How to Fix Malaysia Air? Call Japan. Malaysia Airlines faced deep financial problems even before the disappearance of MH370

What happened to Malaysia Airlines flight 370? That’s naturally first and foremost on everyone’s mind. But there’s another unanswered question: What will happen to Malaysia Airlines itself?

Well before the air disaster, this was an airline in bad financial shape. Last year, one in which the majority of the world’s airlines earned at least some profit, Malaysia Airlines spilled $300m in red ink (officially negative $370m), with an operating margin that was nearly the worst among all reporting airlines worldwide (fourth from the bottom among roughly 70). It lost money in 2011 and 2012 too, when nearly every other East Asian carrier made money. And it barely made money in 2010, the best year ever for Asian carriers—that year, its 2% operating margin was a shocking 20 points lower than that of its hometown LCC rival AirAsia.

Now, it surely faces at least some book-aways in the aftermath of the tragedy. Those book-aways are probably most severe on China routes, where it flies from Kuala Lumpur to no fewer than six cities—Beijing, Shanghai, Guangzhou, Kunming, Xiamen and Hong Kong—as well as to Shanghai and Hong Kong from Kota Kinabalu too.

Unlike most air disasters, moreover, which grab the world’s attention for several days, the MH370 disaster has lingered in the news for weeks, all the while grinding on the airline’s reputation. The company hasn’t publicly disclosed any financial impact from the incident’s fallout, but it’s clearly substantial, putting added pressure on a company that—even before any of this happened—faced survival risk. And to be sure, there is precedent for major air disasters putting the nails in the coffins of already distressed airlines: Pan Am after the bombing of flight 103 over Scotland, TWA after the explosion of flight 800 and Swissair after the crash of flight 111 are three prominent examples.

Of course, Malaysia Airlines is different in one important respect: it is 60% owned and controlled by its government, which showed a willingness to…

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