Two years on, questions still cloud future of Malaysia Airlines

Mon Mar 7, 2016 5:33am EST
 
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By Siva Govindasamy and Praveen Menon

SINGAPORE/KUALA LUMPUR (Reuters) - Two years after twin air crashes that left its brand in tatters, Malaysia Airlines is still a company in limbo.

The loss of two Boeing 777s just months apart in 2014 triggered a much needed state bailout for the already loss-making carrier. It cut a third of its staff, grounded its Boeing 777-200s and scrapped its less profitable long-haul routes.

As a result of those efforts - and low oil prices - the group says it will reach its target to turn a profit in 2018, the same year its German boss, turnaround guru Christoph Mueller, ends a three-year contract.

But some analysts and executives question a bet on a narrow, regional business model they say could leave it struggling to compete with regional rivals.

They say Mueller and his team are not paying enough attention to the airline's long-term strategy, in the face of intense competition from southeast Asian rivals like Singapore Airlines (SIAL.SI: Quote), Garuda Indonesia (GIAA.JK: Quote) and Air Asia AIRA.MK - particularly if the airline continues to hemorrhage pilots, engineers and mid-rank managers.

"Apart from shedding jobs, cutting its fleet size and renegotiating vendor contracts, it would appear nobody envisions what the airline might look like in 10 years’ time," said Shukor Yusof, founder of Malaysia-based consultancy Endau Analytics.

Malaysia Airlines was struggling with a high cost base and low yields even before 2014, but its troubles deepened after March that year, when flight MH370 disappeared en route from Kuala Lumpur to Beijing with 239 people on board. In July 2014, Flight MH17 was shot down by a surface-to-air missile over Ukraine, killing all 298 on board.

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Men watch Malaysia Airlines aircraft at Kuala Lumpur International Airport in Sepang, Malaysia, in this picture taken March 2, 2016.  REUTERS/Olivia Harris