Tainted reputation

On July 17 at 5:15 p.m., Malaysia Airlines lost contact with Flight MH17 while flying over Ukraine with 298 people aboard. A few minutes later came the devastating news. The Boeing 777 en route from Amsterdam to the Malaysian capital, Kuala Lumpur, had crashed near the eastern Ukrainian town of Shaktarsk in the Donetsk region. There were no signs of survivors.

While Ukraine's government and pro-Russian separatists fighting in the region traded blame for the disaster, United States officials said they believed the passenger jet had been shot down by a surface-to-air missile, though it remained unclear who was responsible. World leaders demanded an international investigation into the incident and a ceasefire for experts to gain access to the crash site.

Regardless of who carried out the attack, the incident has dealt a serious blow to the reputation of Malaysia's national carrier. With 16 million passengers per year and a fleet of close to 100 aircraft, Malaysia Airlines - founded in 1947 - is a midsize player in international air traffic.

But its importance for the Southeast Asian nation goes beyond sheer numbers. As the flag carrier of the country, the airline is regarded as a symbol of national pride and an important ambassador to the world.

The MH370 mystery

The Ukraine incident is the second disaster to strike the company in less than five months. The fate of the Flight MH370 has been shrouded in mystery ever since the aircraft left Kuala Lumpur for Beijing in the early morning hours of March 8 with 239 people on board. While the passenger jet is believed to have crashed in the southern Indian Ocean, international search efforts have so far failed to provide any clues as to what happened to the plane.

But even before the MH370 mystery, the largely state-owned airline had been facing serious financial difficulties. According to its earnings report, the carrier suffered a first quarter net loss of 443 million Ringgit ($130 million), its biggest loss in two years.

"However, the results were made worse with the impact on air travel in general following the disappearance of MH370. The whole market has reacted by slowing down demand," said Malaysia Airlines Group Chief Executive Officer, Ahmad Jauhari Yahya in a May 15 press statement. In addition, the company had to deal with heavy criticism of what many called a slow and erratic response to the MH370 tragedy.

'Very difficult times'

"Malaysia Airlines is facing very difficult times," said independent aviation expert Heinrich Grossbongardt. Ever since MH370 vanished, bookings have plummeted, and there have been a high number of cancellations and a decline in long-haul travel, he said, adding that "the recent disaster will certainly worsen the situation."

The main reason for this, according to Grossbongardt, is that trust is the basis of the entire airline business. "When people are in doubt about whether an airline can provide safe and secure transportation, they stop buying its tickets. It's a very emotional thing and it doesn't really matter, whether it was the company's fault or whether people think it is just ill-fated," said Grossbongardt, who is also managing director of Expairtise, a Hamburg-based communications agency specialized in aviation and aerospace.

Chris Yates, a UK-based aviation safety consultant, had a similar view. Yates pointed out that although it is by no means certain that travelers will stop flying with Malaysia Airlines, such a effect does appear likely. "Whenever incidents such as this occur, a hardcore of travelers will remain true to a carrier, but often times they have to work really hard to rebuild trust," he said.

Despite a recent advertising campaign by the airline to win back customers in the immediate aftermath of MH370, it seems that after this second incident consumer trust will be lost - possibly for good, Yates added.

'Change is overdue'

It is difficult to believe that the airline will manage to overcome the twin disasters that have beset it. Mohshin Aziz, aviation analyst at the Kuala Lumpur-based Maybank Investment Bank, said that given the previous losses in revenue and the impact of both tragedies he doesn't think Malaysian Airlines can survive in the near future in its current form.

"We believe that the company will probably be out of business in its present form by the end of second quarter next year," Aziz told DW.

Some analysts are of the view that if the company does manage to hang on, this may only be because of a mixture of good fortune and a radical overhaul of its current business model.

"Change is overdue at Malaysia Airlines," said Grossbongardt, adding that the airline's survival will depend on two key factors: the willingness of shareholders to inject new money into the firm and management's ability to restructure the carrier. "The airline needs to adapt its business model to a market where it is facing increasing competition from the Gulf carriers and Air Asia with its successful low cost operation," he said.

What next?

There are different views as to how to the carrier may keep its business afloat. While Yates said only a widespread pruning of its global route network would suffice for the airline to stay in business, Aziz argued that the company should discontinue international flights altogether.

"I believe that the business of domestic flights has a future - people in Malaysia are still attached to the national carrier, no matter what," Aziz said. "It is very important to the Malaysian identity as many like the food, the service and what it represents. I think if it were to become a domestic airline only, it will need money, but it is likely to survive."

Whether or not the reputation of Malaysia Airlines is damaged beyond repair remains to be seen. A lot will depend on its crisis communication and whether it is able to apply the lessons learned from the mistakes it made in the first days after the loss of MH370.

"Afterward the management needs to take decisive action in order to cut costs and make the airline more flexible," said Grossbongardt.