Malaysia Airlines takes another bad blow

Malaysia Airlines , with majority ownership by Malaysia's government, has been struggling. JOSHUA PAUL / AP
Malaysia Airlines , with majority ownership by Malaysia's government, has been struggling. JOSHUA PAUL / AP
Posted: July 19, 2014

It couldn't get any worse for Malaysia Airlines, still reeling from the disappearance of Flight 370 in March, when reports came Thursday that Malaysia Airlines Flight 17 crashed in Ukraine as it was flying from Amsterdam to Kuala Lumpur, Malaysia.

At the very least, it's a marketing nightmare - two catastrophes for an airline in 41/2 months.

What passenger, going forward, will book a flight on the government-run carrier, which until this year had a reputation for high levels of service and safety?

Even before the disappearance of Flight 370 carrying 227 passengers on March 8, Malaysia Airlines had financial problems and steep losses.

The majority state-owned airline faces increasing competition from low-cost airlines, including AirAsia.

"Even before the first incident, this airline was losing more money than almost any airline in the world," said Seth Kaplan, managing partner of Airline Weekly, a trade publication.

After Thursday's crash, the Federal Aviation Administration said U.S. carriers "have voluntarily agreed not to operate in the airspace near the Russian-Ukraine border."

US Airways and American Airlines, which fly internationally from Philadelphia, had not operated in Ukrainian airspace, the airline said.

American has a codeshare, or ticket-sharing, arrangement with Malaysia Airlines as a result of being in the same global airline alliance, called Oneworld.

That means a passenger can book travel from Philadelphia to Kuala Lumpur, flying on US Airways to Frankfurt, Germany, and connecting to a Malaysia Airlines flight to Malaysia's capital - on a ticket booked on American.

American does not have a codeshare with Malaysia Air on the Amsterdam-Kuala Lumpur route, the airline said.

On April 3, the FAA barred U.S. flights "until further notice" in the airspace over the Crimean region of Ukraine, and portions adjacent to the Black Sea and the Sea of Azov. The advisory did not cover the airspace where Malaysian Flight 17 crashed Thursday.

KLM Royal Dutch Airlines issued a statement: "As a precautionary measure, KLM avoids flying over the concerned territory."

Malaysia Airlines posted a $134 million net loss in the first quarter this year - its fifth consecutive quarter in the red, said Brendan Sobie, chief analyst for CAPA, formerly known as the Centre for Asia Pacific Aviation, in a research report in May.

The disappearance of Flight 370 "particularly" impacted bookings from China. That flight was bound for Beijing. "The outlook for the rest of 2014 and beyond is bleak," Sobie said.

"Out of respect for the families," Malaysia's flag carrier "immediately withdrew from marketing activities, including a Malaysian travel fair, which typically generates significant and vital ticket sales," Sobie wrote.

Malaysia Air was last profitable in the third and fourth quarters of 2012, after a restructuring. The airline lost $372 million in 2013.

"The challenges facing Malaysia's flag carrier are its biggest yet," Sobie noted. The carrier will not "fully recover and return to profitability without a major overhaul."


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