Facing high costs and stiff competition from regional and global carriers, Malaysia Airlines has lost money for the past three years.CreditSamsul Said/Reuters
KUALA LUMPUR, Malaysia — Malaysia Airlines said on Thursday that the “dramatic impact” of the vanishing of Flight 370 pushed the unprofitable carrier to its worst quarterly earnings in more than two years, as overall passenger traffic fell sharply, particularly in China.
The company, which is also known by its formal name, Malaysian Airline System, or M.A.S., said its first-quarter net loss had increased to 443.4 million ringgit, or $137.4 million, from a loss of 278.8 million ringgit a year earlier.
Facing high costs and stiff competition from regional and global carriers, Malaysia Airlines has lost money for the past three years. It said that the disappearance of Flight 370 in March had put “additional stress” on what it already expected to be a challenging year.
The airline, in which Malaysia’s state-owned investment agency, Khazanah, owns a 69 percent stake, did not provide financial targets for 2014, but said it was preparing a new business plan to try to cut costs. It is in talks with banks for a strategic overhaul, which might include the partial sale of its engineering unit and an upgrade of its aging fleet.
“The tragic MH370 incident had a dramatic impact on the traditionally weak first-quarter performance,” the airline said. It said it had high numbers of cancellations and a decline in long-distance travel after the plane disappeared on March 8 while flying from Kuala Lumpur, Malaysia, to Beijing with 239 people aboard, including crew.
Most of the passengers on the flight were Chinese, and the airline said that sales in China declined 60 percent in March.
The hunt for the missing jet continues more than two months after its disappearance. Malaysia Airlines recently restarted marketing campaigns, and said it hoped sales would improve later in the year.
Financial analysts, who had not provided estimates of first-quarter earnings because of the uncertainty surrounding the airline, say that Flight 370’s disappearance will continue to deter some travelers from using the airline, but that the disaster could be a catalyst for management to make significant changes.
“This will give them an opportunity to do something about their losses,” said Tan Kee Hoong, an analyst at Alliance Research, adding that executives “can use this as a reason to restructure the company.”
Malaysia Airlines has been squeezed between nimbler rivals like the low-cost AirAsia on short routes, and by Persian Gulf carriers and AirAsia X — AirAsia’s unit for longer flights — in the medium- and long-distance markets.
Since last year, the company has been lowering fares to try to bolster traffic. But hampered by a strong trade union reluctant to embrace new work practices, it has struggled to reduce costs and improve productivity. Operating costs rose 6 percent in the first quarter, mainly because of higher fuel prices and a weakening of the ringgit against the dollar, the airline said.
The sequence of events known by the authorities, in local times.
Mar. 8, 2014 00:41 AM
A Boeing 777-200 operated by Malaysia Airlines leaves Kuala Lumpur bound for Beijing with 227 passengers, of which two-thirds are Chinese, and a Malaysian crew of 12.
Mar. 8, 2014 01:07 AM
The airplane's Aircraft Communications Addressing and Reporting System, or Acars, which transmits data about the plane's performance, sends a transmission. It is not due to transmit again for a half-hour.
Mar. 8, 2014 01:19 AM
The cockpit crew acknowledges a message from ground control, saying, "Good night Malaysian three seven zero." No further voice messages are received from the plane.
Mar. 8, 2014 01:21 AM
Two minutes after the last voice transmission, the plane's transponder, which signals its identity, altitude and speed to other aircraft and to monitors on the ground, is shut off or fails.
The Acars system fails to send its scheduled signal, indicating that it has been shut off or has failed sometime in the past half-hour.
Mar. 8, 2014 02:15 AM
An unidentified plane flying westward is detected by military radar. It ascends to 45,000 feet, above the approved limit for a Boeing 777, then descends unevenly to 23,000 feet and eventually flies out over the Indian Ocean. Investigators later conclude that it was Flight 370. It was last plotted 200 miles northwest of Panang.
By now Flight 370 was scheduled to have landed in Beijing.
Mar. 8, 2014 07:24 AM
Malaysia Airlines announces that it has lost contact with the aircraft.
Mar. 8, 2014 08:11 AM
The last complete signal is received from an automated satellite system on the plane, suggesting that it was still intact and flying. The Malaysian authorities say the jet had enough fuel to keep flying for perhaps a half-hour after this.
Inmarsat, a satellite communications company, says an incomplete signal representing a “partial handshake" may have been received.
Further analysis of satellite data confirms that the jet went down in the southern Indian Ocean.
Mar. 15, 2014 00:00 AM
The Malaysian authorities say the investigation has become a criminal matter because the jet appears to have been deliberately diverted. The plane's first turn off course, to the west, was executed using an onboard computer, probably programmed by someone with knowledge of aircraft systems.
The authorities say two passengers were Iranians who boarded using stolen European passports, but no links to terrorist groups are found.
Analysts have said that bringing in private investment and reducing the role of Khazanah, the state investor, might help the airline improve its competitiveness.
“Their operating costs are still so high, they need to relook at the business model,” said Ang Kok Heng, chief investment officer at Phillip Capital in Kuala Lumpur, speaking before the quarterly results were released. “Whatever restructuring they go through, they will have to overcome union opposition, which is very difficult to do.”
Khazanah tried to cut its stake in Malaysia Airlines in 2012, but the airline’s main union blocked a share-swap deal with AirAsia that would have resulted in a partnership in a profitable airline with experience in competing aggressively. The airline last raised funds almost a year ago through a $1 billion rights issue backed by Khazanah.
Malaysia Airlines said on Thursday that it needed a thorough review of its operations and current plans to withstand the “harsh business environment.”
The company has tried to turn itself around before. It announced a business plan in late 2011 that failed to achieve its goal of turning a profit by 2013 through ending unprofitable routes and investing in new aircraft.
Since Flight 370 disappeared, Malaysia Airlines stock has slumped as much as 20 percent. The company’s market value has tumbled about 80 percent over the past five years, while the broader Malaysian stock market has risen about 80 percent.
The airline said last month that its passenger numbers for March had fallen close to a monthly low for the company. Its next traffic update, on the number of seats sold in April, is expected in the next few days.
Former regular customers like Ray Tan, a 31-year-old technology executive based in Singapore, highlight the scale of the challenges. For the past two years, Mr. Tan flew Malaysia Airlines for business trips to Kuala Lumpur every couple of weeks, but since Flight 370, he has shunned the carrier.
“If it’s just the incident alone, I would think it’s an isolated one,” Mr. Tan said. “But right after it, there were a couple more breakdowns with the planes, and that kind of really eroded confidence I had for M.A.S.”
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