Tough for MAS to rebuild image

(Bernama) – Malaysia Airlines (MAS) will have a tough road ahead to rebuild its image as consumer sentiments on its safety record will be deeply affected with two major incidents within six months.

Hong Leong Investment Bank (HLIB) said the incidents would further hamper the airline’s hope to turn around by 2015.

In the midst of recovering from the MH370 incident, MAS has again been hit by another disastrous accident involving MH17 bound for Kuala Lumpur from Amsterdam.

The Boeing 777 crashed at the Russia-Ukraine border, killing all its passengers.

Similar to MH370, HLIB expected compensation for the 298 victims in MH17 to be covered by insurance.

“The aircraft should also be covered by insurance. Hence, minimal direct impact to MAS cash flows,” the investment bank said in a note today.

There will be further sell-down pressure on MAS counter amid the incident in the immediate term, it added.

HLIB said related counter – Malaysia Airports Holdings Bhd will also be affected, while AirAsia Bhd may be well-received.

The investment bank placed heavy concern on the sustainability of MAS cash flows.

“With the expected worsening load factor and lower yields for the remaining 2014, we believe MAS may need to raise fresh capital to keep it afloat by 2015,” said HLIB.

As at end of the first quarter of 2014, MAS had RM3.2 billion cash in hand with operating cash flow loss of RM350 million in the quarter alone.