Corporate woes deepen for crisis-hit Malaysia Airlines

Written by AFP | Singapore | Updated: Jul 18 2014, 22:34pm hrs
Malaysia Airlines plane"MH17 is like lightning striking twice. The effects on bookings will be bigger."(Reuters)
Shares in struggling Malaysia Airlines sank today after one of its jets crashed in Ukraine, dealing it a blow just months after the loss of Flight MH370, with analysts warning of the firm's collapse without government help.

All 298 people aboard MH17 from Amsterdam to Kuala Lumpur died yesterday when it came down in violence-wracked eastern Ukraine, with the United States saying it was hit by a surface-to-air missile.

Some industry experts say the incident was beyond the airline's control and while its reputation will be further tarnished, the effect could be limited if it avoided the mistakes made in the MH370 case.

But others warn that even if yesterday's tragedy is proved to have been caused by outside forces it faces an uphill fight to regain passenger confidence.

The flag carrier was already in financial trouble when MH370 disappeared in March en route from Kuala Lumpur to Beijing with 239 people on board. The plane has yet to be found despite an extensive international search.

"MH370 sent shivers down people's spines, but most people realised it was an out-of-the-ordinary occurrence, so bookings recovered," Gerry Soejatman, a consultant with the Jakarta-based Whitesky Aviation chartered flight provider, told AFP.

"MH17 is like lightning striking twice. The effects on bookings will be bigger," he said.

Crucially, two-thirds of passengers on MH370 were from China, its key market, and the firm said sales in the country dived 60 percent after the disappearance.

News of a second tragedy could prove to be a hammer blow to its chances in China, a country where a brand's link to anything to do with death can be extremely damaging.

"The effects will be huge and may cause the airline to collapse without government support. The loss of two wide-bodied aircraft also puts a serious dent in its capability, and their financial performance will reflect this," said Soejatman.

The airline, which is 70 percent-owned by state investment vehicle Khazanah Nasional, posted a net loss of 443 million ringgit (USD 137 million) in January-March.

Song Seng Wun, a Singapore-based regional economist with Malaysian financial giant CIMB, said: "Definitely, massive help is required from the government and taxpayers again if the company is to see through this darkest period."

Malaysia Airlines (MAS) shares plunged more than 11 percent in late afternoon Friday trade on the Kuala Lumpur stock exchange and it has now lost more than a third of its value since the end of 2013.