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MAS can go bust like other airlines, says online portal

MAS holds ‘spring sale’ in bid to attract more passengers

Despite the political impossibility of allowing Malaysia Airlines to go bust, an online portal today pointed out that there was a precedent, citing the example of a no-frills airline called ValuJet.

The Daily Beast reported that in the 1990s, ValuJet served cities in the eastern United States and Canada

"The Federal Aviation Administration (FAA) wanted to ground ValuJet because the airline operated a fleet of very old aircraft and had a woeful safety record.

"But before the FAA could act, a ValuJet DC-9 crashed in Florida in May 1996 after taking off from Miami International Airport, killing 110 people," the online portal reported.

The large amount of negative publicity surrounding the flight 592 tragedy resulted in ValuJet suffering serious financial problems.

ValuJet then merged with the much smaller regional airline Airways Corporation and was rebranded as AirTran, allowing the former tarnished name to pass into aviation history.

The Daily Beast reported that Malaysia Airlines was in a similar position as ValuJet, as the disappearance of MH370 and the shooting down of MH17 were pushing the airline to the brink of collapse.

"The double catastrophes that MAS has suffered within four months has left a business that was already weak in a desperate fight for survival," the Daily Beast reported.

On March 8, flight MH370 was carrying 12 crew members and 227 passengers when it dropped off the radar.

The largest ever search operation in the history of the aviation industry has failed to detect the the aircraft.

On July 17, MH17 was carrying 15 crew members and 283 passengers when it was shot down by a surface-to-air missile in eastern Ukraine.

Even before the MH17 disaster, analysts had predicted that MAS would run out of cash next year.

The cash flow situation has become more critical following reports from travel agents in Asia that many passengers are cancelling flights booked with MAS.

Before MH17, MAS company shares had dropped by 16%. The shares are presently down by 29%.

For the first quarter of 2014, MAS reported a loss of US$137 million (RM443.4 million), its worst ever.

Craig Jenks, an analyst at Airline/Aircraft Projects, told the Daily Beast that the most obvious option was to let MAS go bust.

The Daily Beast reported that this was politically impossible because MAS was a flag carrier, a symbol of national pride, which was also bankrolled by a national investment fund.

Khazanah Nasional Berhad is the majority shareholder in Malaysia Airlines and it does not want the value of its investment to be wiped out, the Daily Beast reported.

"However, MAS has also proved to be a major headache as the ailing carrier has swallowed more than US$1.6 billion over the past decade," the Daily Beast added.

One of the problems is that MAS has a huge manpower of 20,000, most of which are members of the Malaysia Airline Systems Employees Union (Maseu).

"Maseu has effectively blocked any attempts to trim staff in the past although it could be faced with a tough ultimatum this time, accept retrenchments or watch MAS tank," the Daily Beast reported.

MAS's inefficiency was highlighted earlier this year when the magazine Aviation Week published its annual assessment of airline financial performance.

In the category of airlines with annual revenues of between US$2 billion and US$6 billion, MAS came second to last, at number 23. – August 1, 2014.