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Malaysia Airlines "Was Losing Money" Years Before MH370 And MH17, Analyst Says

Emily Goldberg |
November 23, 2014 | 5:30 p.m. PST

Staff Reporter

Malaysia Airlines has continued to promote price reductions in the wake of the MH370 and MH17 tragedies. (Flickr/Creative Commons)
Malaysia Airlines has continued to promote price reductions in the wake of the MH370 and MH17 tragedies. (Flickr/Creative Commons)
An aviation industry analyst says that a restructuring of Malaysia Airlines was necessary a long time prior to the incidents involving the missing flights MH370 and MH17.   

“Financially, they were a loss-making firm for years in advance of these incidents but the willingness to restructure was probably not in the cards until it was pretty much mandated by the accelerating losses,” said Bob Mann, president of the airline industry analysis and consulting firm R.W. Mann & Company. "This is an opportunity to restructure."

In the wake of the twin disasters, Malaysia Airlines has continued slashing its prices to keep the company afloat. It announced its “Global Year-End Specials” on Wednesday, which will offer discounted economy and business class airfares for a number of domestic and international flights.

The promotion comes a day after Malaysia Airlines' third-quarter results were scheduled to be released, but the company delayed the release until Nov. 28 to allow time for more details, a company representative told Reuters. The company claimed they missed details that needed to be included in the earnings results. 

Analysts say the July to September period would have been one of the airline’s worst quarters ever as passenger numbers fell and yields dropped, Reuters reported. In addition to the effect of the tragedies of MH370 and MH17, the airline’s lack of efficiency, such as an excess of staff, has exacerbated their financial woes, said Mann.  

“It’s not a particularly efficient airline. The problem is that they face significant competition in long haul international and domestic routes, and have no real response,” Mann said. “They are a carrier that has been losing money for years.”

Perth Now reported that the airline’s international passenger numbers fell 15.2 percent in the month after the MH17 tragedy on July 17 compared to the same month last year. Domestic passengers were also down 21.5 percent. 

However, in October, the airline said that their passenger loads on Australian flights had returned to more than 70 percent of capacity after the company saw a dip in the months prior. 

The company promoted its “Spring Sale” with reduced fares, which ran in the beginning of October. The promotion announcement also coincided with the first week of the underwater search for MH370. 

In another effort to bolster their customer base, during the company’s Spring sale, the airline emphasized the use of A330s and A380s on Asian, Middle East and European routes rather than the Boeing 777s that were involved in the two tragedies and make up almost a fifth of its fleet, according to Perth Now. 

However, clinical psychologist and flight anxiety treatment specialist Martin Seif said that customers’ brand preferences will likely carry more weight than any promotions or marketing tactics by the airline.  

“Most people have strong brand preferences when it comes to airlines, and some of my clients can be more susceptible to press,” Martin Seif, a clinical psychologist and anxiety treatment specialist who specializes in helping those who have a fear of flying, said.

"The fact is that most people will not fly Malaysian Airlines for good reason," he added.

Malaysia Airlines customers began to witness a major decline in passengers as early as in July when tweets and photos of nearly empty planes went viral online. If the airline were unable to remain in operation, it wouldn’t be the only one to disintegrate following a disaster. It took less than three years for the U.S. airline Pan Am to fold after the bombing of flight 103 from London to New York in 1988. 

Reach Staff Reporter Emily Goldberg here



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