When lightning strikes twice: The tragedy-induced demise and attempted corporate resuscitation of Malaysia airlines

https://doi.org/10.1016/j.annals.2020.103109Get rights and content
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Highlights

  • We investigate the financial effects of the Malaysia Airlines disasters.

  • Share price response to both tragedies was substantial compared to previous incidents.

  • The reverberating shocks changed long-standing correlations and information flows.

  • International passengers sought other options despite lower fares offerings.

  • The most prudent choice was Malaysian state intervention to protect tourism industry.

Abstract

In 2014, Malaysia Airlines experienced two tragedies in quick succession, damaging the company's reputation and finances, with negative implications for Malaysian tourism. This research assesses the impact of this. We find that the share price response was immediate and substantive. The carrier implemented sweeping adjustments, while passenger traffic rapidly declined particularly in Asian markets. Malaysian Airlines augmented fare reduction after each accident to stem the ongoing leakage of passengers. Traffic from China witnessed sharp declines, signalling the severity of the incumbents' prognosis. We further examine the investor response and the ultimate government decision to nationalise and restructure.

Keywords

Malaysia Airlines
Airline
Crisis management
MH17
MH370
Nationalisation

Cited by (0)

Marina Efthymiou is an assistant professor in Aviation Management at Dublin City University Business School, Ireland. In the past, she held posts at the University of West London, UK and EUROCONTROL, Belgium. Dr. Efthymiou's research interests focus on the business economics of air navigation service providers, air traffic management and policy issues, aviation governance and performance regulation, as well as sustainable aviation.

John F. O'Connell is a reader in Surrey University, UK. Previously, ‘Frankie’ worked for Cranfield University (where he also completed a PhD in Airline Strategy), Boeing and Embry-Riddle Aeronautical University. He holds a pilot's licence and has produced over 40 academic journal papers as well as a popular book entitled Air Transport in the 21st Century. He is also a regular speaker at international commercial conferences discussing the ongoing trending events in the airline industry.

Brian Lucey is a professor of International Finance and commodities at Trinity the Business School Trinity College Dublin. A PhD graduate from Stirling University, Prof Lucey has worked as a statistician, a central banker, and since 1992 as an academic. He is editor of International Review of Financial Analysis, Finance Research Letters, and has published in excess of 100 peer-reviewed papers, mainly in the areas of international finance, international economics, and behavioural finance.

Shaen Corbet is Professor of Finance at Dublin City University Business School in Dublin, Ireland and holds a PhD in finance (NUIM). He is Programme Chair of the MSc in Finance (MFCM) and has previously worked as a commodities and equities trader, and with the Financial Stability Department at the Central Bank of Ireland. He has published across a range of economics and finance topics including econometrics, financial derivatives and international economics and finance.