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All 298 people aboard MH17 from Amsterdam to Kuala Lumpur died on Thursday 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 avoids the mistakes made in the MH370 case.
But others warn that even if Thursday’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.”
Crucially, two-thirds of passengers on MH370 were from China, its key market, and the firm said sales in the country dived 60 per cent 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.
Malaysia Airlines shares plunged more than 11 per cent 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.
The carrier, which has lost 4.57 billion ringgit ($1.4 billion) since the start of 2011, had been speeding up an overhaul of its business after the disappearance of Flight 370 spurred the longest search for a missing plane in modern aviation history. “This is shocking,” Geoffrey Ng, an adviser for strategic investments at Fortress Capital Asset Management, said in Kuala Lumpur. “Investors will want to sell first and get more information later. This will raise concerns about the safety culture of airlines in general.”
The Subang Jaya, Malaysia-based carrier last reported an annual profit in 2010. Malaysian Air missed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out revenue gains. Analysts project losses through 2016 for the airline, according to data compiled by Bloomberg.
“I can’t comprehend of anything they can do to save themselves,” said Mohshin Aziz, an aviation analyst at Maybank in Kuala Lumpur, Malaysia.
“Perception-wise it really hits home... it’s very difficult to fight against negative perception.”
Already losing about $1.6 million a day, there will be “no miracles” for Malaysia Airlines, said Aziz. Before the Ukrainian disaster, his opinion was the airline didn’t have the capacity to survive beyond a year.
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