Malaysia Airlines (MAS): Tragedy strikes twice

MAS flight MH17 en-route from Amsterdam to Kuala Lumpur was strike down by a surface-to-air missile in eastern Ukraine. There were 295 people in the flight and none survived. Images of the crash site was painful to watch; the aircraft fully disintegrated and we can see bodies scattered all over. We should retrieve the black box soon and understand what actually happened. The Ukraine government and the separatist rebel have blamed each other on the incident, with none taking the responsibility. Our deepest sympathy for the families and friends of the victims.  
 

This might be the last straw for MAS. MAS was already looking weak prior to this incident with a cash burn rate of MYR5m/day and we thought its best for Khazanah to privatize it. Our view is even stronger now. No airline in the history of aviation has had to go thru two tragedies in a span of four months, this is beyond unlucky. While I firmly believe that MAS is not at fault, but it doesn't matter. Customer perception is negative, and it will take a very long time to overturn this - if ever! It's very sad, no words can explain.  

Who suffers?

MAS MK: No brainer really, and we don't need to explain more. We have a SELL rating with a fair value of MYR0.125.

Brahims (BRAH MK): The in-flight food caterer for MAS and it has >70% of its revenue to MAS... If MAS goes down, so will it.

Allianz (ALLZ MK):  The master insurer for MAS. We are not certain of the extend of the exposure, but there will definitely be a negative impact.

Malaysia Airports (MAHB MK): Technically this is more perception than reality. Airlines will continue to fly to Malaysia, and even is MAS restructures, there will be plenty of other airlines that will swallow its passenger list. Just think of AirAsia Group and the middle-eastern based airlines... But nonetheless, this incident has impacted on the sentiment of the sector and we can expect short-term share price weakness on MAHB.  


MAS is not at fault.
As usual, we will have many armchair experts and the Comic News Network coming out with ridiculous statements blaming everyone under the sun including the airline... I will do my nationalistic duty and quell some of the ridiculous rumor that has surfaced at the moment.  

(1) MAS was wrong to fly via Ukraine because there is a war over there!
Commercial airline have often flown thru areas of conflict with no problems. As we speak, airlines are flying over Syria, Iraq, Afghanistan to name a few. The reason why airlines are coy about it is because not anybody can have access to a ground-to-surface missiles that can hit a commercial aircraft at cruising altitude. Only the military has access to such arsenal, and no country wants to shoot down a civilian airline. In the history of aviation, there was only two incidents whereby the military shot down a commercial airline by mistake: 1) Korean Air flight 007 was shot down by Russian military on 1983 due to a mistake encroachment into Russian restricted airspace; and 2) Iran Air flight 655 was shot down by the US Navy carrier in the Persian Gulf - exact details of what transpired is still unclear until today.  

Furthermore, the European Air Control Body (Eurocontrol) have kept the Ukraine airspace open. There was some advisory to avoid due to the Ukraine-Russian conflict but the route remained open. If it is "open", it means it is safe. Who is MAS to contest the European regulatory body in their home turf?    

(2) MAS pilot was not good enough to dodge the missile
No commercial aircraft is equip with any devices to know that a missile is trajectoring towards them. Even if you put a highly trained fighter pilot in the aircraft, there is nothing he/she could have done to avoid it. Flight MH17 wouldn't have known there were in imminent danger until the missile hit them.

There will be more of stupid comments by the media coming soon, I can't answer them all...  Meanwhile, let's hope we get closure to this matter and that incidents like this will never happen again.  


Best regards,
Mohshin Aziz