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November 27, 2014

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Double disasters could destroy image of Malaysia Airlines

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Joshua Paul / AP

Malaysia Airlines flight crews arrive at Kuala Lumpur International Airport in Sepang, Malaysia, on Friday, July 18, 2014. The Malaysia Airlines Boeing 777-200 that was shot down over war-torn eastern Ukraine on Thursday was carrying 298 people from at least nine countries.

HONG KONG — Hit by two astonishing tragedies in quick succession, the Malaysia Airlines brand may become the airline industry's equivalent of asbestos or News of the World: toxic to the public and, experts say, impossible to redeem.

Malaysia Airlines Flight 17 was downed over eastern Ukraine on Thursday with 298 people aboard by what American intelligence authorities believe was a surface-to-air missile. Just four months earlier, a Malaysia Airlines jetliner carrying 239 people disappeared about an hour after taking off from Kuala Lumpur. The jet has still not been found, a source of profound unease for travelers and the aviation industry.

"I can't comprehend of anything they can do to save themselves," said Mohshin Aziz, an aviation analyst at Maybank in Kuala Lumpur, Malaysia.

"Perception-wise it really hits home," Aziz said. "It's very challenging. It's very difficult to fight against negative perception."

Even before the Flight 370 mystery, state-owned Malaysia Airlines was in serious financial trouble. In an industry notorious for impoverishing shareholders and irking customers, Malaysia Airlines had long stood out for its years of restructurings and losses.

That disaster along with the often bumbling response of Malaysia Airlines and the Malaysian government deeply scarred the carrier. Now, the once proud national airline is facing the unthinkable again.

Already losing about $1.6 million a day, there will be "no miracles" for Malaysia Airlines, said Aziz. Before the Ukrainian disaster, his opinion was the airline didn't have the capacity to survive beyond a year.

The airline's share price plummeted 11 percent Friday.

Unlike Flight 370, the responsibility for which is pinned with Malaysia Airlines, the second disaster appears largely beyond the airline's control. It may, however, face questions about why it continued with flight paths over eastern Ukraine, which is the heart of a violent rebellion against Kiev, when some airlines were circumventing the country.

For air travelers in Asia, who have a multitude of options thanks to the budget airline boom, the latest incident will make the Malaysian carrier even less attractive. Its brand in the rest of the world, where it became known largely because of the Flight 370 mystery, will become more closely associated with the worst fears of fliers.

Josh Gokul, an Australian university student on a layover at Incheon International Airport in South Korea, said he had flown with Malaysian Airlines before and its service was "fantastic."

But he is now "very hesistant" about using the airline. "Flying is scary enough."

His friend, Dayne Rodgers, waiting for a flight to Brisbane, Australia said even very cheap fares might not convince him to fly with Malaysia Airlines.

"I don't know if my Mum would let me," he said.

Within Malaysia, the shock is palpably raw.

"I was stunned," said 48-year-old shopkeeper Reezal Mohamed. "At first I could not understand. It's unbelievable."

Malaysia Airlines has been in the red for the last three years. Last year, its losses ballooned to 1.17 billion ringgit ($363 million), nearly three times larger than its 433 million ringgit loss in 2012.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.

Seth Kaplan, managing partner of industry newsletter Airline Weekly, said the airline was in "worse shape" financially that almost any other airline before Flight 370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," he said.

Wright reported from Bangkok. AP Business Writer Youkyung Lee in Seoul, South Korea, AP writer Satish Cheney in Kuala Lumpur, Malaysia and AP Airlines Writer Scott Mayerowitz in New York contributed.

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