True Crime/Paranormal/Conspiracy Stories Part VI

Malaysian Airlines Flight 370 Part IV

Financial troubles

At the time of Flight 370's disappearance, Malaysia Airlines was struggling to cut costs to compete with a wave of new, low-cost carriers in the region. In the previous three years, Malaysia Airlines had booked losses of: RM1.17 billion (US$356 million) in 2013, RM433 million in 2012, and RM2.5 billion in 2011. Malaysia Airlines lost RM443.4 million (US$137.4 million) in the first quarter of 2014 (January–March).The second quarter—the first full quarter in the aftermath of Flight 370's disappearance—saw a loss of RM307.04 million (US$97.6 million), representing a 75% increase over losses from the second quarter of 2013. Industry analysts expected Malaysia Airlines to lose further market share and face a challenging environment to stand out from competitors while addressing its financial plight. The company's stock, down as much as 20% following the disappearance of Flight 370, had fallen 80% over the previous five years, in contrast to a rise in the Malaysian stock market of about 80% over the same period.

Many analysts and the media suggested that Malaysia Airlines would need to rebrand and repair its image and require government assistance to return to profitability. The loss of Flight 17 in July greatly exacerbated Malaysia Airline's financial problems. The combined effect on consumer confidence of the loss of Flight 370 and Flight 17, and the airline's poor financial performance, led Khazanah Nasional—the majority shareholder (69.37%) and a Malaysian state-run investment arm—to announce on 8 August its plan to purchase the remainder of the airline, thereby renationalizing it. Malaysia Airlines renationalized on 1 September 2015.

Compensation for passengers' next of kin

Lack of evidence in determining the cause of Flight 370's disappearance, as well as the absence of any physical confirmation that the airplane crashed, raises many issues regarding responsibility for the accident and the payments made by insurance agencies. Under the Montreal Convention, it is the carrier's responsibility to prove lack of fault in an accident and each passenger's next of kin are automatically entitled, regardless of fault, to a payment of approximately US$175,000 from the airline's insurance company—amounting to a total of almost US$40 million for the 227 passengers on board.

Malaysia Airlines was also vulnerable to civil action from passengers' families. Compensation awarded during civil cases (or settlements reached out of court) was likely to vary widely among passengers, based on the country where the proceedings were to take place. An American court could be expected to award upwards of US$8–10 million, while Chinese courts would be likely to award a small fraction of that amount. Despite the announcement that the flight ended in the southern Indian Ocean, it was not until 29 January 2015 that the Malaysian government officially declared Flight 370 an accident with no survivors, a move that would allow compensation claims to be made. The first civil case relating to the disappearance was filed in October 2014—even before Flight 370 had been declared an accident—on behalf of two Malaysian boys whose father was a passenger; they were claiming for negligence in failing to contact the aircraft soon after it was lost and for breach of contract for failing to bring the passenger to his destination. Additional civil proceedings against Malaysia Airlines were filed in China and Malaysia.

Soon after the disappearance of Flight 370, Malaysia Airlines offered ex gratia condolence payments to families of the passengers. In China, the families were offered ¥31,000 (approx. US$5,000) "comfort money", but some rejected the offer. It was also reported that Malaysian relatives received only $2,000. In June 2014, Malaysia's deputy Foreign Minister Hamzah Zainuddin said that families of seven passengers received $50,000 advance compensation from Malaysia Airlines, but that full payout would come after the aircraft was found, or officially declared lost (which later occurred in January 2015).