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MAS reels from body blow

Second air disaster for Malaysian carrier in just five months; govt demands airline produce turnaround plan by next week

Singapore

THE world grappled yesterday with a second air tragedy involving Malaysia Airlines (MAS) in just five months - something deemed "statistically impossible" by some - after its Flight MH17 was shot down in troubled Ukrainian airspace on Thursday. This was an event described as one of the highest-casualty airliner shootdowns in aviation history.

"This is a tragic day, in what has already been a tragic year for Malaysia," said Malaysian Prime Minister Najib Razak.

President Tony Tan Keng Yam yesterday sent his condolences to the kings of Malaysia and the Netherlands, and Australia's governor-general while Prime Minister Lee Hsien Loong expressed his condolences to Mr Najib.

The shocking crash, suspected to be caused by a sophisticated ground-to-air missile that left no survivors, has Malaysian officials now pushing the airline to come up with a turnaround plan within a week. Industry sources said that the airline, backed by its key adviser CIMB Group, has been summoned to work out a "reset plan" - not within the initial timeline of 6-12 months set by majority shareholder Khazanah Nasional, but by next week.

"It has a week to come out with a turnaround plan. Right now, after the MH17 crisis, several options are hurriedly being reviewed," said a source.

The MH17 disaster comes some 130 days after an MAS jet - also a Boeing 777-200 - that was carrying 239 passengers and crew went missing en route to Beijing from Kuala Lumpur. Its disappearance - despite a long, rigorous search in the Indian Ocean that is still ongoing - remains a mystery till today and had worsened MAS's already wobbly financials. For the ailing flag carrier, which only a day before had received uplifting news - it won a much-sought-after award from Skytrax for having one of the best cabin crews - and had tried to put up a valiant front amid a gloomy setting, two disasters in quick succession may be too much to bear.

"This latest incident will cripple the airline and prolong its agony unless the Malaysian government jumps to its aid," said Shukor Yusof of Endau Analytics.

Delisting the airline (which has been mired in red ink for three straight years) remains an option although BT understands that there are concerns among the powers-that-be that, at current levels, investors who have not yet bolted from the counter are unlikely to make a gainful exit. The devastating disappearance of MH370 is beyond that of a struggling carrier and MAS shares have lost 17 per cent since early March. In May, it was underwater by 35 per cent; yesterday, it got slammed further, losing 11 per cent to 20 sen.

The other option, said the source, is to inject funds of up to RM5 billion (S$1.95 billion) to help keep the carrier afloat on the back of a worryingly high cash burn rate of some RM5 million a day, which is fast depleting its cash reserves.

A completely new board and top management line-up cannot be ruled out. "More than funds, MAS needs a group of people with gravitas and deep understanding of the intricacies of airline business to start the recovery path," said Mr Shukor.

MAS was already reeling from MH370, which has dented sales, mostly among Chinese nationals who have shunned the airline due to its perceived mishandling of the disaster. Amid brutal competition - much of it led by low-cost carriers, which air travellers in the region have freely embraced - MAS was facing an uphill task to keep passenger loads and yields up.

"Not many fly MH for this Europe-bound route as their pricing is not very attractive," said Dynasty Travel Singapore's marketing communications director Alicia Seah. She, however, observed that following the MH370 incident, when MAS cut the fares on certain routes making it attractive to travel business class, there were many enthusiastic takers.

UOB KayHian expects a significant "demand destruction" following the disaster as Europe accounts for a substantial 10 per cent of MAS's capacity.

The latest tragedy may have been beyond MAS's control but many questioned its decision to fly over strife-torn Ukraine - a route deemed safe by the International Civil Aviation Organization (ICAO) and one of the most congested global flight paths, but circumvented by airlines such as South Korea's Korean Air and Asiana and Australia's Qantas as early as March when Russian troops moved into Crimea.

In a statement issued late yesterday, MAS said that at all times, MH17 was in airspace approved by ICAO. It added, however, that after the incident, it was avoiding Ukrainian airspace entirely, flying further south over Turkey. Mr Shukor said: "One can exonerate MAS from any blame in this latest incident but the bottom line is this: something peculiar is happening to the airline, and that could mean some will be reluctant to fly MAS."

When quizzed at a press briefing on why MAS had not chosen a safer flight path, Malaysia's newly minted Transport Minister Liow Tiong Lai reasserted that the flight path was approved by ICAO and that some 15 out of 16 airlines in the Association of Asia Pacific Airlines flew that route over Ukraine. "European airlines also use the same route and traverse the same airspace. In the hours before the incident, a number of other passenger aircraft from different carriers used the same route," he said.

The unfolding tragedy involving the loss of 298 lives of 10 nationalities - the majority of them from the Netherlands and some 100 bound for Melbourne for an Aids conference - stumped the world and set off an outpouring of grief, solidarity and condolences from world leaders and netizens.

"We stand in sorrow and solidarity with Malaysia," tweeted PM Lee earlier, after making a call to Mr Najib.

As many mourned the downing of the airplane reportedly by Ukrainian separatists, the catastrophe also showed up the menacing side of geopolitical hostility with public officials from Russia and Ukraine playing the blame game even as search efforts were going on at the crash site.

The Ukraine government accused pro-Moscow militants of firing the missile that brought down the passenger liner while Russia pinned the blame on Kiev.

There is also a tug of war over the aircraft's black box - a recording device key to the crash investigation - with reports stating that it was on its way to Moscow, sparking concern that Russia could get in the way of impartial investigations.