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#1
Can Malaysia Airlines survive a second disaster in four months?
AP JULY 18, 2014 4:31PM

The Malaysia Airlines logo is clearly visible on the tail of the downed Boeing 777 in Ukr
The Malaysia Airlines logo is clearly visible on the tail of the downed Boeing 777 in Ukraine. Source: Supplied
HIT by two astonishing tragedies in quick succession, the Malaysia Airlines brand may become the airline industry’s equivalent of asbestos: toxic to the public and, experts say, impossible to redeem.

Malaysia Airlines Flight 17 was downed over eastern Ukraine with 298 people aboard by what American intelligence authorities believe was a surface-to-air missile.

Just four months earlier, a Malaysia Airlines jetliner carrying 239 people disappeared about an hour after taking off from Kuala Lumpur. The jet has still not been found, a source of profound unease for travellers and the aviation industry.

“I can’t comprehend of anything they can do to save themselves,’’ said Mohshin Aziz, an aviation analyst at Maybank in Kuala Lumpur, Malaysia.

“Perception-wise it really hits home,’’ Mr Aziz said. “It’s very challenging. It’s very difficult to fight against negative perception.’’

Even before the Flight 370 mystery, state-owned Malaysia Airlines was in serious financial trouble. In an industry notorious for impoverishing shareholders and irking customers, Malaysia Airlines had long stood out for its years of restructurings and losses.

That disaster along with the often bumbling response of Malaysia Airlines and the Malaysian government deeply scarred the carrier. Now, the once proud national airline is facing the unthinkable again.

Already losing about $1.6 million a day, there will be “no miracles’’ for Malaysia Airlines, said Mr Aziz. Before the Ukrainian disaster, his opinion was the airline didn’t have the capacity to survive beyond a year.

The airline’s share price plummeted 11 per cent today.

Unlike Flight 370, the responsibility for which is pinned with Malaysia Airlines, the second disaster appears largely beyond the airline’s control. It may, however, face questions about why it continued with flight paths over eastern Ukraine, which is the heart of a violent rebellion against Kiev, when some airlines were circumventing the country.

For air travellers in Asia, who have a multitude of options thanks to the budget airline boom, the latest incident will make the Malaysian carrier even less attractive. Its brand in the rest of the world, where it became known largely because of the Flight 370 mystery, will become more closely associated with the worst fears of flyers.

Danny Gokul, an Australian university student on a layover at Incheon International Airport in South Korea, said he had flown with Malaysian Airlines before and its service was ``fantastic.’’

But he is now “very hesitant’’ about using the airline. ``Flying is scary enough.’’

His friend, Dayne Rodgers, waiting for a flight to Brisbane, said even very cheap fares might not convince him to fly with Malaysia Airlines.

“I don’t know if my Mum would let me,’’ he said.

However, as news broke of the latest disaster, some travellers were quick to show their support of the airline on its official Facebook page.

One poster said he wouldn’t be abandoning the airline.

“Sad to hear of another fatal blow to a great Airline ... despite these 2 horrific events of late blame should not be turned back upon your organisation ... Stand tall and hold your head high ... I will be back soon to use your great service.’’

Another added: ``Travelling with you guys next week from Auckland NZ to KL, to all crew stay strong our thoughts are again with you. see you on Thursday.’’

Within Malaysia, the shock is palpably raw.

“I was stunned,’’ said 48-year-old shopkeeper Reezal Mohamed. “At first I could not understand. It’s unbelievable.’’

Malaysia Airlines has been in the red for the last three years. Last year, its losses ballooned to $363 million, nearly three times larger than its 2012 loss.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.

For some travellers, the airline’s poor financial health is more concerning for the future than the two disasters.

“Last time I saw them, the plane was almost empty and so I suspect, probably losing a lot of money,’’ said tourist Ricky Leong as he checked in for a Malaysia Airlines flight from Hong Kong to Kuala Lumpur. “They’re not going to maintain their fleet and there’s going to be issues in the future.’’

After the disappearance of Flight 370, the biggest backlash emanated from China because its nationals were the majority of passengers on the flight. Hopes for a recovery in that crucial market might now be set back.

Tongcheng Network Technology, which operates the Chinese ticket booking website ly.com, suspended all flight ticketing and hotel bookings involving Malaysia Airlines after Flight 370 vanished.

“Now there’s this plane crash, we would be very unlikely to consider resuming it in the future,’’ said the manager of its public relations department, who only gave her surname, Zhang.

Seth Kaplan, managing partner of industry newsletter Airline Weekly, said Malaysia Airlines was in “worse shape’’ financially that almost any other airline before Flight 370 vanished.

“It’s just hard to imagine that they could have even survived the first incident,’’ he said.

AP
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#2
Planes would recognise as loss and no compensation from insurer.

Having justified that flight path was ok, prevents MAS from payout.

IMO, it would still be around. Just loss of plane now.
Confidence? Probable an resounding YES.

====
http://www.iata.org/pressroom/facts_figu...rance.aspx

Fact Sheet: War Risk Insurance
Background:

Governments have been concerned about how they will compensate victims of a major terrorist attack involving an airline in the absence of insurance
Traditional War Risk Insurance provided coverage
For war, hijacking and related perils
A subset covers weapons of mass destruction (WMD)
The insurance market has
Removed WMD protection from hull coverage
But postponed use of a war risk exclusion clause on the liability side
The lack of such hull coverage has not affected financing/leasing agreements or airlines’ ability to operate
But removal of liability coverage
Would place airlines out of compliance with minimum insurance levels
Could force countries to ground aircraft
Or in the event of a terrorist attack, governments will not be able to compensate victims on the ground

Impact on Air Transport:

After 9/11 there was a complete withdrawal of coverage for terrorism insurance
Since then the market has partially reinstated coverage at a significantly higher cost
Some countries, like the United States, assist airlines in insuring war risks

Partial Solution:

Efforts by the International Civil Aviation Organization (ICAO) culminated in revisions to the Rome Convention
Revisions provide compensation to victims of an aircraft accident caused by terrorist attacks resulting in damage to people and property on the ground
Compensation under the new convention would be funded through contributions from airline passengers and cargo shippers
Airlines would be subject to strict liability for losses up to a cap of:
Specified amounts of insurance (which airlines are required to purchase in order to operate); and
Funds in a Special Compensation Mechanism (SCM) collected from a charge of 1 Special Drawing Rights per passenger per international flight, or 1 SDR per tonne of cargo per international flight
Airlines would be liable for amounts in excess of those amounts (the cap), but only if senior management deliberately caused the loss, or engaged in reckless conduct with knowledge of loss
Airlines have safe harbor—a presumption that they are not at fault if they are certified under regulatory requirements for security (the IATA Operational Safety Audit is an example)—but safe harbor is subject to state discretion

Status:

ICAO Diplomatic Conference adopted the proposal in 2009
The impact of the final version affects airlines differently, depending on their jurisdiction
The number of counties signing the convention stands at 11 and 2 parties (Ecuador and Montenegro
Ratification is seen as unlikely because the terms of the convention require 35 countries with sufficient traffic volume to build up a fund

Updated: December 2013
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#3
One thing i do not understand is why MAS decided to fly over a conflict zone when earlier there have been reportings of Ukraine Military planes got shot down. Isn't safety of passengers utmost important ? I think potentially they will be open to be sued and distrusted by passengers even if they are flying over "legally". Management should step down imo.

Just my Diary
corylogics.blogspot.com/


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#4
(19-07-2014, 11:46 AM)corydorus Wrote: One thing i do not understand is why MAS decided to fly over a conflict zone when earlier there have been reportings of Ukraine Military planes got shot down. Isn't safety of passengers utmost important ? I think potentially they will be open to be sued and distrusted by passengers even if they are flying over "legally". Management should step down imo.

Sia was also flying thru the war zone. . . .
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#5
(19-07-2014, 12:01 PM)xiang38 Wrote:
(19-07-2014, 11:46 AM)corydorus Wrote: One thing i do not understand is why MAS decided to fly over a conflict zone when earlier there have been reportings of Ukraine Military planes got shot down. Isn't safety of passengers utmost important ? I think potentially they will be open to be sued and distrusted by passengers even if they are flying over "legally". Management should step down imo.

Sia was also flying thru the war zone. . . .

I do not think this is a valid excuse.

Furthermore is one thing to fly over Ukraine but is another to fly directly over the the conflict area.

Just my Diary
corylogics.blogspot.com/


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#6
(19-07-2014, 01:03 PM)corydorus Wrote:
(19-07-2014, 12:01 PM)xiang38 Wrote:
(19-07-2014, 11:46 AM)corydorus Wrote: One thing i do not understand is why MAS decided to fly over a conflict zone when earlier there have been reportings of Ukraine Military planes got shot down. Isn't safety of passengers utmost important ? I think potentially they will be open to be sued and distrusted by passengers even if they are flying over "legally". Management should step down imo.

Sia was also flying thru the war zone. . . .

I do not think this is a valid excuse.

Furthermore is one thing to fly over Ukraine but is another to fly directly over the the conflict area.

I agree that SIA mgt should step down. For a premium carrier charging premium prices that they would save fuel flying over conflict areas. It's understanable if you are a budget carrier or carriers charging cheap tickets.
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#7
Tough industry to be in at the moment. According to reports I read about 100 flights / day still flew through Ukraine airspace, so saving fuel is common practice. Any of those 100+ flights could have been the target. Unfortunately MAS took the hit. At that altitude I don't think whoever fired the missiles knew which airline they were taking out.

MAS management stepping down would be a good gesture of apology. As for SIA management, they should at least apologize as they probably got lucky. They were probably taking similar flight path to MH17.

The recent run of events may actually end up providing a favourable share price for buying MAS. Is the stock trading at less than half the NAV yet?
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#8
Hi Bluekelah,

Was thinking of similar idea. unfortunately, MAS NAV is RM0.21 and pending further losses for this FY, it is likely to be less than the last traded price of RM0.20. In fact, SIA trades at a better ratio than MAS as of now*
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#9
(19-07-2014, 03:07 PM)Jacmar Wrote:
(19-07-2014, 01:03 PM)corydorus Wrote:
(19-07-2014, 12:01 PM)xiang38 Wrote:
(19-07-2014, 11:46 AM)corydorus Wrote: One thing i do not understand is why MAS decided to fly over a conflict zone when earlier there have been reportings of Ukraine Military planes got shot down. Isn't safety of passengers utmost important ? I think potentially they will be open to be sued and distrusted by passengers even if they are flying over "legally". Management should step down imo.

Sia was also flying thru the war zone. . . .

I do not think this is a valid excuse.

Furthermore is one thing to fly over Ukraine but is another to fly directly over the the conflict area.

I agree that SIA mgt should step down. For a premium carrier charging premium prices that they would save fuel flying over conflict areas. It's understanable if you are a budget carrier or carriers charging cheap tickets.

According to a report, the MH17 original flight path is to avoid the conflict region but due to thunderstorm on that flight path, the pilot may have requested for a diversion from the Ukrainian Air Traffic Controller to fly through the conflict airspace at altitude of 33,000 ft.

Reference: http://www.businessinsider.sg/a-fateful-...8o-R_mvV74
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#10
Any VBuddies have experience taking air flights that are code shared?

At the time of booking, does the customer know which airline will be the actual one making the flight?
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