Malaysia Airlines Says Priority Is Families of the Missing, Though Ticket Sales Fall: Company, Struggling Even Before Flight 370 Disappears, Suspends Advertising

The Wall Street Journal
By Gaurav Raghuvanshi And Jason Ng
Updated April 5, 2014 12:46 p.m. ET

KUALA LUMPUR, Malaysia—One month after  Malaysia Airlines Flight 370 disappeared on a routine flight to Beijing, the company's chief executive said the mystery over what happened to the plane has hurt sales.

But Ahmad Jauhari Yahya said on Saturday that the airline is still focused on the needs of passengers' families and is holding off on fully assessing how the crisis is affecting its business for the time being.

"Our primary focus right now is that we do take care of the families in terms of their emotional needs and also their financial needs," Mr. Ahmad said in an interview. "It is important that we provide answers for them. It is important that the world has answers, as well."

Mr. Ahmad's comments were made before China's state news agency Xinhua reported that a Chinese ship searching for the missing plane had detected a pulse signal in the southern Indian Ocean that matches the frequency of signals beacons on aircraft black boxes emit. But the terse report said it wasn't clear if the signal was from the missing plane.

Malaysia Airlines also has to get through the crisis and find some resolution before moving forward, Mr. Ahmad said.

The company is trying to learn lessons from the incident, but it isn't sure when it can start repairing its image and return to the market to promote itself. The airline will consult with the government and other stakeholders on a decision to return to business as usual, he said.

"We still have an airline to run, we still have tickets to sell, we still have people to fly," he said. "It has not been easy for us, especially (for) those who lost their friends."

The Malaysia Airlines chief executive said ticket sales have suffered after Flight 370 disappeared with 239 people on board, most of them Chinese nationals. This is partly due to the airline's move to suspend advertising promotions in the aftermath of the incident.

Mr. Ahmad wasn't specific about how much ticket sales have fallen or how the airline's financial results would be affected.

"We can only look back at history to see the impact on airlines with reputation. Naturally, you will see a decline. But the general pattern is of a steady recovery, and ultimately, a full recovery," Andrew Herdman, director general of the Association of Asia Pacific Airlines, recently told The Wall Street Journal.

Malaysia Airlines, run by Malaysian Airline System Bhd. and majority-owned by a government pension fund, had been struggling to contain costs and overcome the challenge from a new wave of budget carriers in the region long before Flight 370 vanished from radar screens in the wee hours of March 8. The airline booked a full-year loss of 1.17 billion ringgit ($356 million) in 2013, compared with 433 million ringgit in 2012 and 2.5 billion ringgit in 2011.

Industry analysts said they expect the carrier to lose further market share following the flight's disappearance. Once Malaysia Airlines and its shareholders decide to refocus their attention on business operations, the airline could respond by stepping up the in-flight service levels to outshine those of its primary low-cost competitor, AirAsia 5099.Bhd.

But that is unlikely to make it stand out given stiff regional competition from other full-service carriers. It can add more fuel-efficient aircraft. But most competitors are doing the same. Or it can lower fares, although that reduces revenue. "This will increase the cost of your recovery, and your turnaround plan will be further delayed," said Morgan Stanley analyst Daniel Lau. "It is a tough time for them."

Malaysia Airlines has taken steps to address its financial problems before the Flight 370 crisis. It has cut loss-making routes to the U.S., South Africa and Buenos Aires. It also has reduced fares to fill more seats on other core routes, especially in Asia, a sweet spot for the global industry, where air travel is enjoying an unprecedented boom.

Mr. Ahmad, an engineer by training with a graying buzz cut, said the airline was adequately insured to cover the financial loss of Flight 370. He said he didn't want to comment on any potential legal action coming from families of passengers or crew given the absence of any formal litigation.

But Mr. Ahmad indicated that efforts to revive the foundering carrier will eventually intensify. "We know what we need to do," he said, declining to elaborate.

Meanwhile, Malaysia said it would appoint three groups of investigators and has asked several countries including the U.S. and China for help in the probe.

The investigators will examine airworthiness, such as maintenance records and structures; operations, involving flight recorders and meteorology among others; and human factors that include psychology and survival, said Defense Minister, Hishammuddin Hussein.

"Malaysia will appoint an independent investigator-in-charge to lead" the probe, he said at a press briefing on Flight 370.

Australia has accepted Malaysia's invitation to be part of the investigation team, and China, the U.S., U.K. and France will also help. "Malaysia will continue to lead the investigation into MH370," he said.

Mr. Hishammuddin said he met with U.S. Defense Secretary Chuck Hagel during a meeting between Southeast Asian defense ministers and the U.S. in Hawaii this week and that the secretary told him the U.S. would continue helping in the search for the missing plane.

Mr. Hishammuddin also denied what he called "unfounded allegations" that Malaysia was involved in the disappearance of the plane. Without citing any specific claims against the government, Mr. Hishammuddin said: "These allegations include the extraordinary assertion that Malaysian authorities were somehow complicit in what happened to MH370. I should like to state, for the record, that these allegations are completely untrue."

--Mark Magnier, Richard C. Paddock, and James Hookway contributed to this article.
 
Source:   http://online.wsj.com