Malaysian Airlines and the Aviation Safety in Malaysia As of February 18, 2021

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Malaysia Airlines, a prominent airline in Asia and part of the one world airline alliance group, is the flag carrier airline of Malaysia, a company created in Singapore in 1937 as Malaysia Airways Limited. Due to the separation of Malaysia and Singapore the name has changed a several times and in 1965 it was called Malaysia-Singapore Airlines, which lasted until 1972 when the company split, became Malaysia Airlines and Singapore Airlines. The 80´s were booming for Malaysia Airlines and at the end of the decade, it was the first airline in South Asia to fly to South America. Even being a major airline in Asia, it went through good and bad financial periods for various reasons, and primarily because of two accidents that called attention to this airline specially, the Flight MH370 that mysteriously disappeared in March 2014 and the Flight MH17 that was intentionally shot down in Ukraine in July 2014. 

Malaysia Airlines is the second biggest airlines in Malaysia while the first position belongs to a low cost carrier called AirAsia.

The main highlights in the history of Malaysia Airlines is presented in the figure below:

Figure 01 – Malaysia Airlines Timeline

(https://asia.nikkei.com/Business/Company-in-focus/Sell-it-to-save-it-Mahathir-weighs-Malaysia-Airlines-fate)

The Current Situation of Malaysia Airlines

Like the vast majority of airlines worldwide, Malaysia Airlines is also struggling to survive due to the coronavirus pandemic crises. The year of 2020 was marked for urgent restructuring in operations, network changes, fleet plans cancellations, and many flights cancellations.

The profitability of Malaysia Airlines was usually inconsistent and always oscillating with profit and losses. Nevertheless, just before the coronavirus crises in the aviation, Malaysia Airlines arrived in 2020 with a clear need of money to support its operations and the crisis only made the company’s situation worse. The airline has been losing money since 2010 and situation was aggravated in 2014 after the two accidents that occurred in a period very close to each other. The airline has passed for different restructuration in the last 20 years, being the last big one in 2014 that led to a 30% staff reduction. Lastly, the Malaysian government was seeking for a partnership with a foreign airliner to invest in the Malaysia Airlines but the plans had to the changed because of the pandemic crises.

The competition in Malaysia with local airlines are one of the problems that the Malaysia Airlines is facing and contributed to the current uncomfortable situation of the company. The figure below provides a summary comparing the Malaysian local airlines:

Figure 02 – Malaysia Aviation Market

(https://asia.nikkei.com/Business/Company-in-focus/Sell-it-to-save-it-Mahathir-weighs-Malaysia-Airlines-fate)

On one hand, Malaysia Airlines is doing all the efforts to comply with Covid-19 procedures and precautions, planning the resumption of international flights based on the restrictions and taking actions to reduce costs and increase efficiency. On the other hand, the airline has an estimated debt in US$ 4 billion among lessors and other entities, which makes the future of the airline at this moment quite unpredictable.

The Figure below provides the financial results from 2015 to 2018 where the company recorded only loses in this period:

Figure 03 – Financial Results (in Malaysian Ringgit currency)

(https://www.theedgemarkets.com/article/malaysia-airlines-fy18-net-loss-narrows-rm7917-million)

Malaysia Airlines Safety Standards

Malaysia Airlines has a history of accidents and incidents from 1977 to 2020, where two accidents, one in 1977 and the other one in 2014, were attributed to criminal occurrences as the aircraft suffered a catastrophic event intentionally.

The figure below provides a summary since 1992 with the main occurrences with Malaysia Airlines:

Figure 04 – Malaysia Airlines Occurrences

(https://aviation-safety.net/database/dblist.php?sorteer=datekey_desc&kind=%&cat=%&page=1&field=Operatorkey&var=5718)

In the figure above it is possible to observe three accidents with fatalities, which are situation that can typically jeopardize the image of any company. The accident in July 2014 was caused by a criminal act and therefore this specific event does not affect the safety numbers of the company. The other two fatal accidents certainly decrease the airline’s safety level. Since 2014, the company has not registered any other accident with fatalities, being the last accident occurred in 2017 when an aircraft experienced a runaway excursion without any injuries. Nevertheless, it had a few incidents without air safety complications, and Malaysian Airlines has since been reconstructing its image as a safe airline to fly.

            Malaysian Airlines was known worldwide in March 2014 due to the mysterious disappearance of the Flight MH370 with 239 people on board, which took off from Kuala Lumpur in Malaysia with its final destination in Beijing, China. The flight lost contact about two hours after departure and it was never found, consequently a concrete analysis of this event could not be defined. The Appendix I provides the flight details for this peculiar “accident”. The investigation and search for the aircraft took about 4 years, with millions of dollars spent and without clear results. Many assumptions have been considered, but the final report released in 2018 by the Civil Aviation Authority of Malaysia is inconclusive due to the lack of evidence.

The Malaysian Safety Standards

The Malaysian air safety can be considered relatively safe and based on the figure below it is possible to verify that the number of accidents is relatively low in the last decade and following the worldwide tendency:

Figure 05 – Malaysia Accident Rate per Year

(https://aviation-safety.net/database/country/country.php?id=9M)

            Despite the fact that the number of accidents are low and comparable with similar countries, the American Civil Agency FAA downgraded the Malaysian Air Safety status from Category 1 to Category 2 in Nov 2019 imposing restrictions to new flights from Malaysia to United States. The restrictions are the results of audits performed in the Civil Aviation Authorities of Malaysia or CAAM. The FAA observed deficiencies in one or more areas that might affect the safety oversight in the Malaysian airlines, indicating the ICAO standards for safety standards were not meet. It does not mean that an accident or incident will happen soon, but it means that there are vulnerabilities that must be evaluated and fixed by the Malaysian authority. The restrictions affected exclusively new flights from any Malaysian Airlines to the United States, and imposing additional restrictions in codeshares between Malaysian Airlines and American Airlines. The regular flights that were previously approved were not affected, however Malaysian Airlines and its aircraft can be subject to inspections once landed and before departing from an American airport. The category 2 status in the FAA database is still restricting the Malaysian Airlines and is certainly aggravated by the pandemic crisis.

            The CAAM changed the CEO in 2020 and one of the main objectives is to recover the Category 1 from FAA. It was observed that the CAAM is short in manpower and not hiring new staff for some years, missing mainly qualified inspectors to provide the proper surveillance of the Malaysian Airlines, and a promise of restructuring was put in place. Another complication is that the agency is a government agent and the salary is considered low and people are not motivated to stay in the company. Finally, many actions looking for the restructuration are planned to put Malaysia in the Category 1 of FAA which represents a label of confidence and safety in the aviation. The new direction of the CAAM affirms that that last 6 months were very productive and can assure that the civil aviation is at a high level standard again, it is not ready for a new audit and requires some few more months to have the improvements completed, expected for the second quarter of 2021.

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