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Loss-making Malaysian Airline Systems risks losing out on lucrative corporate business from travelers outside the country in the wake of the disappearance of a China-bound flight carrying 239 people, travel agents warned.
The plane’s still-unexplained disappearance – six days after it took off from Kuala Lumpur – has sparked concerns over the airline’s handling of the issue and that of Malaysian government officials.
It may also hit the lucrative tourism trade to Southeast Asia from China, according to a report by Bank of America-Merrill Lynch, although it said that a growing Chinese middle class and more affordable travel would underpin numbers.
China accounts for 12 percent of tourists to Malaysia, excluding those from neighbouring Singapore, the bank said.
The airline and the Malaysian government have faced demands to speed up their hunt for the plane from China, home to two-thirds of those on the aircraft.
While Malaysian travel agents said they had seen few cancellations, some others outside the country warned that corporate travelers would switch if they had a choice.
It was not clear how much of the airline’s revenue comes from business travel. For Malaysia overall, business travelers accounted for just over half of travel and tourism’s contribution to GDP in 2012, according to a World Travel and Tourism Council report.
“I would say 80 percent of corporate travelers would opt to change for now,” said Alicia Seah, director of communications at Dynasty Travel in Singapore, adding that foreign travelers were switching to national carriers such as Singapore Airlines.
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“With time, travelers will overcome this sense of fear. During this time, Malaysia Airlines will need aggressive efforts to rebuild trust and confidence and reputation.”
Among those on the flight were 20 employees of U.S. chipmaker Freescale Semiconductor.
Malaysia’s airports operator and Malaysian Airline declined to comment on whether they had seen evidence of cancellations.
Jane Chang, marketing communications manager at another Singapore travel agency Chan Brothers Travel, said her firm had not received any calls from customers expressing concern or asking to switch flights.
The airline’s losses ballooned by 171 percent in 2013 to 1.17 billion ringgit ($355.84 million) from a loss of 431 million ringgit in 2012 and it was already forecasting a tough 2014 thanks to competition from low cost carriers that forced it to cut prices.
Chinese tourists to Southeast Asia had surged to almost 7.4 million arrivals in 2012, 10 percent of the total, from just 1.9 million in 2001, according to Bank of America-Merrill Lynch.
“In the short term, if there is a problem, especially for leisure tourism, the Chinese are quickly shying away from these places,” said Wolfgang Georg Arlt, director of China Outbound Tourism Research Institute, a consultancy based in Germany.
Arlt said that Chinese tourists book their tickets much closer to flight dates than western tourists, tending to decide travel plans one to two weeks before departure.
Malaysia was hoping for a total of 28 million tourist arrivals this year, which would be a 9 percent gain from 2013, and 76 billion ringgit in receipts.
Malaysian tourism officials remained confident that numbers would hold up, although the bank report warned that the 2014 numbers appeared over-optimistic.
“There have been maybe one or two cancellations, but travel is still going on,” said Phua Tai Neng, CEO of the Malaysian Association of Tour & Travel Agents. ($1 = 3.2880 Malaysian ringgit)
(Additional reporting by Anshuman Daga in Kuala Lumpur; Writing by David Chance; Editing by Emily Kaiser)