(Bloomberg) — Malaysian Airline System Bhd. is facing an influxof passenger cancellations after the carrier's second disaster thisyear, adding to the strains of a company that's bracing for afourth consecutive annual loss.

Travel agents from Melbourne to Singapore, New Delhi andMalaysian Air's home country said they've seen a spike in withdrawnreservations since MH17's downing this month — with cancellationsclimbing above 20% in some places. The Samoan women's rugby teamswitched to Thai Airways International Pcl from Malaysian Air onJuly 27 for a flight to a world cup event in France.

The cancellations may add to the financial difficulties of anairline whose state-run parent, Khazanah Nasional Bhd., estimatedit only had enough cash to operate for a year even before thelatest crash. The two Malaysian Air disasters have left 537 peopledead this year, which means 2014 will be the worst year in almost adecade for commercial airline fatalities.

Passengers “are very, very afraid about anything else happeningagain,” said Ann Chitumbalam, manager at Escape Travel Sdn.'sbranch in Petaling Jaya, who's seen about 30% of Malaysian Airbookings through her office canceled. Ticket holders “don't want totake a risk,” she said.

Chitumbalam said she received a text-message from a businessmanwithin hours of the crash, canceling a trip to Amsterdam onMalaysian Air.

Four Months

The airline said July 19 it would refund fares to customerspostponing travel or canceling their tickets, includingnon-refundable ones. It also agreed to waive any fees for peoplechanging travel plans to any destination Malaysian Air flies toduring 2014, as long as they applied from July 18 to 24.

Subang-based Malaysian Air, responding by e-mail to questionsabout passenger traffic, declined to give numbers of cancellationsor to comment on ticket prices.

While passenger traffic figures since the July 17 downing ofFlight 17 aren't available, Webjet Ltd. in Melbourne estimates it'scanceled about a quarter of its Malaysian Air bookings since thedisaster, which killed all 298 people on board and occurred fourmonths after the disappearance of Flight 370.

Yatra.com, a New Delhi-based, online travel agent, saw anincrease in cancellations and a dip in Malaysian Air bookings afterthe latest incident, said Sharat Dhall, the company'spresident.

'Double Whammy'

“It's just natural to be worried,” Sera Mika, manager of thefemale Samoan rugby team, said by phone from Auckland. “We did havea lot of concerns.”

In Singapore, Dynasty Travel estimates passengers will thinktwice before booking flights with the airline.

“Many will avoid Malaysian Air for the time being,” said AliciaSeah, spokeswoman at Dynasty Travel, one of the three largestleisure travel agents in Singapore, without specifying any numberfor cancellations. “This is certainly a double whammy for theairline.”

Malaysian Air, which racked 4.13 billion ringgit ($1.3 billion)in losses in the past three years, will probably lose more than 1billion ringgit in 2014 as it grapples with costs and an exodus ofpassengers, according to the average analyst estimate compiled byBloomberg.

Loyal Customers

Thirteen of 15 analysts whose ratings are tracked by Bloombergsay investors should sell the airline's stock while two say hold.The carrier's shares have declined 29% this year, after dropping ineach of the past six years.

In June, before the latest disaster, Malaysian Air carried 3.1%fewer passengers than a year ago, the second straight monthly drop.The previous month saw the highest proportion of empty seats since2009.

Reversing that trend would involve restoring the loyalty ofcustomers such as Vincent Sim, a 35-year-old self-employedSingapore resident.

“The airline is going through such bad time, but I willdefinitely fly with them in the future as their prices, service andaircraft are on par with that of Singapore Airlines and Emirates,”Sim said.

Malaysian Air has sought to lure passengers by offering lowerfares. Today it had six of the ten cheapest single-stop fares forearly-December return flights between Sydney and London on pricecomparison site skyscanner.net, undercutting China SouthernAirlines Co. and Cathay Pacific Airways Ltd.

Cutting Prices

At A$1,818 ($1,712), Malaysian Air's cheapest return fare is4.2% cheaper than its lowest-priced option a week earlier. The newrate would result in the carrier being paid less than 5 U.S. centsper kilometer over the 34,260-kilometer (21,300-mile) round trip.That compares to average costs of 5.34 cents per kilometer onMalaysian Air's network in 2013, according to data compiled byBloomberg.

“They are under severe cost pressure,” Tan Kam Meng, an analystat TA Securities Holdings Bhd. in Kuala Lumpur, said by phone. “Idon't think cutting airfares would be an advantage.”

While travelers and prices adjust to perceived risks, thedowning of Flight MH17, 60 kilometers from the Ukrainian city ofDonetsk, brought that region's conflict back into the globalspotlight. Rather than prompting a pause in the fighting, it risksescalating hostilities while world leaders pressure RussianPresident Vladimir Putin to speed an investigation. Some evidencepoints toward the plane being brought down by a surface-to-airmissile.

Appreciating Service

Malaysian Air Chief Executive Officer Ahmad Jauhari, who said ina June interview that he may modify the airline's future planeorders as a result of the MH370 disappearance, may need to reducefrequencies on some international routes, according to a May 16report by CAPA Centre for Aviation, a Sydney-based consultancy.

The carrier had previously anticipated ordering as many as 100planes for delivery from late 2016 or early 2017, a person familiarwith the matter said in February.

While cheaper prices may deter defections, some people will beharder to convince.

“I will not travel MAS,” Chen Shiying, a science tutor inSingapore, said in reference to Malaysian Air. He says he's beenshunning the carrier for some time because it is “suay,” or unluckyin the Hokkien dialect. “It might not be their fault, but still, Iwould want to avoid taking them.”

–With assistance from Elffie Chew in Kuala Lumpur, AndreaTan and Weiyi Lim in Singapore and Anurag Kotoky in NewDelhi.

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