Posted on 03/07/2016

Malaysia Airlines is out of intensive care and working on long-term rehabilitation. Two years ago this week, disaster struck when Flight 370 vanished, leaving the company reeling from a crisis magnified months later by the downing of a second Boeing 777 over Ukraine.

Shunned by travellers and already ailing from years of mismanagement that saddled it with at least US $1.7 billion in losses since 2011, the Southeast Asian airline teetered on the edge of bankruptcy, forcing its government owners to carry out radical restructuring.New CEO Christoph Mueller, a turnaround veteran, has been scaling back or cutting unprofitable routes, grounding jets and axing 6,000 workers from a bloated workforce as part of a $1.7 billion overhaul aimed at returning the carrier to profitability as early as next year.Analysts say, however, the strategy of shrinking to survive makes Malaysia vulnerable to fierce competition from the budget carriers proliferating to serve Asia's booming, travel-hungry middle class consumers. Competitors include homegrown rival Malaysia AirAsia as well as Indonesia's Lion Air, Singapore's Tigerair and Scoot and Qantas offshoot Jetstar.Mueller made his biggest move yet in December, unveiling a strategic alliance with Emirates that allows Malaysia Airlines to piggyback onto more than 90 of the Gulf carrier's global routes as it shrinks its own network to focus on Asia.The deal with Emirates, one of the world's biggest airlines by seat capacity, was “definitely a rabbit out of the hat,” said Mohshin Aziz, an aviation analyst at Maybank Kim Eng Securities. “Yet they made it happen. For me, that's definitely a solid foundation for their future survival.”Still, the unsolved mystery of MH370 haunts the airline.Flight 370 disappeared after leaving Kuala Lumpur on March 8, 2014, carrying 293 people. No trace of the Boeing 777 has been found except for a wing part on a Reunion beach last year and, possibly, part of a tail section discovered last weekend on the Mozambique coast.In June 2014, Flight 17 was shot down en route to Amsterdam by what Dutch authorities say was a Soviet-designed missile, killing all 298 people on board.Despite better than expected rankings in airline safety surveys, some travellers still worry, complicating Malaysia's battle against cutthroat competition. Passenger traffic at Kuala Lumpur International Airport's main terminal, used by Malaysia Airlines and other full-service carriers, fell 9.2 percent last year, while traffic at the budget terminal rose 9.5 percent.Mohshin credits Mueller, a German and the first foreigner to lead the airline, with making tough changes avoided by predecessors.Mueller carried out a successful but tough revamp of Ireland's Aer Lingus that earned him the nickname “The Terminator” because his accent made for apt comparisons with Arnold Schwarzenegger's cyborg hitman.Aiming to help Malaysia Airlines re-emerge as Southeast Asia's leading carrier, since he took charge in May he has led renegotiations of supply contracts and aircraft leasing deals, brought in new senior executives with budget airline experience and introduced state of the art German cost-management software meant to cut ground operations costs by 20 percent.To attract more passengers, the airline is updating inflight menus and rolling out new services like on-board Wi-Fi and a new lie-flat seat in business class on some aircraft.Malaysia's already skeletal network outside Asia has been scaled back further. Paris and Amsterdam routes were scrapped in January as part of a broader withdrawal from international markets that started before the crisis struck. London and Jeddah, Saudi Arabia, are now its only non-Asia-Pacific destinations, though passengers can buy code-share flights transiting through Emirates' Dubai hub.The airline is adjusting its fleet to cut costs and accommodate the route revamp, phasing out older Boeing 777s and fuel-hungry Airbus A380s and scaling back on smaller Boeing 737s. The airline has ordered four A350s, Airbus's latest and most advanced airliner.Tumbling oil prices have helped cut fuel costs, though the gains were partially eroded by the dollar's recent rise against Malaysia's currency, the ringgit.However, doubts persist over whether the government-backed carrier serves Malaysia's long-term interests.“The question that needs to be asked is does Malaysia need Malaysia Airlines now?” asked one analyst. “If Malaysia Airlines were to shut down tomorrow there won't be many people who would feel the absence.”Families file suitMeanwhile, twelve Chinese families with relatives aboard the missing plane filed a lawsuit in a Beijing court today, one day before the deadline for pursuing litigation against the carrier.Under international agreements, families have a two-year window to sue following an air accident.Speaking outside a transportation court in Beijing, the group's lawyer, Zhang Qihuai, said the families are seeking a range of damages but the ultimate goal of the lawsuit is “to find out the cause of the accident and those who are responsible.”Several relatives said they hope to use the case to obtain more information from the airline, which they said has not been forthcoming.“If we lose this opportunity, it might become even more difficult” to obtain answers, said Zou Jingsheng, a professor whose 27-year old son, Ling Annan, was studying in Malaysia and was on the flight. “We will find out the truth through legal means, and we'll look into the responsibilities that Malaysia Airlines failed to fulfil.”The lawsuit also named Boeing and jet engine manufacturer Rolls-Royce among the defendants. The court will decide if and where to hear the case. Malaysia Airlines did not immediately respond to an email requesting comment about the case.