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Can Malaysia Airlines rise again like a phoenix?

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Time will tell whether the company can remain steady on its path to recovery.

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PETALING JAYA:
Lightning does sometimes strike the same place twice.

Exactly three years ago, Malaysia Airlines Flight 370 disappeared from radar, triggering the most extensive search operation in aviation history. Its whereabouts are still unknown.

Four months later, Flight MH17 was shot down over eastern Ukraine. Investigators concluded that the airliner had been downed by a BUK surface-to-air missile launched from pro-Russian separatist-controlled territory.

Much was lost in the two tragedies: two planes, 537 lives and a great deal of confidence in MAS.

In a report in The Guardian, aviation brand consultant Jonny Clark said, “When a plane crashes, it’s not the Boeing 777 that crashed. For the general public, it’s the company that was flying the plane that crashed – in this case, Malaysia Airlines.”

Certainly in the months following the two tragedies, questions were raised over the airline’s survival. Industry experts said the company, already struggling at the time, would be hard put to weather the disasters.

For years, MAS grappled with high costs and falling sales, with analysts suggesting that the airline rebrand or request government assistance to return to profitability. In 2012, it reported a stunning net loss of RM2.5 billion for 2011. Chairman Md Nor Md Yusof said then that the company was “in crisis”.

Before it lost MH370 and MH17, though, MAS had recorded only two fatal accidents. Its solid reputation won it a series of high profile Skytrax awards between 2001 and 2013, and World Travel Awards dubbed it Asia’s best airline in 2013.

According to statistics provided on its website at the time, the airline flew 37,000 passengers a day to 80 destinations worldwide. It employed about 20,000 people.

Following the loss of MH370 and MH17, though, the airline’s reputation and sales took a severe beating, particularly in China, which had lost 153 citizens on board MH370.

Recovery plan

In August 2014, state investment fund Khazanah Nasional, which owned 69% of the company, said it would purchase the remaining shares from minority holders and de-list MAS from the stock exchange.

It released a report outlining an RM6 billion restructuring plan, which involved the elimination of 6,000 jobs, or about 30% of the airline’s workforce. It said the airline would also scrap unprofitable long-haul routes to focus on regional destinations.

Khazanah planned to return Malaysia Airlines to profitability by late 2017 and re-list the company by 2018 or 2019.

MAS began anew as Malaysia Airlines Berhad on Sept 1, 2015. Under the five-year recovery plan, German national Christoph Mueller was appointed chief executive officer.

Mueller, 52, had a history of turning struggling airlines around. Before taking the helm at Malaysia Airlines, he had successfully restructured Ireland’s Aer Lingus and led a revamp at Lufthansa.

At Malaysia Airline, he faced a challenging task. In 2015, he said the airline was “technically bankrupt”. On April 20, 2016, less than a year into his three-year contract, he resigned, citing “changing personal circumstances”.

Chief operating officer Peter Bellew took over as CEO on July 1. At the time, the airline’s load factor was reportedly running at 68%, just under break-even point.

Speaking shortly after taking over from Mueller, Bellew said he was confident of steering the airline back onto the stock market by 2019. He said prioritising factors like ticket prices, more aggressive promotion and cost-cutting exercises would help achieve this.

Observers say Bellew has been doing a good job of continuing Mueller’s work, even exceeding the German in several aspects.

Soon after he took over, The Star ran a report favourably comparing Bellew to AirAsia chief Tony Fernandes, who it noted had a large following and knew how to communicate with the market. Unlike Mueller, who preferred to stay out of the limelight, Bellew was open in his approach and encouraged better information flow, it said.

Under Bellew’s leadership, the paper said, the airline was making positive developments as seen in the purchase of 50 jets from Boeing and the clear message that there would be no more job cuts.

The report added that the Irishman was also advertising fares and services in a more coordinated manner and focusing on prices to which the market would likely respond.

Last November, news of Project Hope, Malaysia Airlines’ endeavour to serve umrah and haj pilgrims using its six existing Airbus A380 aircraft, added to the airline’s positive outlook.

Bellew said the project, which would see the establishment of a new airline and create 700 jobs, had attracted inquiries from interested investors both overseas and in Malaysia.

There are doubtful naysayers against these hopeful projections, but time will tell whether Malaysia Airlines remains steady on its path to recovery.

Other airlines such as Pan American and Trans World Airlines failed following fatal air crashes, but there is precedent for hope in Korean Air Lines, which survived periods of low confidence after several fatal accidents including the 1983 crash of Flight 007. The flight was shot down by the Soviet Union’s air force, killing all 269 people on board, including a sitting US congressman.

Bellew has vowed that Malaysia Airlines will be profitable by 2018, committing to the first quarter of 2019 for the airline’s initial public offering.

According to a New Straits Times interview on Jan 17, 2017, the Irishman said the airline was now at 80% factor load. Its market share on the London-Kuala Lumpur route was at 60% from 45% the year before, he added.

Bellew’s three-year contract expires in July 2019. Between now and then, Malaysia can only watch and wait to see if Malaysia Airlines can rise like a phoenix from the ashes of ruin.

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