Malaysia Airlines, which had been struggling financially before the MH370 disappearance, now faces the even tougher task of dealing with the second loss of a plane in four months after MH17 was shot down over Ukraine.
A leading Australian travel agent said customers had been ringing in on Friday morning to cancel booking on Malaysia Airlines in the wake of the incident. Penny Spencer, the managing director of Spencer Travel, said Malaysia Airlines had offered reasonable fares to Europe, particularly in business and first class.
But she said there had been six or seven phone calls to cancel tickets on Friday morning. “I couldn’t believe it this morning," she said. "I think [Malaysia Airlines] are in for a difficult time."
The latest tragedy, which pushed down the Malaysian carrier’s share price 13 per cent in its home bourse of Kuala Lumpur, comes just as the airline had been hoping to return to a more normal state. Today's sell-off has taken the company's share plunge this year to 37 per cent.
P.K. Lee, the Sydney-based ANZ and South-West Pacific head of Malaysia Airlines, had scheduled an interview with Fairfax Media for Monday, July 21, to discuss how the airline was looking to rebound commercially from the MH370 disaster. The airline had also planned to take a contingent of Australian media to Malaysia next month, escorted by Mr Lee and MasterChef runner-up Poh Ling Yeow to discuss how Malaysia Airlines wanted to grow in the Australian market.
Malaysia Airlines and its local rival AirAsia X have been among the fastest growing airlines in Australia.
And there is anecdotal evidence that the MH370 disappearance, while disturbing for many Australians, hadn't stopped them from flying on the airline. This week, Business Insider reporter Simon Thomsen said his family was bumped from a flight from Kuala Lumpur to Sydney because he was told it was “overbooked and full”.
One Fairfax Media employee this week said he had just returned from London on a Malaysia Airlines flight and was also surprised at how crowded the aircraft was.
Malaysia Airlines, which has lost 4.57 billion ringgit ($1.5 billion) since the start of 2011, had offered unusually high commissions of 3 per cent to travel agents in the wake of the MH370 disappearance to help encourage customers to return, and the move appeared to be working.
The airline was also believed to be holding talks with Etihad Airways - a major shareholder in Virgin Australia - about deepening its existing codeshare relationship, although the purchase of an equity stake was not expected at this time.
Some analysts questioned now whether the Malaysian government, which owns the majority of Malaysia Airlines, would need to bail out the carrier. Major shareholder and sovereign wealth fund Khazanah Nasional said last month the carrier has funds to last about a year. The airline last reported an annual profit in 2010, and analysts project losses through 2016, according to data compiled by Bloomberg.
While Malaysia Airlines had seen signs of a rebound in the Australian market, the MH17 tragedy may now reverse that trend. And there are suggestions within the travel industry that the carrier has been faring badly of late in the crucial Chinese market. Most of the passengers on MH370 were Chinese nationals.
The Malaysian authorities faced accusations of incompetence following the MH370 disappearance and Chinese tourists had been avoiding Malaysia as a result.
Singapore Airlines, and other carriers with flights to Malaysia, were also hit by the drop in Chinese tourism to the area.
MH17 was shot down travelling from Amsterdam to Kuala Lumpur with 283 passengers and 15 crew on board.
Like MH370, the plane lost was a Boeing 777. Its value is about $US97.3 million ($104 million), according to London-based insurance broker Aon, which tracks the market for aviation coverage. German insurance giant Allianz is the lead hull and liability reinsurer, while Atrium Underwriting Group is the leader for war coverage, which could pay claims if the damage is tied to terrorism, Aon said.
An Allianz spokeswoman, Jacqueline M. Maher, said in a statement the company "stands by to support our client as fully and quickly as possible. It is much too early to comment on reports of this tragic incident while details are still being confirmed, except to extend our deepest sympathy to all those affected by this crash.”
Before the MH370 incident, the only deaths on a 777 had occurred during the crash of an Asiana Airlines plane upon landing in San Francisco last year.
In a statement after the MH17 incident, Boeing said: “Our thoughts and prayers are with those on board the Malaysia Airlines airplane lost over Ukrainian airspace, as well as their families and loved ones. Boeing stands ready to provide whatever assistance is requested by authorities.”