Skip to comments.Debts mount, Shares Plunge for Malaysia Airlines
Posted on 07/20/2014 3:20:43 PM PDT by nickcarraway
Malaysia Airlines shares down 11% Friday following Thursdays crash of MH17 Double aviation disasters this year for Malaysia Airlines come amid existing financial difficulties Airline was already more than USD $1 billion in the red before crashes
KUALA LUMPUR, Malaysia - The embattled Malaysia Airlines may require a government rescue amid mounting debts, a severely deflated stock price and two major air disasters that will undermine confidence in the airline for years to come.
Thursday's crash of Malaysia Airlines Flight MH 17 came just four months after Flight MH370 went missing en-route from Kuala Lumpur to China. While details are conflicted, what does seem certain is that the airliner was brought down by a surface-to-air missile.
Although that is unlikely to factor into investor and consumer confidence in the airline, with shares in the airline on Friday falling as much as 17% before closing 11% down.
Even before the disappearance of MH 370 on March 8th and the crash of MH 17, Malaysia Airlines was in deep financial trouble. Competition from region carriers such as the budget airline AirAsia had eaten into revenue, sending the airline into three consecutive loss-making years.
The struggling airline tried to boost revenue by selling more tickets, rather than raising prices, while keeping costs under control. It also canceled some Longer flight routes, but the strategy did little to pull them out of a fall that has already seen Malaysia Airlines incur USD $1.3-billion in losses.
This is aside from the costly lawsuits the airline is facing from the MH370 and MH17 disasters and the millions of dollars in payments it will likely need to make to passengers' families. The airline may also at some point be required to contribute in repayment of the several hundred million dollars spent on the search for the missing plane by 26 different countries.
In the past, the Malaysian government has bailed the airline out, which has an inconsistent record of being able to operate on a profit. Previous help provided by the government has only been a temporary stop-gap measure, however, and this time round more significant support may be required.
Ten years ago, the government created a new state-owned company to absorb various assets and financial liabilities from Malaysia Airlines, which helped clean up the company's debt and free up cashflow.
"That paved the way for a couple of years of profitability, before fresh rounds of mismanagement, and the impact of a unionised work force played out," says Timothy Ross, head research analyst for Asia Pacific transport at Credit Suisse, earlier this year.
The Malaysian government hasn't indicated yet if it will help the airline financially, but it is unlikely to allow its national flag carrier to declare bankruptcy amid two high-profile air disasters.
What else is new?
Will insurance help with the financial liability at all?
Sorry if it’s a stupid or insensitive question. Just thinking that airlines, like any business, have insurance on their business assets. But not sure if the missing plane is officially considered destroyed and an insurable loss. Also, it occurs to me that an act of war or terror, in the missile shoot down, may somehow be excluded from insurance coverage.
Has there ever been another case where an Airline lost 2 planeloads of passengers within months?
If I had a ticket for a flight with them I would cancel it for sure. Even if it meant going overland or over sea to another location and flying from there.
I feel bad for this company, they must really be asking: why us, Lord?
I think acts of war and/or terrorism are often excluded from insurance coverage.
I used to work for a major company in their importing division, mostly involving ocean going cargo shipments.
Some of the language on the bills of lading was very archaic. I remember one paragraph saying the carrier would not be held responsible for the actions of “Pirates, Robbers, Princes or Kings”.
I told that to a friend of mine and he said: that agrees with my opinion of princes and kings!
Would you fly Malaysian Airways anytime in the future?
It’s not that big an airline is it?
Sure, if they’re giving double miles!
I would be afraid to fly Malaysian Airlines. It makes you wonder, was it a coincidence that 2 of their planes were lost. Is there some connection we are all missing. Perhaps the airline is a target. I have no evidence. But yes, I would hesitate about flying with them.
I have no idea. I strive to be a non-flyer, although I have been on areoplanes occasionlly.
fleet size: 94 (or was)
destinations: 60 (not including shares and subsidiaries)
Excellent buying opportunity along here somewhere. They’ll either: a) survive and recover, maybe via bailout, or b) be bought up by somebody else.
I guess that’s pretty small, right? Oh, I just feel so bad for them. 2 totally weird things happened to them. And of course all the poor people who were killed. It’s just awful. still nobody knows what happened to that first plane.
Not too small but probably heavily leveraged!
Those two planes probably cost $500 million or more (together, not each) and who knows what kind of payouts they had to the families of those who perished.
It has two less planes now.....
“If I had a ticket for a flight with them I would cancel it for sure.”
One plane disappeared, another plane shot down, what’s left? Do they have any routes that go through the Bermuda Triangle?
I know some folks in management at Malaysia Airlines. I would fly them. These incidents are beyond their control and are the result of astonishingly bad luck.
Let’s not forget that Korean had five incidents in five years and are still in business. I flew them during that time too..