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Missing jet a big blow for struggling Malaysia Airlines

Published on Mar 8, 2014 8:07 PM
Malaysia Airlines, which was rocked on Saturday, March 8, 2014, by the presumed crash of one of its planes, has been a respected name in regional aviation, enjoying an enviable safety record. -- ST FILE PHOTO:  KEVIN LIM

KUALA LUMPUR (AFP) - Malaysia Airlines, which was rocked on Saturday by the presumed crash of one of its planes, has 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 on 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 Mr 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 (S$973 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.

Background story

About Malaysia Airlines

- Malaysia Airlines (MAS) is the government-owned flag carrier of Malaysia operating flights from its home base, Kuala Lumpur International Airport, and its secondary hub in Kota Kinabalu. It has its headquarters based in Sultan Abdul Aziz Shah Airport in Subang, Selangor.

- With a fleet of 88 planes, it operates flights in South-east Asia, East Asia, South Asia, Middle East and between Europe and Australasia. It operates trans-pacific flights from Kuala Lumpur to Los Angeles via Tokyo.

- MAS has two short-haul subsidiaries - Firefly and MASwings. Firefly operates scheduled flights from its two home bases at Penang International Airport and Subang International Airport. The airline focuses on mostly secondary destinations within Malaysia, Indonesia, Thailand, and Singapore. MASwings focuses on inter-Borneo flights.

- Malaysia Airlines has a freighter fleet operated by MASKargo, which manages freighter flights and aircraft cargo-hold capacity for all MAS passenger flights.

- In February 2013, MAS became a full-fledged member of oneworld alliance and is now connected to some 850 destinations in 150 countries, including the Heathrow Airport in London, across the oneworld alliance network.

- MAS was named World's Leading Airline to Asia and Asia's Leading Airline in 2010 and 2011.

- The airline reported a net loss of RM1.17 billion (S$460 million) in 2013.

Past Accidents

- On October 10 2013: Two people were killed, including co-pilot Marc Joel Bansh, 23, and passenger Tan Ah Chai, 96, when a MASwings flight from Kota Kinabalu to Kudat crashed into a house, after landing short of the runway.

- On September 15, 1995: Thirty-four people were killed and 19 survived after a Malaysia Airlines flight crashed during approach in Tawau. It had touched down 500m before the end of the 2.2km runway. While attempting to carry out a go-around, the aircraft crashed into a shantytown. The accident was caused by the pilot's poor in-flight decision-making and failure to follow standard operating procedures.

- December 4, 1977: A MAS passenger jet flying from Penang for Kuala Lumpur and Singapore was hijacked and the pilot was forced to fly directly to Singapore instead. But the Boeing 737 exploded in mid-air over Johor and killed all 100 people on the plane. Several VIPs, including agriculture minister Datuk Ali Ahmad, Public Works Department head Datuk Mahfuz Khalid, and Cuban ambassador to Japan Mario García, were also on board.

Source: Malaysia Airlines website, Agence France-Presse, Reuters