Malaysia Airlines losses worsen on MH370 disappearance
- 16 May 2014
- From the section Business
Malaysia Airlines has seen its losses deepen after Flight 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 443m ringgit ($138m; £82m) in the January-to-March period, marking its fifth straight quarter of losses.
The firm attributed it to "tough operating conditions" and "negative sentiment".
Shares of Malaysia Airlines closed nearly 10% lower on Friday.
Overall though, the firm has lost more than 40% of its market value this year.
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.
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.
Flight 370 went missing on 8 March 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 Flight 370 were from China, prompting boycotts by some travel agents on the Mainland.
Malaysia Airlines chief executive Ahmad Jauhari Yahya said the disappearance of Flight 370 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 $1.3bn 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 Flight 370 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
Michael Beer, a transport analyst at Citibank remains neutral on the stock, but says a lot depends on the company's strategy.
"The significant negative sentiment and increasingly competitive operating environment will likely further impair management's ability to "right the ship" anytime soon," he said.
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."