Speculation on future of Malaysia Airlines grows

The shooting down of MH17 has hit Malaysia Airlines hard in the wake of MH370's disappearance in March. Photo / AP

Malaysia Airlines shares rise slightly but experts says it will need major revamp.

Malaysia Airlines shares halted their dramatic slide yesterday but speculation about the airline's future grew.

Although shares rose slightly after a plunge on Friday, consensus among most analysts is that without government support the airline is heading for failure and it will need substantial restructuring to continue flying in any form.

The airline, which flies daily from Auckland to Kuala Lumpur, is 69 per cent owned by Malaysia's state investment fund Khazanah Nasional, and it is likely the Government will continue with plans to buy the remainder of the company and take it private.

Among other airline stocks in this region, Air New Zealand closed up 9c at $2.04 while in early trading Singapore Airlines rose half a per cent, Cathay Pacific remained stable and Qantas fell slightly.

Malaysia Airlines flight MH17 was shot down by a missile over Ukraine early on Thursday, killing all 298 on board and leaving the carrier reeling as it was still trying to recover from flight MH370's vanishing in March.

In the face of competition from more nimble low-cost carriers, the airline had been losing money for three years. It is offering passengers who don't want to fly with it a full refund which will further hit revenue which plunged in the wake of the earlier loss and led to a first-quarter loss of close to $150 million.

On Friday the airline's share price plummeted as much as 18 per cent to 0.185 Malaysian ringgit but traded as high as 0.205 ringgit yesterday.

AirlineRatings.com editor Geoffrey Thomas said with two disasters so close together there was no respite from the bad publicity, especially with the lingering impact of the loss of flight MH370.

"Passenger numbers will plummet further. Put simply - if it wasn't a government-owned airline it would collapse," Thomas said.

Before this year the airline had enjoyed a fatality-free jet record since 1977 when a hijacker took over a 737 and apparently crashed it, killing 100.

Thomas said the airline had won awards for its maintenance from plane-makers although it had been tarnished by the poor handling of the MH370 disappearance.

"Passengers will understandably ask, 'Is Malaysia Airlines jinxed?'"

Last month there was speculation Middle Eastern carrier Etihad could form a partnership with Malaysia.

The Wall Street Journal said the plan for Khazanah Nasional to buy the rest of Malaysia Airlines' shares might be announced next month and at current prices it would be cheaper.

Regardless the airline will face big decisions to rebuild.

Caroline Sapriel, managing director of CS&A, which specialises in reputation management in crises, said the airline would attract some sympathy after the shooting down but needed 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," Sapriel said. It could also install a new executive leadership, she said.

- additional reporting AP