The Malaysia Airlines crash was a terrible disaster. Rescue teams are sifting through the wreckage today as families grieve.
The company is facing two significant problems: financials and branding.
The financial issues are substantial. Even before the two disasters, Malaysia Airlines was struggling. The growth of discount carriers in Asia has put pressure on fares. Malaysia has a high cost structure so maintaining margins has been difficult.
Malaysia’s financial issues will now get worse. After the first tragedy people were reluctant to fly on the carrier, forcing fares down. According to a Financial Times article published on Saturday, traffic from China was recently down 60 percent versus year ago. People will now be even more hesitant to fly on Malaysia. The financial situation will rapidly deteriorate further.
The branding problem is even bigger. Brands are associations, the connections people make when they see a name or symbol. The issue is that the Malaysia Airlines brand, after losing two jumbo jets in four months, is now connected firmly with aviation tragedy.
This is a long-term problem because brands matter when choosing an airline. Which company will provide better service and get us there safely? Brands shape our opinions.
One aviation analyst quoted in the FT article was skeptical, “It’s just too big a curse.”
This is a terrible situation for the people working at Malaysia Airlines. The airline apparently did nothing wrong last week but it is once again in the headlines. It doesn’t seem fair.
So what happens now?
I suspect Malaysia will go through a major financial restructuring and at some point will emerge with a new brand name and hopefully a fresh set of associations.
This wouldn’t be the first time an airline had to adopt a new brand following a disaster. ValuJet went through a similar experience after a terrible crash in the Florida Everglades in 1996. The following year the carrier merged with AirTran and embraced the new name. The ValuJet brand vanished. Malaysia Airlines will likely do the same.