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Malaysia Airline woes not to wash away with rebranding

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[By Zhai Haijun/China.org.cn]

As air-disaster investigators on the ground in Ukraine sift through the ashes of Malaysia Airlines MH17, so too are the vultures circling over what remains of Malaysia's national carrier, with Malaysia Airlines' twin disasters leading the airline to the brink of ruin.

The dire truth is that Malaysia Airlines (MAS) was under tremendous pressure even before the bewildering and often terrifying loss of MH370 in March 2014.

Now that the world's attention has been drawn to the lonely, war-torn fields of Ukraine, where MH17 in July 2014 fell in pieces to the ground, the future for Malaysia's flag carrier is fraught with doubt.

Defined by its national branding, its function as quasi-state- owned, and locked into its history as the nation's international flag-carrier, Malaysia Airlines has been something of an also-ran in the highly competitive airline industry where cruel margins, volatile oil markets and fickle customers make dire business conditions.

Struggling in a new world order

For several years now Malaysia Airlines has been struggling to effectively compete in the new paradigm.

The infusion of low cost carriers and the razor's edge of competition from regional newcomers Air Asia has been squeezing profit margins against a tide of gulf-state airlines.

The high-profile loss of another Boeing, mere months since the world's media gathered in solemnity and frustration on the edge of Western Australia in the forlorn hope of understanding the fate of MH370, is inevitably leading Malaysia Airlines to the brink of financial collapse.

While there is precedent for once-troubled carriers such as Korean Air and Garuda Indonesia to achieve commercial reinvention, no airline has been so utterly tarnished in image, function and trust as Malaysia Airlines.

The airline industry is transitioning with the grace and speed of a glacier. According to Ian Douglas, a senior lecturer in Aviation at the University of New South Wales, the cost of capital hasn't been recovered any time in the past 25 years, and in 2014 the industry-wide profit forecast by the International Air Transport Association equates to little more than 4 dollars for every demanding passenger.

"This pressure can only be amplified with the recent opening of the dedicated low cost terminal KLIA (Kuala Lumpur International Airport) 2, replacing a cargo shed on the far side of the airport with a purpose-built terminal connected by fast train to the city center. Air Asia's passengers no longer contend with second rate facilities at their home base airport," Douglas said from Sydney.

Commercial reality

The nuts and bolts of Malaysia Airlines' fiscal predicament are coming into play.

At the full-service end of the market, Malaysia Airlines faces steadily increasing competition from Emirates, Etihad, Qatar and Turkish Airways for its traditional role connecting passengers from Australasia and Southeast Asia to Europe.

Opportunities for MAS to exploit its recent oneworld alliance membership have also faded, as Qantas aligned itself with Emirates steering more Australian long-haul traffic away from Southeast Asia. Qantas further weakened the appeal of MAS to its frequent flyers by changing the status credits earned on MAS flights to Kuala Lumpur in a recent program overhaul.

Calls are now insistent that the flag carrier needs bold intervention from all corners. Brand specialists, industry leaders and the Malaysian government investment fund (Khazanah Nasional, which owns 69 percent of Malaysia Airlines) must hand over control for a deep, endemic restructuring, that, along with time, will heal the Malaysian carrier from the terminal wounds of these twin tragedies that in themselves have changed the nature of air travel around the world.

Support is notably thin on the ground and potential partners in the region scarce.

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