Airline insurance for Malaysian Airline could be affected by hurt reputation

The missing Flight 370 aircraft may lead to serious struggles in the struggling carrier’s future.

When it comes to airline insurance on a broad scale, the costs have been steadily dropping over the years as problems have become decreasingly common and crashes of any major sort have simply not been happening.

Malaysian Airline System could be facing its own coverage issues following the disappearance of its plane.

Flight 370 was carrying 239 people when it disappeared along its path from Kuala Lampur, Malaysia, to Beijing China. This type of situation, said Standard & Poor’s analyst in Singapore, Shukor Yusof, always has a deep impact on the reputation of a carrier. However, the specific details and the mystery surrounding the missing aircraft, and the likelihood that it led to a crash which produced two oil slicks in the ocean, could also mean that the company will be facing some unwanted changes to the cost of its airline insurance.

Aside from the airline insurance woes, a shadow has also been cast on the carrier’s management and shareholders.

Malaysian Airline System was already experiencing losses and was fighting to be able to overcome them. Less than three years ago, the carrier replaced its CEO, bringing in Ahmad Jauhari Yahya to help to bring itself into a situation of profitability. Now that the plane and 293 people have gone missing, this mission has become increasingly challenging for him.

The national, state controlled company had already been hit hard by September 2011, when the 59 year old veteran of the power industry stepped up as CEO. At that time, the stock was already slumping by a massive 63 percent. Its struggles included competition from low cost carriers and its use of non-viable routes. Over its past three financial years, it has faced a loss of $1.3 billion.

Now, as rescuers continue their desperate search for Malaysia Airlines Flight 370, this represents not only the second mishap the carrier has faced within six months (the last one being a crash landing of a Twin Otter DHC6 plane in October on a Borneo island, in which two people died), but it is also facing harm to its reputation and airline insurance status.