Malaysian Air share retreats

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UkraineMalaysiaCrash12310 Reuters. An armed pro-Russian separatist stands at a site of a Malaysia Airlines Boeing 777 plane crash in the settlement of Grabovo in the Donetsk region, July 17, 2014.

Malaysian Airline System shares fell in pre-market trading after one of its aircraft was shot down in Ukraine, four months after the disappearance of Flight 370 contributed to the carrier’s biggest loss since 2011.

The stock tumbled 8.9 percent as of 8.30am yesterday in Kuala Lumpur.

It had already declined 27 percent this year.

Malaysia’s ringgit weakened 0.5 percent against the dollar, heading for its biggest drop in four months.

Malaysian Air had been speeding up an overhaul of its business after the disappearance of Flight 370 spurred the longest search for a missing plane in modern aviation history.

The airline has lost 4.57 billion ringgit (R15bn) since the start of 2011, and the company has said the lost jet put additional stress on operations.

“This is shocking. There will be a selloff as investors will want to sell first and get more information later,” Geoffrey Ng, an adviser for strategic investments at Fortress Capital Asset Management, which oversees about 1 billion ringgit, said in Kuala Lumpur.

“This will raise concerns about the safety culture of airlines in general.”

The Bloomberg World Airlines Index tumbled 2 percent yesterday amid concern the disaster would deter fliers.

Delta Air Lines, American Airlines Group and United Continental Holdings retreated more than 3.4 percent in American trading.

 

MH370 impact

Malaysian Air’s Flight 17, carrying 298 passengers and crew, was shot down yesterday over eastern Ukraine in an attack that the government in Kiev blamed on pro-Russian rebels.

The separatists denied the accusation.

The Boeing 777 crashed en route to Kuala Lumpur from Amsterdam.

Malaysian Air’s major shareholder and sovereign wealth fund, Khazanah Nasional, said last month it had time to come up with a restructuring plan as the carrier had funds to last about a year.

The Subang Jaya, Malaysia company last reported an annual profit in 2010.

The flag carrier missed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out revenue gains. Analysts project losses through 2016 for the airline, according to data compiled by Bloomberg.

The vanishing of MH370, which carried mostly Chinese passengers, put the carrier under global scrutiny, jeopardising its reputation and prompting boycotts in China.

It has also hurt the country as a travel destination, with Chinese tourists cancelling their visits to the South-East Asian nation, according to Malaysia’s tourism promotion agency. – Shamim Adam for Bloomberg.



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