Friday’s announcement by Malaysian Airlines comes as no shock to analysis, as the troubled airline continues to cope with a range of financial and operational issues. The press release noted specifics of the company’s overall restricting plan, including a reduction in workforce of 6000 employees (about 30 percent.) In addition, the airline will receive the equivalent of 1.9 billion US dollars from the Malaysian government to help rebuild and restructure, according to a report from CNBC.com.
The restructuring announcement followed the release of Malaysian Airlines’ second quarter earnings, or in this case a second quarter loss, totaling 97 million US dollars. Stock shares were halted Friday, pending the statement, but were expected to resume trading on Monday. As part of the long term plan, stock shares will be delisted by the end of the year, meaning that they will no longer be traded on the stock market. Currently, 70 percent of stock is held by Khazanah Nasional Bhd., a state backed investment firm. Khazanah is expected to purchase or absorb the remaining stock by year’s end, as part of its plan to take the company private.While many analysis believe the company was in financial trouble before the disappearance of Flight 370, the lack of answers has certainly not helped. Freighted passengers began avoiding the airline, which gave it little time to respond and forced it to fly partially empty planes in order to maintain published schedules. The Wall Street Journal reported Friday, that Malaysian saw a drop of nearly 10 percent in occupied passenger seats following the loss of Flight 370, but the numbers had started to improve as of June. Accompanying the airlines statement on Friday, were reports from multiple news agencies, indicating that the search area for Flight 370 had been moved further south, based on new satellite data. The search which had been largely by air at the onset is now focusing entirely on underwater mapping and scanning. Further compounding the situation was the loss of Flight 17 which dashed any hope of an independent financial recovery. No party has yet claimed responsibility for what is believe to be an intentional shoot down act but Western Nations have blamed Russian backed rebels. Experts believe the flight was brought down by a surface-to-air missile, possibly of Russian design. An intercepted phone call, likely between rebels, indicated that the aircraft may have been mistaken for a Ukrainian military aircraft. The phone call, along with other evidence, remains unsubstantiated as investigators struggle just to reach the site of the crash.
Beyond, the current financial loss, the airline warned of potentially large losses in the second half of the year, citing a 33 percent drop in booking immediately after the crash of Flight 17. Passengers will likely regain confidence in Malaysian Airlines but it will take time for the harm of this year’s events to begin to fade. Although the airline will have to rely on government funding to stay afloat, it made sure to note on Friday that flights will continue as scheduled, hoping that regain in confidence will happen sooner
rather than later.