, sparking a global search for the plane that has yet to yield any results.
“They were the wrong airline in the wrong place at the wrong time.”
In the first quarter of 2014, MAS reported losses of RM443.4 million, from a net loss of RM278.8 million in the same period last year. Losses in 2013 amounted to RM1.17 billion, its third consecutive year in the red.
MAS said that the Q1 loss was due to missing flight MH370, where it saw high numbers of cancellations and a decline in long-haul travel after the March 8 incident.
But even without the tragedy, Malaysia’s flagship carrier has steadily been in the red for years.
In 2001, the government was forced to bail out MAS to save it from massive financial losses.
Ian Douglas, a senior lecturer of aviation at the University of New South Wales, told WSJ that MH370’s disappearance had caused MAS’s yields - the money the carrier makes per passenger for each kilometre flown - to decrease further.
The paper said MAS registered a year-on-year decline in passenger numbers of 4% in May to 1.3 million since MH370 vanished, its first drop in traffic since September 2012.
Analysts said the biggest challenge now for the airline was to keep its passenger load up without offering substantial discounts, according to WSJ.
While previously the flagship carrier was struggling with a cost base, it now may also face a revenue problem as passengers shy away from MAS.
Douglas said that several of his friends in Australia have already cancelled their MAS bookings after Thursday’s crash.
“(That is) even though they know the loss of the aircraft could have happened to any carrier flying from Western Europe towards Southeast Asia,” Douglas was quoted as saying.
Siti Dina, whose daughter was on board flight MH17, weeps after seeing her name on the list of passengers at Kuala Lumpur International Airport in Sepang, yesterday. – Reuters pic, July 19, 2014.Siti Dina, whose daughter was on board flight MH17, weeps after seeing her name on the list of passengers at Kuala Lumpur International Airport in Sepang, yesterday. – Reuters pic, July 19, 2014.Jonathan Galaviz, partner at consulting firm Global Market Advisors, said the business implications for MAS were extremely significant.
“The MAS brand is heavily damaged, even if it’s not the airline’s fault.”
MH17 was shot down over a conflict zone in eastern Ukraine on Thursday, killing all 298 people on board including three infants.
Those responsible for downing the jet have yet to be identified, with Russian and Ukrainian authorities blaming each other.
Although MAS appeared blameless in the matter, Daniel Tsang, founder at Aspire Aviation, a Hong Kong-based consultancy, said demand would still likely plummet in spite of the peak season.
“The dire situation of the airline right now is just the tip of the iceberg that has been brewing for the last decade,” he told WSJ.
He suggested that the best course of action may be to allow the airline to “start from scratch” and rebuild it from the ground up.
Lines said MAS now needed to handle MH17’s crash better than it did the disappearance of MH370 in March.
He added it should be easier to find out what happened, and to comfort the relatives of the victims, as opposed to MH370’s mysterious disappearance which still remains unsolved.
But for the longer term, MAS has to reassure passengers that it is safe to travel on its planes, said Lines, adding that this could require a complete overhaul of the company and the brand.
- TMI

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