Malaysian Airline System Bhd. (MAS) shares tumbled the most in nine weeks after the disappearance of Flight 370 contributed to the carrier’s biggest loss since 2011.
The stock lost 13 percent to 19.5 sen as of 9:59 a.m. on July 18 in Kuala Lumpur, extending this year’s drop to 37 percent, while Malaysia Airports Holdings Bhd. (MAHB) fell 4.2 percent. The FTSE Bursa Malaysia KLCI Index retreated 0.4 percent and Malaysia’s ringgit weakened 0.4 percent versus the dollar. The Bloomberg World Airlines Index slipped 0.2 percent, following a 2 percent tumble on July 17 amid speculation the crash will deter fliers.
Malaysian Air’s Flight 17, carrying 298 passengers and crew, was shot down last Thursday over eastern Ukraine in an attack that the government in Kiev blamed on pro-Russian rebels. The carrier, which has lost 4.57 billion ringgit ($1.4 billion) since the start of 2011, 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.
“This is shocking,” Geoffrey Ng, an adviser for strategic investments at Fortress Capital Asset Management Sdn., which oversees about 1 billion ringgit, said in Kuala Lumpur. “Investors will want to sell first and get more information later. This will raise concerns about the safety culture of airlines in general.”
Cathay Pacific Airways Ltd. (293), the biggest international carrier in Asia, dropped 1.4 percent in Hong Kong trading while Air China Ltd declined 1.3 percent. Delta Air Lines Inc., American Airlines Group Inc. (AAL) and United Continental Holdings all retreated more than 3.4 percent in U.S. trading last Thursday.
Ukraine’s state security service said it intercepted phone conversations among militants discussing the missile strike,which knocked Flight 17 from the sky about 30 kilometers (18 miles) from the Russian border. The separatists denied the accusation.
U.S. officials said the weapon probably was a Russian-made model used widely in Eastern Europe. The Boeing Co. (BA) 777 crashed en route to Kuala Lumpur from Amsterdam in the main battleground of Ukraine’s civil war.
The jet didn’t make distress call, Malaysian Prime Minister Najib Razak told reporters at the Kuala Lumpur International Airport today. The aircraft’s flight route was declared safe by the International Civil Aviation Organisation, and the International Air Transportation Association has said the airspace the plane was in was not subject to restrictions, Najib said.
The escalation of Ukraine’s crisis, combined with Israel’s movement of ground forces into the Gaza Strip, fuelled a selloff in global equities yesterday. The MSCI All-Country World Index dropped 0.9 percent, and lost another 0.1 percent today.
Malaysian Air’s major shareholder and sovereign wealth fund, Khazanah Nasional Bhd., said last month it had time to come up with a restructuring plan as the carrier has funds to last about a year.
Asuki Abas, a spokesman for Khazanah, said the fund will “focus its energy on supporting Malaysian Air in emergency efforts.” He declined to comment further.
The Suband Jaya, Malaysia-based carrier last reported an annual profit in 2012. Malaysian Air 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.
“Malaysian Air will have a though road ahead to rebuild its image,” Hong Leong Investment Bank Bhd. analysts wrote in a report last Friday. “Consumer sentiment on its safety record will be deeply affected, which has further hampered its hope to turnaround by 2015.”
The vanishing of MH370 which carried mostly Chinese passengers, put the carrier under global scrutiny, jeopardizing its reputation and prompting boycotts in China. It has also hurt the country as a travel destination, with Chinese tourists canceling their visits to the Southeast Asian nation, according to Malaysia’s tourism promotion agency.
“This is beyond unlucky,” Mohshin Aziz, an analyst at Malayan Banking Bhd. in Kuala Lumpur, said in a note to clients. “It will take a very long time to overturn this.”
Source from Myanmar Business Today, 24-30 July,2014