Can Malaysia Airlines salvage its brand in wake of MH370 and MH17 disasters?
Some analysts say state-owned airline won’t survive a year without substantial cash injection from Malaysian government
Malaysia Airlines is in uncharted territory after the disappearance of flight 370 in March with 239 people aboard was followed this week by the downing of another of its jets, carrying 298 people, over Ukraine.
Before the disasters the carrier had among the worst financial performance of any airline. An even bigger question mark now hangs over the future of Malaysia Airlines, with its brand tied to two almost unfathomable tragedies.
Some analysts say the state-owned airline won’t survive a year without a substantial cash injection from the Malaysian government.
A bailout would address the airline’s immediate financial problems but without far-reaching changes it could remain a burden on taxpayers and shrivel into regional obscurity.
Several experts give their views on the airline’s crisis.
How bad is the situation for Malaysia Airlines?
Other airlines have come back from disasters but none have experienced two tragedies of such magnitude within the space of four months.
“There’s no historical precedent,” said Mohshin Aziz, aviation analyst at Maybank. “It’s completely not their fault, but right now if you ask any customers would they fly with Malaysia Airlines, they’d just have that negative sentiment of I’d rather choose something else.”
The airline was already losing about US$1.6 million a day and has been in the red for the past three years. The disappearance of flight 370 with many Chinese passengers on board also caused a backlash in the crucial China market. Experts don’t see any short cuts to recovery.
“It cannot be a quick fix,” said Aziz. “So the second question is do they have the financial resources to survive a year, two years? And the answer is, unfortunately, no.”
Is Malaysia airlines to blame?
The airline was blasted for its erratic response to the disappearance of flight 370 en route to Beijing from Kuala Lumpur. Because the whereabouts of the plane was unknown, Malaysia Airlines had little meaningful information for the families of passengers. Communication of what information it did have was often mishandled, compounding the anguish of relatives.
The plane, believed to have crashed far off course in the southern reaches of the Indian Ocean, still hasn’t been found.
The fate this week of flight 17, heading to Kuala Lumpur from Amsterdam, is far more clear-cut. It was shot out of the sky over an area of eastern Ukraine controlled by pro-Russian separatist rebels.
“They are a victim this time, so it is very different from a situation where they have no answers,” said Caroline Sapriel, managing director of CS&A, a company that specialises in reputation management in crisis situations. “The whole world is going to be sympathetic to them.”
A few airlines were avoiding flying over Ukraine, which involves taking a longer route, but most weren’t since Ukrainian authorities had not closed the airspace above 32,000 feet.
Still, Kuniyoshi Shirai, crisis management expert at A.C.E. Consulting, said he finds the eastern Ukraine route “unthinkable” from a risk management perspective.
“Their brand is going to suffer serious damage,” he said. “There is even a possibility the airline will go out of business.”
How should Malaysia Airlines handle the latest tragedy??
Clear, consistent and compassionate communications are essential, experts say.
“I think their immediate response has been consistent and caring. They are communicating on Twitter and Facebook, they are definitely going out on the commercial media,” said Sapriel of CS&A. That’s important, she said, because “if they weren’t getting the immediate response right, then it just would be the nail in the coffin for them.”
Others say that being open and transparent, continuing to assist the families of passengers and crew members while also running a punctual and reliable business will help the airline build on the sympathy about its plight.
Malaysia Airlines “appears to have learned lessons from its halting slowness to react to the MH370 tragedy and is already applying those lessons,” said aviation consultant Robert Mann.
What can the airline do to rebuild its brand?
The airline needs far reaching changes.
“I think the Malaysian government is going to look at it eventually and say ‘Do we keep this same name or do we rebrand them?’ Maybe they will feel that they need a new name,” said Sapriel, the reputation management expert.
Because of its financial struggles, some analysts had advocated the sale of the state-owned airline to bring in fresh capital, ideas and expertise. Like all international airlines, Malaysia Airlines needs to renew its fleet with modern jets to be competitive, which requires substantial investment. Its capacity to make those investments is further compromised if travellers avoid the airline because of the disasters. But even a partial sale of the airline is unpopular with the airline’s union, the government and sections of the Malaysian public.
There are other ways it could make a break with the past, such as installing a new executive leadership.
“Malaysia needs to bring in a new CEO and head of flight operations to restore employee and consumer trust in the airline,” said travel consultant Henry Harteveldt of Atmosphere Research.
Beyond that, the carrier needs to demonstrate an absolute commitment to safety to overcome negative perceptions and rebuild confidence.
“You need an expert on risk management at the top, who has the power equal to a chief executive,” said Shirai, the crisis management executive.
“You have to change people’s consciousness. And while you’re doing all that, you have to keep the whole process transparent. Otherwise, you cannot regain the trust of either consumers or investors.”