March 11, 2014 1:45 am JST

Missing plane adds to worries of struggling Malaysia Airlines

TAKESHI SHIRAISHI, Nikkei staff writer

TOKYO -- As the search continued Monday for a Malaysia Airlines passenger jet, the mysterious disappearance cast a shadow on a carrier that has already had its share of troubles.

     Flight 370 took off from Kuala Lumpur with 239 passengers and crew members shortly before 1 a.m. on Saturday, only to lose contact with Malaysian air traffic controllers not long after. The revelation that two passengers had boarded the Beijing-bound Boeing 777-200 with stolen passports has raised suspicions of foul play.

     The incident comes as established players in the Southeast Asian nation's airline industry face growing pressure from budget carriers, which now control more than half of short-haul routes. Struggling under pressure from such low-cost rivals as AirAsia, Malaysia Airlines booked a 1.17 billion ringgit ($356 million) net loss for the year ended December.

     The company has endeavored to boost its competitiveness by scaling up operations. Malaysia Airlines added more routes last year, focusing on long-haul routes in particular. Available seat kilometers, a measure of capacity defined as the number of seats times kilometers flown, rose 17%.

     In 2013, Malaysia Airlines also officially joined oneworld, one of the top three global passenger airline alliances. Partnering with major carriers helped the firm raise revenue passenger kilometers -- the number of paying passengers times distance traveled -- 27% on the year in fiscal 2013.

     The aim is to use the increased volume to help absorb the company's fixed costs, which run higher than those of budget competitors. But the move to quickly boost capacity while mired in red ink has invited criticism.

     "They are going about this restructuring backwards," says an industry expert who maintains that returning to profitability and cutting labor costs ought to be top priorities for the carrier.

     And it looks like pressure on the country's airlines will only intensify down the road. Lion Air, Indonesia's top low-cost carrier, has its own plans to ramp up capacity in Malaysia, while high-speed rail connecting Kuala Lumpur and Singapore is scheduled to start running in 2020.