Malaysian Airline System Bhd is facing an influx of passenger cancellations after the carrier’s second disaster this year, adding to the strains of a company that’s bracing for a fourth consecutive annual loss.
Angela Dyczynski sits on a piece of wreckage of the downed Malaysia Airlines Flight MH17, during their visit to the crash site near the village of Hrabove (Grabovo), in Donetsk region July 26. According to local media, the Perth-based couple's daughter Fatima was aboard the Malaysia Airlines plane en route from Amsterdam to Kuala Lumpur when it was brought down in eastern Ukraine. Travel agents across Australia and Southeast Asia report a wave of reservation cancellations, running as high as 20% in some cases. (Reuters photo)
Travel agents from Melbourne to Singapore, New Delhi and Malaysian Air's home country said they've seen a spike in withdrawn reservations since MH17's downing this month - with cancellations climbing above 20% in some places.
The Samoan women's rugby team switched to Thai Airways International Pcl from Malaysian Air on July 27 for a flight to a world cup event in France. "It's just natural to be worried," Sera Mika, manager of the female Samoan rugby team, said by phone from Auckland. "We did have a lot of concerns."
The cancellations may add to the financial difficulties of an airline whose state-run parent, Khazanah Nasional Bhd, estimated it only had enough cash to operate for a year even before the latest crash. The two Malaysian Air disasters have left 537 people dead this year, which means 2014 will be the worst year in almost a decade for commercial airline fatalities.
Passengers "are very, very afraid about anything else happening again," said Ann Chitumbalam, manager at Escape Travel Sdn's branch in Petaling Jaya, who's seen about 30% of Malaysian Air bookings through her office cancelled. Ticket holders "don't want to take a risk," she said.
Ms Chitumbalam said she received a text-message from a businessman within hours of the crash, cancelling a trip to Amsterdam on Malaysian Air.
Four Months
The airline said July 19 it would refund fares to customers postponing travel or cancelling their tickets, including non-refundable ones. It also agreed to waive any fees for people changing travel plans to any destination Malaysian Air flies to during 2014, as long as they applied from July 18-24.
Subang-based Malaysian Air, responding by e-mail to questions about passenger traffic, declined to give numbers of cancellations or to comment on ticket prices.
While passenger traffic figures since the July 17 downing of Flight 17 aren't available, Webjet Ltd in Melbourne estimates it's cancelled about a quarter of its Malaysian Air bookings since the disaster, which killed all 298 people on board and occurred four months after the disappearance of Flight 370.
Yatra.com, a New Delhi-based, online travel agent, saw an increase in cancellations and a dip in Malaysian Air bookings after the latest incident, said Sharat Dhall, the company's president.
'Double Whammy'
In Singapore, Dynasty Travel estimates passengers will think twice before booking flights with the airline.
"Many will avoid Malaysian Air for the time being," said Alicia Seah, spokeswoman at Dynasty Travel, one of the three largest leisure travel agents in Singapore, without specifying any number for cancellations. "This is certainly a double whammy for the airline."
Malaysian Air, which racked 4.13 billion ringgit ($1.3 billion) in losses in the past three years, will probably lose more than 1 billion ringgit in 2014 as it grapples with costs and an exodus of passengers, according to the average analyst estimate compiled by Bloomberg.
The daily Malaysia Airlines flight on 12pm from Amsterdam to Kulala Lumpur is announced with the new flight number MH019 on a screen at Schiphol Amsterdam Airport near Amsterdam, the Netherlands on July 25. Malaysian Airlines changed the flight number, as a tribute to the victims of the plane crash in Ukraine with flight MH017. (EPA photo)
Loyal Customers
Thirteen of 15 analysts whose ratings are tracked by Bloomberg say investors should sell the airline's stock while two say hold. The carrier's shares have declined 29 percent this year, after dropping in each of the past six years.
In June, before the latest disaster, Malaysian Air carried 3.1% fewer passengers than a year ago, the second straight monthly drop. The previous month saw the highest proportion of empty seats since 2009.
Reversing that trend would involve restoring the loyalty of customers such as Vincent Sim, a 35-year-old self-employed Singapore resident.
"The airline is going through such bad time, but I will definitely fly with them in the future as their prices, service and aircraft are on par with that of Singapore Airlines and Emirates," Sim said.
Malaysian Air has sought to lure passengers by offering lower fares. Today is had six of the ten cheapest single-stop fares for early-December return flights between Sydney and London on price comparison site skyscanner.net, undercutting China Southern Airlines Co. and Cathay Pacific Airways Ltd.
"They are under severe cost pressure," Tan Kam Meng, an analyst at TA Securities Holdings Bhd. in Kuala Lumpur, said by phone. "I don't think cutting airfares would be an advantage."
While cheaper prices may deter defections, some people will be harder to convince.
"I will not travel MAS," Chen Shiying, a science tutor in Singapore, said in reference to Malaysian Air. He says he's been shunning the carrier for some time because it is "suay," or unlucky in the Hokkien dialect. "It might not be their fault, but still, I would want to avoid taking them."