Arab Today, arab today plane mystery deepens malaysia airlines\ financial woes
Last Updated : GMT 23:12:04
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Plane mystery deepens Malaysia Airlines\' financial woes

Arab Today, arab today

Arab Today, arab today Plane mystery deepens Malaysia Airlines\' financial woes

Kuala Lumpur - AFP

The mystery surrounding the fate of a possibly hijacked Malaysia Airlines plane raises the spectre of costly lawsuits and a damaging drop in bookings for a national carrier already haemorrhaging cash in the face of intense competition. Prime Minister Najib Razak said Saturday that investigators believe the jet, with 239 passengers and crew on board, had been deliberately diverted from its course and flown on for hours after primary radar contact was lost. "It definitely makes investors very concerned," Daniel Wong, an analyst with Hong Leong Investment Bank in Malaysia, told AFP. "People want to know what went wrong, whether there is a safety issue or security issue with Malaysia Airlines if the plane was hijacked," he said. The airline has a good safety record, although a Twin Otter aircraft belonging to its fully-owned subsidiary MASWings crashed in October last year, killing two people. Najib's announcement all but ruled out a mechanical issue with the Beijing-bound Boeing 777 that disappeared on March 8, but raised the alarming prospect that one or both pilots might have been involved. The singular peculiarities of the case have kept the missing plane at the top of the global news agenda for more than a week -- placing the carrier under a harsh and unwanted spotlight at a time when it is desperate to turn its finances around. - Huge losses - Last month, Malaysia Airlines (MAS) announced a 1.17 billion ringgit ($360 million) loss for the year to December 2013, exceeding analysts' expectations. The airline, which is 70 percent owned by Khazanah Nasional, Malaysia's state investment arm, last posted a net profit -- 237 million ringgit -- in 2010. In 2011 and 2012, it reported consecutive losses of 2.5 billion ringgit and 433 million ringgit respectively. Analysts have long blamed poor management, government interference, a bloated workforce, and powerful, change-resistant unions for preventing the airline from remaining competitive. Wong said the sensational daily headlines generated by the missing Boeing could only undermine efforts to bring the carrier back to profit. "The financial impact will be longer term. It could mean less people wanting to travel on Malaysia Airlines, and the airline will have to reduce ticket prices to encourage people to travel with them," he said. Travel agents told AFP that Malaysian travellers were already shunning the airline. "Of course there are customers who don't want to fly MAS. They are scared," said one travel agent, who declined to be named. "Even if MAS has the best rates, some don't want it. They try to avoid it. They are willing to pay more." Malaysia Airlines did not immediately respond to queries on whether ticket sales have been affected. In a statement Saturday, the airline defended itself against criticism it was slow in disseminating fresh information about developments in the search for the missing aircraft. - State sell-off? - Shukor Yusof, an aviation industry analyst with Standard & Poors Capital IQ, said the airline's earnings could be impacted by incidental expenses arising out of the incident, as well as potential legal costs. Malaysia Airlines has offered family members of each passenger $5,000 expenses as they await the conclusion of the search for flight MH370. And the possibility of legal suits from family members "has to be taken into account when we look at MAS's earnings," Shukor said. The missing Boeing 777-200ER aircraft, which has a list price of $261.5 million according to the US manufacturer, is however not on the airline's books. Shukor said it was leased from Penerbangan Malaysia, an aviation company fully owned by Malaysia's finance ministry. Irrespective of how the MH370 mystery finally pans out, analysts say the real challenge for MAS remains the structural and managerialinefficiencies blamed for its plunge into the red. "They have been far behind the curve, and the only reason they have been able to stay afloat is because of Khazanah," said Shukor. He added that a damaging financial fallout from the missing plane case could push the government into finally selling its stake in MAS, after years of internal resistance against such a move. Tony Fernandes, the flamboyant boss of Malaysian budget airline AirAsia ripped into MAS last month after it announced its latest annual loss. "So much money wasted," Fernandes said. "I wonder if it's fair that Malaysia Airlines can lose so much money and protect its market share." Fernandes had agreed to a strategic tie-up aimed at breathing fresh life into MAS in 2011, but the deal was called off just months later, with the AirAsia chief faulting "massive" union resistance to reform and hinting at deep problems in the state carrier.

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