Categories: Business

Malaysia Airlines net loss widens after MH370 disappearance

Malaysia Airlines’ losses widen after flight MH 370 vanished over two months ago, raising questions about the future of the 76-year-old carrier.

The company’s net loss rose by 59% to 443 million ringgit ($138 million) in the January-to-March period, marking its fifth straight quarter of losses.

Malaysia Airlines attributed it to “tough operating conditions” and “negative sentiment”.

Investors shrugged off the news with shares rising 2.4%.

Only 30% of the company is able to be bought freely on the stock exchange in Kuala Lumpur, with the rest held by state investment firm Khazanah Nasional.

Malaysia Airlines’ losses widen after flight MH 370 vanished over two months ago

Of the 30% that trades on Malaysia’s stock exchange, most of that is owned by the country’s pension funds and other institutions, leaving a small proportion for retail investors to trade.

Overall though, Malaysia Airlines has lost more than 40% of its market value this year.

Flight MH370 went missing on March 8 while flying from Kuala Lumpur to Beijing, leading to a massive search and rescue operation that is still ongoing and may cost millions of dollars.

The Malaysian government believes the plane ended its journey in the Indian Ocean, but no trace of the plane or wreckage has been found so far.

The crisis led to a high number of cancellations and reputational damage to the carrier, including a 60% drop in sales from China.

About two-thirds of the 239 people on board MH370 were from China, prompting boycotts by some travel agents on the Mainland.

Malaysia Airlines chief executive Ahmad Jauhari Yahya said the disappearance of MH370 added to its poor results, which were “not unexpected”.

“The results were made worse with the impact on air travel in general following the disappearance of MH370. The whole market has reacted by slowing down demand,” he said in a statement.

The company “needs to accelerate efforts to improve its revenue stream and better manage our high costs which have increased” he added.

“This need has become even more urgent for Malaysia Airlines’ future survival and sustainability in a market that is not showing any signs of letting up on competition.”

Malaysia Airlines has been struggling in the face of high fuel prices, foreign exchange fluctuations and increased competition from budget carriers in the region.

“Further efforts need to be made to manage fuel costs which increased 14% despite a decrease in jet fuel price,” the company said.

Malaysia Airlines has racked up losses of more than $1.3 billion over the last three years and analysts expect that to rise further.

Malaysian Defense Minister Hishammuddin Hussein said at a news conference on Thursday that the government has no plans to financially bail out Malaysia Airlines.

Malaysia Airlines said much of the costs associated with the disappearance of MH370 will be covered by insurance.

However, the mounting red ink has increased speculation it may be forced to file for bankruptcy or possibly be broken up even though it is majority-owned by Malaysia’s state investment firm

Despite the grim outlook, Malaysia’s airline chief plans to continue with the company’s turnaround effort.

“We still have much work ahead of us to deal with the reality of the business and competition as a dynamic and nimble operation,” he said.

“MH370 has brought out the best of our Malaysia Airlines team to stand united to face the crisis. We will be leveraging on this team spirit to fight for our future.”

Clyde K. Valle

Clyde is a business graduate interested in writing about latest news in politics and business. He enjoys writing and is about to publish his first book. He’s a pet lover and likes to spend time with family. When the time allows he likes to go fishing waiting for the muse to come.

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