MALAYSIAN Airline System Bhd (MAS) is facing a spate of passenger cancellations after the carrier’s second disaster this year, adding to the strains of a company that’s bracing for a fourth consecutive annual loss.
Travel agents from Melbourne to Singapore, New Delhi and MAS’ home country said they’ve seen a spike in withdrawn reservations since MH17’s downing this month – with cancellations climbing above 20 per cent in some places.
The cancellations may add to the financial difficulties of an airline whose state-run parent, Khazanah Nasional Bhd, estimated it only had enough cash to operate for a year even before the latest crash. The two Malaysian Air disasters have left 537 people dead this year, which means 2014 will be the worst year in almost a decade for commercial airline fatalities.
Passengers “are very, very afraid about anything else happening again,” said Ann Chitumbalam, manager at Escape Travel Sdn Bhd’s branch in Petaling Jaya, who’s seen about 30 per cent of Malaysian Air bookings through her office canceled. Ticket holders “don’t want to take a risk,” she said.
Chitumbalam said she received a text-message from a businessman within hours of the crash, cancelling a trip to Amsterdam on MAS.
The airline said July 19 it would refund fares to customers postponing travel or canceling their tickets, including non-refundable ones. It also agreed to waive any fees for people changing travel plans to any destination Malaysian Air flies to during 2014, as long as they applied from July 18 to 24.
MAS, responding by e-mail to questions about passenger traffic, declined to give numbers of cancellations or to comment on ticket prices.
While passenger traffic figures since the July 17 downing of Flight 17 aren’t available, Webjet Ltdin Melbourne estimates it’s canceled about a quarter of its MAS bookings since the disaster, which killed all 298 people on board and occurred four months after the disappearance of Flight 370.
Yatra.com, a New Delhi-based, online travel agent, saw an increase in cancellations and a dip in Malaysian Air bookings after the latest incident, said Sharat Dhall, the company’s president.
“It’s just natural to be worried,” Sera Mika, manager of the female Samoan rugby team, said by phone from Auckland. “We did have a lot of concerns.”
In Singapore, Dynasty Travel estimates passengers will think twice before booking flights with the airline.
“Many will avoid MAS for the time being,” said Alicia Seah, spokeswoman at Dynasty Travel, one of the three largest leisure travel agents in Singapore, without specifying any number for cancellations. “This is certainly a double whammy for the airline.”
MAS, which racked RM4.13 billion in losses in the past three years, will probably lose more than RM1 billion in 2014 as it grapples with costs and an exodus of passengers, according to the average analyst estimate compiled by Bloomberg.
Thirteen of 15 analysts whose ratings are tracked by Bloomberg say investors should sell the airline’s stock while two say hold. The carrier’s shares have declined 29 per cent this year, after dropping in each of the past six years.
In June, before the latest disaster, Malaysian Air carried 3.1 per cent fewer passengers than a year ago, the second straight monthly drop. The previous month saw the highest proportion of empty seats since 2009.
Reversing that trend would involve restoring the loyalty of customers such as Vincent Sim, a 35-year-old self-employed Singapore resident.
“The airline is going through such bad time, but I will definitely fly with them in the future as their prices, service and aircraft are on par with that of Singapore Airlines and Emirates,” Sim said.
MAS has sought to lure passengers by offering lower fares. Today is has six of the ten cheapest single-stop fares for early-December return flights between Sydney and London on price comparison site skyscanner.net, undercutting China Southern Airlines Co and Cathay Pacific Airways Ltd.
“They are under severe cost pressure,” Tan Kam Meng, an analyst at TA Securities Holdings Bhd in Kuala Lumpur, said by phone. “I don’t think cutting airfares would be an advantage.” — Bloomberg