Wounded by MH370, cutthroat competition may be final straw for MAS
(Malay Mail Online) – Increasingly vicious competition at a time when already-ailing Malaysia Airline (MAS) is struggling to cope with the fallout from Flight MH370 may prevent the flag carrier from making the recovery it needs to avoid a potential bankruptcy, the Wall Street Journal reported
Pointing to developments in the US air travel industry that saw the traditional full-service airlines decimated by the entrance of no-frill budget carriers, an air industry executive told the US newspaper that MAS was set to head the same way.
“What we saw in the US is a precursor to what we are going to see over here,” Vinay Dube, Delta Air Lines senior vice president for Asia-Pacific, told the WSJ.
In its report on MAS’s financial troubles today, the WSJ contrasted how the national carrier continued to be saddled with legacy issues — such as “a sprawling route network built up in earlier expansions” — with AirAsia that has emerged as the region’s most successful airline and which has now found a new home in klia2.
AirAsia operates in the low-cost sector and technically is an indirect competitor to MAS, although the reality is that all commercial carriers are increasingly vying for the same travellers.
Aside from AirAsia, Malindo also recently entered the local market while the region also contains rivals such as Scoot and Jetstar, among others.
And while AirAsia was ringing in the new, a snapshot of MAS’s financials revealed yesterday that its old problems have continued unabated and made worse by the disappearance of its Flight MH370 on March 8.
In a filing with the Bursa Malaysia to announce that it lost RM443 million in the first quarter of the year, MAS said the plane’s disappearance “had a dramatic impact on the traditionally weak first quarter performance”. It lost RM279 million in the same period last year.
The disappearance of MH370 that carried 153 Chinese nationals among the 239 people on board hit the carrier’s market in China most, causing it to lose 60 per cent of its sales there.
Yesterday’s announced loss also follows the swathe of red ink that has already been splashed on its books.
This February, MAS announced a worse-than-expected fourth quarter result for 2013 that saw it rack up another RM343 million in losses, putting the airline RM1.17 billion in the red for the entirety of 2013.
In 2011, it chalked up a record loss of RM2.5 billion.
Analysts are increasingly raising the prospect of a bankruptcy or heavy restructuring of the group to stave off the looming disaster.
Last month, MAS chief executive Ahmad Jauhari Yahya said it could take the airline as long as six months to recover from the impact of MH370, but indications are surfacing to suggest it is running out of time.
Yesterday, acting Transport Minister Datuk Seri Hishammuddin Hussein warned the airline not to expect government aid following the announcement of its first quarter loss.
Prime Minister Datuk Seri Najib Razak previously told the WSJ that Putrajaya was considering all options for MAS.
“We have to look at it from all angles… bearing in mind that Malaysia Airlines is a government-linked company. It’s not a private company, so there are certain repercussions in what you want to do in terms of how it is received by the employees and the general public,” Najib told the newspaper.
But it is this consideration that led one political observer to say that Putrajaya was unlikely to allow MAS to simply crash and burn.
