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After two aviation disasters, Malaysia Airlines will struggle to survive

Malaysia Airlines faces a corporate crisis and will be fighting for its financial survival after the downing of Flight MH17 over Ukranian airspace.

Malaysia has already experienced a sharp decline in tourists from China after the mysterious disappearance of the carrier's Beijing-bound Flight MH370 that departed from Kuala Lumpur in March. That doomed flight nearly 19 weeks ago carried 239 people, including more than 150 Chinese nationals.

Flight MH17 originated in Amsterdam and was en route to Kuala Lumpur when it crashed with 298 people aboard Thursday in eastern Ukraine, about 40 kilometres from the border with Russia. The anxiety about flying on Malaysia Airlines isn't focused on China any longer because there is now a perceived risk among many passengers making bookings in Europe, said Robert Kokonis, president of airline consulting firm AirTrav Inc.

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To have two catastrophic aviation events slam one carrier within five months is tragic on a human scale and damaging from a business perspective to Malaysia Airlines, Mr. Kokonis said.

"Those were two massive body blows, and it will be very difficult for the airline to bounce back. It will likely not survive financially in its present form," he said. "The Chinese aviation market is important to Malaysia Airlines, and there will be a loss of consumer confidence in Malaysia Airlines in the European market."

Even before Thursday's plane disaster, the carrier needed to undergo financial restructuring because its ticket sales slumped after the Boeing 777-200ER vanished in March. Low-cost carriers such as Air Asia and Lion Air have been eroding Malaysia Airlines' already troubled business.

Malaysia Airlines' stock price slipped 2.2 per cent Thursday on Bursa Malaysia, formerly known as the Kuala Lumpur Stock Exchange. The Malaysian government, which owns more than 69 per cent of the airline, has watched the share price of the carrier slump 27 per cent this year.

"Talk about being in the wrong place at the wrong time," said Marcella Munro, a Vancouver-based principal at communications consulting firm Earnscliffe Strategy Group. "This is a story about innocent bystanders getting caught in a foreign affairs mess. That's what it sounds like."

Ms. Munro expects Malaysia Airlines to avoid comment about the role of Russia in the international community and instead stick to a script that emphasizes condolences for the victims. "A missile looks for a hot target, and unfortunately, there was a commercial airline's jet nearby," she said.

Several global carriers said they altered their routes after learning of Thursday's jet crash. Germany's Lufthansa, for instance, said four of its flights took a longer path on Thursday. "Lufthansa has decided to fly a wide detour around east Ukrainian airspace," Lufthansa said.

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Air Canada has Canada-Europe service and also offers connecting flights in Europe through its Star Alliance partners such as Lufthansa. At any rate, "as a precautionary measure, Air Canada has been proactively avoiding airspace" over eastern Ukraine for many months, the Montreal-based carrier said in a statement.

Malaysia Airlines posted a statement about Flight MH17 on its website from Malaysian Prime Minister Najib Razak. "The aircraft's flight route was declared safe by the International Civil Aviation Organization. And International Air Transportation Association has stated that the airspace the aircraft was traversing was not subject to restrictions," Mr. Najib said. "This is a tragic day, in what has already been a tragic year, for Malaysia."

Hugh Dunleavy, the former executive vice-president of strategy at WestJet Airlines Ltd., is the commercial director at Malaysia Airlines.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More


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