IE 11 is not supported. For an optimal experience visit our site on another browser.

Malaysia Airlines' Woes Mount After Ukraine Crash

Can the airline survive dual aviation disasters in a little more than four months?
We apologize, this video has expired.
/ Source:

On the home page of Malaysia Airlines website, there are two links about two separate air disasters: the first one is "Latest Updates on Flight MH 17; the second, just below it on the page, reads "Updates on MH 370."

The national airline of Malaysia is grappling with something no other airline has had to deal with since the 9/11 attacks: two astonishing aviation tragedies back-to-back. And the dual disasters are raising questions about whether the carrier, already in deep financial trouble, can survive the hit to its brand from an exodus of passengers.

Sign up for top Business news direct to your inbox.

"Even before the incident we were very skeptical that Malaysia Airlines could survive beyond a year because in the current situation they are incurring losses in excess of about 5 million ringgit ($1.56 million) per day. In order for them to get out of the dire situation they would need to get some sort of miracle," Mohshin Aziz, an aviation analyst at Maybank told CNBC on Friday.

"But unfortunately, another disaster struck so things are looking even grimmer than before," he said.

"But unfortunately, another disaster struck so things are looking even grimmer than before."

On Thursday, MH17 with 298 people on board was brought down by a surface-to-air missile in eastern Ukraine while en route from Amsterdam to Kuala Lumpur. None survived.

We apologize, this video has expired.

The tragedy happened just about four months after the mysterious disappearance of another Malaysia Airlines jet traveling from Kuala Lumpur to Beijing. The wreckage of flight MH370, believed to have been diverted from its original route to Beijing and crashed into the southern Indian Ocean in March, has yet to be found.

There was already widespread criticism about the way Malaysia Airlines handled that air disaster and its aftermath. In the current disaster the airline is facing questions about why it was taking a route above a known war zone and not avoiding it, even though it's a commonly flown route in a section of airspace that aviation authorities had deemed safe.

The Malaysia Airline crashes alone have boosted the death toll in aviation disasters above the annual global average, according to the International Air Transport Association.

Passenger perception

The carrier is set to suffer a decline in passenger traffic and will likely be forced to pour cash into a public relations campaign to salvage its image, analysts said.

Scattered among recent tweets expressing sympathy for the victims are some that spell out the image debacle the carrier has to deal with.

Malaysia Airlines declined to comment for this story.

In a bid to lure passengers, the airline began price cuts on its websites on Friday, slashing fares on its Singapore-Frankfurt route by around 500 Singapore dollars ($400) overnight.

The latest tragedy is set to add to the financial woes of the carrier, which is already in bad shape having reported a loss of $138 million in the January to March period — its worst quarter in over two years.

Aziz said bankruptcy is a realistic end game if the carrier continues operations in their current form. "If they were to continue under current form it wouldn't have enough capital to continue running by mid-2015," he said.

To prevent this, the company needs to urgently restructure its business, Aziz said, suggesting the carrier should shift its focus to its domestic business while scaling back unprofitable international routes.

The airline is almost 70 percent owned by the Malaysian government through its investment arm Khazanah Nasional.

Shares of Malaysia Airlines plummeted almost 18 percent at one point on Friday before paring back some losses to trade down 6 percent at 0.08 Malaysian ringgit.