News Column

Crisis-hit Malaysia Airlines cuts 6,000 jobs: Two disasters that cost 537 lives force restructuring Passengers, especially Chinese, desert carrier

August 30, 2014

Gwyn Topham Transport correspondent



Malaysia Airlines is to slash its staff numbers by a third, cutting 6,000 jobs, after the airline suffered the two worst disasters in modern aviation only five months apart.

The carrier had been struggling financially even before the disasters that beset it this year, starting with the unexplained disappearance of flight MH370 with 239 people aboard in March. The airline's name became synonymous with disaster after a second major tragedy in July, when flight MH17 was shot down over Ukraine, killing 298 passengers and crew.

The 6,000 job losses announced in Kuala Lumpur yesterday are part of a major restructuring of the airline, including the appointment of a new chief executive by next year. The state announced plans to take full ownership of its 77-year-old flag carrier after trading in the airline's shares was suspended last month, when it was valued at less than 15% of its 2012 peak. Currently Malaysia's sovereign wealth fund, Khazanah Nasional, is the 69% majority owner, and plans to buy out other shareholders at a premium.

Malaysia Airlines will also review its routes, after flying with high numbers of empty seats on many of its planes. The airline has been adding flight capacity and slashing fares to get customers aboard, meaning overall passenger numbers have only dropped by 0.3% year on year.

Revenue dropped 5% in the three months from April to June even as available seats rose 9% from 2013. The full effect on sales has yet to be seen as the airline offered full refunds to passengers who had booked to fly later in the year after the shooting down of MH17.

One route that will continue is the twice-daily service between Heathrow and Kuala Lumpur, a high-capacity service operated with Malaysia's Airbus A380 superjumbo.

A London-based Malaysia Airlines spokesman said: "The London-Kuala Lumpur route is highly successful and will carry on. Today's announcement is all about rebuilding the airline after these two awful incidents. The airline is being reshaped and the aim is to return it to profitability."

Analysts anticipate that Malaysia's restructuring could extend to selling off its engineering, airport services or budget airline units.

Not all of Malaysia's staff may be unwilling to leave the airline: it emerged this week that almost 200 cabin crew had already quit this year, citing family pressure and fear of flying after the two disasters, which claimed the lives of 27 crew. Unions reported that those who remained were often working extended hours due to staff shortages.

Sales have been hit hard since March, with customers from China deserting the airline after the disappearance of MH370, which was carrying 152 Chinese citizens among the 227 passengers presumed to have died. The airline lost pounds 58.5m in the last quarter, putting it on track to exceed the pounds 222m loss it recorded in 2013.

John Strickland, of the independent aviation consultancy JLS Consulting, said turning around Malaysia Airlines' fortunes was not impossible but "a very steep mountain to climb".

He added: "It's not going to be a quick fix. On one hand, they should be well placed: they are in an extremely buoyant market in Asia. But they have got stiff competition from budget rivals Air Asia and Air Asia X, quality neighbouring airlines like Singapore, and the Gulf carriers.

"They face all these current challenges on top of a lengthy history of being overmanned and suffering state interference. They have to reduce their operations, take capacity out of the market where it's not profitable, and overcome the public reaction to these incidents: to show they are compassionate and restore confidence that they are nothing but safety focused as an airline."

An intensive underwater search for MH370 will resume next month, after the mapping of a 34,000sq mile area of the southern Indian Ocean floor by two survey ships.

The Boeing 777 disappeared on 8 March en route from Kuala Lumpur to Beijing. A broad international search operation revealed no physical trace of the plane, but analysis of satellite signals has led authorities to believe it crashed in the sea west of Australia.

Dutch investigators are expected to issue an interim report soon on the MH17 crash in eastern Ukraine. It is believed that pro-Russian separatists fired the missile that brought down another Malaysian Boeing 777 plane, flying from Amsterdam to Kuala Lumpur on 17 July.

Captions:

Pupils in Manila view a tribute to the Malaysian Airlines flight that vanished in March Photograph: Romeo Ranoco/Reuters



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Source: Guardian (UK)


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