Note to Malaysia Airlines: Call In an Expert to Fix This Mess

KUALA LUMPUR (TheStreet) -- Since March, everything has gone wrong for Malaysia Airlines, which lost 510 passengers, 27 crew members and two airplanes in two oddball fatal crashes, tried to recover with a ridiculously bad advertising campaign, faces mounting competition from Middle East carriers, continues to lose money for the fifth consecutive year, now flies planes filled with empty seats and plans to cut 6,000 jobs.

Moreover, the remnants of Flight 370, which apparently crashed somewhere in the Indian Ocean on March 8, still have not been found, and some experts think they never will. The cause of the July 17 crash of Flight 17 has not been officially determined, although Ukrainian separatists are widely believed to have shot it down.

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The Malaysia government appears ready to step in to try to save the country's national carrier. But the job is probably not one that a government can manage because so many unpleasant changes must be made, starting with layoffs to correct a history of overstaffing, said aviation consultant Bob Mann.

New top management must come from outside, Mann said. He called Malaysia "a typical inefficient legacy flag carrier facing a lot of low-cost competition," adding that the "government will have to bring in the right person and then stay hands off. "

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Malaysia Airline's problems include its fleet, a proverbial "one of each" array. The 52 aircraft include five aircraft types -- three Boeing (BA)  747s, six Airbus A380s, 13 Boeing 777s, 15 A330s and 15 737s, according to Wikipedia. (By contrast, the Southwest (LUV)  fleet of 680 jets includes two aircraft types.)

Besides being excessively diverse, the fleet is made up primarily of aircraft that are too big, Mann said. "It's a very complicated fleet, geared for long-haul and generally too large in gauge, which drags down unit revenue," he added. "You would very probably have to refleet it."

Initially, the Malaysia government appears to be taking the right steps. The government said last month it will provide a bailout of $1.9 billion and the carrier will cut 6,000 jobs, about 30% of its work force. Azman Mokhtar, managing director of the government's investment arm, promised a worldwide search for leadership.

The carrier said it lost $98 million in the second quarter and projected additional losses in the second half. The last profitable year was 2009. Since then, competition has mounted, primarily from Middle East carriers that have established vast international route systems that can carry passengers between Asia and the West, just as Malaysia seeks to do. Another competitor is Kuala Lumpur-based, low-cost carrier Air Asia.

Precedent exists for remaking failed carriers. ValuJet's reputation collapsed in 1996, due to a fatal crash that called its safety practices into question and caused a steep falloff in traffic. After the Federal Aviation Administration mandated a reduction in size, management enhanced safety practices, bought AirTran, took its name, and eventually sold out to Southwest. Unlike the Malaysia crashes, ValuJet's crash was caused primarily by the airline's own maintenance practices.

Perhaps a closer analogy is that by the late 1990s the reputation of Korean Air had been horribly blemished by a series of fatal crashes, including a 1997 incident when a Korean Air Boeing 747 crashed into a Guam hillside, killing 228 people. Partners Delta (DAL) and Air France ceased selling codeshare tickets on Korean.

Korean responded by seeking help from the outside, primarily from Boeing and Delta, as it sought to improve its safety practices and cockpit culture. Safety executives from US Airways and Delta were hired to oversee the improvements, despite opposition to hiring foreigners.

Between 2000 and 2006, Dave Greenberg, a former head of flight operations at Delta, worked at Korean to improve cockpit culture. In 2006, Delta and Air France resumed codeshare ticket sales.

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