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Saturday, July 19, 2014

Is this the end for Malaysia Airlines?

Is this the end for Malaysia Airlines?
AFTER a second tragedy in four months, Malaysia Airlines stock has seen a dramatic 13 per cent fall in the first few minutes of trading on the Malaysian stock market.
Malaysia Airline’s stock price was dropped to MYR0.195. At one point, it had tumbled 18 per cent to MYR0.185 before stabilising.
Yesterday, it closed at MYR0.22 (approximately $A0.07) on the Bursa Malaysia (previously the Kuala Lumpur Stock Exchange). The company’s market capitalisation was MYR3.75 billion ($A1.25 billion) last night.
Malaysia Airline’s stock has fallen more than 36 per cent since this time last year. The company’s share price fell sharply in the weeks before the March 8 disappearance of MH370 to MYR0.25. Since the disappearance of MH370, the stock price has continued to slide, hitting a nadir of MYR0.155 on May 19.
The stock price had rebounded after that to reach yesterday’s closing price.

First-aid workers gather at the crash sight.
First-aid workers gather at the crash sight. Source: AFP
Malaysia Airlines MH17 was shot down over Ukraine in an area controlled by Ukrainian rebels. Of the 298 people on board, 27 have been confirmed as Australians. Many passengers were en route to the 20th International AIDS Conference to be held in Melbourne.
The accident will surely inflict more financial damage on Malaysia Airlines. Even before the March disaster, it reported losses because of stiff competition from budget airlines such as Air Asia.
After the MH370 disaster, passengers cancelled flights, and while the airline is insured, it faces uncertainty over payouts to the victims’ families.

The wreckage of Malaysia Airlines MH17.
The wreckage of Malaysia Airlines MH17. Source: AFP
Combined with the airline’s perennial losses, the MH370 debacle has pummelled its shares this year and sparked intense speculation over whether it may be sold off or restructured.
The latest crash worsens the carrier’s outlook, said Mohshin Aziz, research analyst at Maybank Investment Bank.
“In the history of aviation... there’s never been an airline that had to go through two huge disasters in the span of four months, so I don’t think there’s any historical evidence that they can get out of this,” he told Dow Jones Newswires.
John Cox, president and CEO of Safety Operating Systems and a former airline pilot and accident investigator said: “Either one of these events has an unbelievably low probability. To have two in a just a few months of each other is certainly unprecedented.”
Charles Oman, a lecturer at the department of aeronautics and astronautics at the Massachusetts Institute of Technology said: “The airline and the Malaysian transport ministry took a lot of hits for the way they handled MH370, due to their inexperience,” Oman said. “Hopefully they will do better this time.”

Huib Gorter, senior vice-president of Malaysia Airlines, speaks at a press conference at
Huib Gorter, senior vice-president of Malaysia Airlines, speaks at a press conference at Schiphol Airport in Amsterdam. Source: AP
The airline tragedy has already hit globally with markets in US and Europe declining. The Australian market is expected to experience a rough day. Stock futures indicate the market will open around half of one per cent lower, but the sell-off could be even worse if the moves in the US and Europe overnight are any indication.
“Today is going to be a pretty ugly day,” IG market analyst Chris Weston said on Friday.
In the US, the Dow Jones Industrial Average dropped almost one per cent, while the S&P 500 dropped more than one per cent and the Nasdaq fell 1.4 per cent.
Germany’s DAX 30 and Paris’ CAC 40 also lost more than one per cent, while London’s FTSE 100 was down 0.68 per cent.
The New Zealand market has also opened lower, down around half a per cent to 5087 points. -News.com.au

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