Missing jet a big blow for struggling Malaysia Airlines

Missing jet a big blow for struggling Malaysia Airlines

POSTED: 08 Mar 2014 20:02
Malaysia Airlines, which was rocked Saturday by the disappearance of one of its planes, has long been a respected name in regional aviation, enjoying an enviable safety record.

KUALA LUMPUR: Malaysia Airlines, which was rocked Saturday by the disappearance of one of its planes, has long been a respected name in regional aviation, enjoying an enviable safety record.

Flight MH370 from Kuala Lumpur to Beijing disappeared in the early hours of Saturday morning, triggering a vast search effort in the South China Sea and sparking grave fears for the 239 people on board.

The incident will be a major blow to the airline, which has struggled to remain profitable recently against a host of nimble competitors, particularly the rise of budget airlines.

Malaysian Airlines flies about 37,000 passengers daily to 80 destinations across Asia, and to Europe and the United States. It operates more than 250 flights a day.

The carrier has suffered few incidents in its history and has a solid safety record.

Its worst accident came in 1977, when a hijacking and subsequent crash in southern Malaysia killed 93 passengers and seven crew.

The airline has a fleet of 88 aircraft including Boeing 747-400s, Boeing 777-200s and Airbus A380-800s.

The plane that disappeared Saturday somewhere over the South China Sea — believed near Vietnam airspace — was a Boeing 777-200, considered one of the safest planes in the industry.

First formed in 1947 as Malayan Airways, the airline went through a series of organisational changes culminating in its 1972 re-launch under its current name.

The flag carrier’s steady expansion gained pace in the 1980s, benefiting from the Malaysian economy’s rapid export-led growth. Its fleet and route system grew rapidly.

But the Asian financial crisis that rocked the region in 1997 pushed the airline into the red, forcing it to undertake a series of steps including cutting unprofitable routes and reducing costs.

The company subsequently see-sawed between profit and loss, with its balance sheet looking increasingly shaky.

It has bled red ink in recent years as its struggles to fend off competition from rivals such as fast-growing Malaysia-based budget airline AirAsia.

“This incident comes at a most unfortunate time for the airline which is undergoing a transformation to return to profit,” said Shukor Yusof, aviation analyst with Standard & Poor’s Equity Research in Singapore.

“It will further aggravate its road to profitability.”

Malaysia Airlines has drawn derision from some observers and analysts with its announcement of a series of “recovery” plans aimed at steering it back into the black over the years.

None has succeeded, and critics have accused the government of keeping the state-linked airline afloat with cash injections of taxpayers’ money rather than launching painful and necessary reforms.

Analysts also blame poor management, government interference, a bloated workforce, and powerful, change-resistant unions for preventing the airline from remaining competitive.

In 2011, it chalked up a record 2.5 billion ringgit ($767 million) loss, due in part to rising fuel costs.

Its managers admitted in 2012 the airline was in “crisis”, implementing yet another cost-cutting campaign.

Malaysia Airlines recorded four successive quarterly losses in 2013 and warned of a “challenging” year ahead due to intense competition.

Despite its troubles, the airline has continued to win accolades for the quality of its service.

Last year, it became a full member of Oneworld, one of the world’s largest airline code-share alliances, connecting it to some 850 destinations in 150 countries across the group’s network.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

One Response to Missing jet a big blow for struggling Malaysia Airlines

  1. Naomi says:

    I hope they are able to find the plane soon. I do not think a black hole sucked it in. That would mean the black hole would be too close to earth.

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