Malaysia Airlines suffering but not vanishing

BANGKOK – Over the week end, newspapers and radios reported almost non-stop over the new crash of Malaysia Airlines Boeing 777 in the Ukrainian air space. Although the Donetsk region flown by the aircraft on the route Amsterdam-Kuala Lumpur was considered a war zone, there was no restriction from international civil aviation authorities to fly over the territory at high altitude. Malaysia Airlines shot down cannot be blamed on the airline. However, after a first aircraft catastrophe on March 8, the airline will have difficulties to restore its image. 
 

In the Financial Times, Mohshin Aziz, an aviation analyst at Maybank in Kuala Lumpur declared that “no airline in the history of aviation has gone through a tragedy of this magnitude: two big disasters in four months. It’s just too big of a curse”, he explained to the British newspaper.
 

The Malaysian national carrier has been living turbulent years in its recent history. Its worsening financial conditions have been the result of the heavy competition in Malaysian skies, especially against low cost airlines’ group AirAsia. Despite dynamic marketing strategies, the modernization of its fleet and the improvement of its board and ground service, the carrier has been dragged into a price battle to keep head with AirAsia but also the increasing competition of low fare carriers. 
 

Financially, Malaysia Airlines is in a weakened position: the last time it showed a profit was back to 2010. Since 2011, the carrier loses money and the two recent catastrophes will further worsen its financial performance for 2014. Adding to weakening yields due to the pressure from the competition, Malaysia Airlines has experienced since March a vanishing of Chinese passengers, one of its main markets. According to analysis, Chinese booking on the carrier are down by 60% while MAS announced in May that its net losses were up by 58% between January and March 2014, compared to the same period of last year. Maybank Analyst Mohshin Aziz estimated to the Financial Times that the airline was spending US$ 1.6 million per day…
 

There is no doubt that Malaysia Airlines will need to restructure its operations with specialists thinking that it would happen within the next six months. But could the airline disappear as suggested by some newspapers and analysts? There is little possibility of such a catastrophe scenario. 
 

In Asia, more than in any other part of the world, the prestige of a State is also seen in its airline. Malaysia’s neighbour Thailand is a typical example of permanent political intervention in its national carrier to assure its survival. If Thai Airways International did not belong to the Ministry of Finance, the airline would have disappeared for a long time already. But prestige is at stake in Thailand if anything would happen to Thai Airways. Philippine Airlines had a similar fate and went bankrupt just for a short time before coming back. Garuda went through a painful restructuring process but thanks to clever strategies and a strong State support, the Indonesian carrier is back and stronger than ever. 
 

A similar fate is likely for Malaysia Airlines. There is no doubt that the carrier will be restructured, it might change his name, it might get a new shareholder –rumours start to circulate over a possible involvement of a Gulf carrier- but it will last. For the pride of Malaysia, MAS must live on. And must already look at ways to win back passengers’ confidence. The battle will be tough.