Run of disasters poses questions about future

A passenger at Kuala Lumpur International Airport in Sepang, Malaysia, where flags have been flown at half mast. Photograph: Brent Lewin/Bloomberg

A passenger at Kuala Lumpur International Airport in Sepang, Malaysia, where flags have been flown at half mast. Photograph: Brent Lewin/Bloomberg

Tue, Jul 29, 2014, 01:30

There has been much discussion in recent days about the future of Malaysia’s national flag carrier, Malaysia Airlines. Its MH17 was downed over Ukraine with the loss of 298 people even as the airline was still trying to get over the mysterious disappearance of flight MH370 on March 8th, with 239 on board.

The downing of MH17 had nothing to do with the airline, but it will have to bear the brunt of the fallout. That something like this should happen at an airline which until this year had experienced only two fatal accidents in 68 years of operation and had 19 years of fatality-free flying, is terribly unfair.

But its books were not in good shape, even before the two incidents. In the past three years, the airline has lost nearly €900 million, according to Businessweek, and it lost €104 million in the first quarter of this year, with business down 59 per cent.

Consumer confidence, vital in an airline, has been badly dented, and ticket bookings and stock prices have plummeted.

It is also struggling to compete against Singapore Airlines and Thai Airways at the high end, and it also faces competition at the lower end from budget carriers.

The airline has various options. Either it goes bankrupt, which Japan Air Lines did and paved the way for recovery. Or the government steps in and nationalises Malaysia Airlines, or it goes for privatisation, or a possible merger with Tony Fernandes’s Air Asia.

Or it tries to rebrand, which has worked for Swiss International Airlines (formerly Swissair).

The problem is always going to be pride. Malaysians I talked to last week in Kuala Lumpur all spoke about what Malaysia Airlines meant to their sense of pride in their country.

Korean Air

The airline’s terrible run is similar in some ways to the plight of Korean Air three decades ago.

In September 1983, Korean Airlines flight KAL 007 was shot down by a Soviet missile, killing all 269 people on board. Five years earlier, Russian jets had forced a Korean Air aircraft to crash land, killing two passengers, while in 1987, the North Koreans blew up a Korean Air aircraft over Thailand, killing all 115 passengers and crew.

In the 1990s, Korean Airlines had another run of accidents, but it is now one of the world’s top airlines.

There have also been questions asked about the country’s wider economic outlook, and whether the brace of disasters would have a broader impact, in the way the Korean ferry disaster hit growth in that country.

On that score the news is, thankfully, more positive.

According to the Malaysian Institute for Economic Research (MIER), Malaysia’s economy is expected to expand up to 5.2 per cent in the second half of this year and for the full year, growth is expected to be 5.3 per cent.

In the first quarter ended March 31st, GDP expanded at a faster-than-expected pace of 6.2 per cent, and MIER said growth would be moderately higher this year when compared to the 4.7 per cent growth last year.

It expects the momentum to continue into next year 5 with growth forecast at between 5.5 per cent and 6 per cent.

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