MH370, 100 Days On: Finding answers at all costs

The unsuccessful search for Malaysia Airlines (MAS) flight MH370 – 100 days after it vanished – continues to become the largest, longest, and costliest operation in aviation history.

Without answers, pressure mounts for the governments involved in the multinational mission each passing day.

And as days go by, questions grow louder: How long will it drag on? At what cost? Who will pay?

Analysts Astro AWANI spoke to said if the plane is not found by this year end, monetary costs could easily surpass half a billion ringgit.

"All in all, we'll reach RM500 million by the end of this year, if not more, and that's a very low conservative estimate," said an aviation analyst who wished anonymity due to his close ties with the government and industry.

'Costs are not the priority'

To put the amount in context, Malaysia had, during Budget 2014, allocated RM500 million for the Pan-Borneo Highway; RM457mil for the provision of potable water to 8,000 houses in rural areas, and RM441mil for the development and welfare of the disabled.

In comparison, the previous most expensive search, the recovery of Air France 447, was at least RM322 million (USD100 million). Government sources have been reported to have said MH370 would cost at least double the amount.

For all 26 countries involved so far, the total expenses that have been made public has already exceeded RM250mil (see below). This involves everything in terms of ships, satellites, planes and submarines deployed first in the South China Sea and the Malacca Straits, and later in the southern Indian Ocean.

Australia, whose territory the search zone falls within, has reportedly spent the most at RM130 million.

Although they kept mum on the cost at first, the Malaysian government had, last week, revealed that they have spent RM27.6 million so far. This small amount, however, might change as Malaysia has committed to "sharing 50-50" with Australia in the next phase of the search.

It still remains unclear how much each country is required to pay in the end. All international aviation treaties – including the 1944 Chicago Convention, the 1963 Tokyo Convention, 1970 Hague Convention, and the 1971 Monteal Convention – are virtually silent on which countries should bear the costs in a search for a missing aircraft.

The governments involved – now mainly Malaysia, Australia, China – have vowed to "never give up", and that the families, rather than monetary costs, were the number one priority.

"No one will say that the operations to find MH370 is a waste of money, so it's important for Malaysia to tell how much have been spent and is going to be spent. People need to know the plan moving forward so that Malaysia won't be accused of playing around," an aviation analyst said.

Impact on economy and confidence

While the search for MH370 will definitely incur additional costs for Malaysia, it would not be huge at all as the economy is now more robust, said RAM Holdings economist Dr Yeah Kim Leng.

"If no extra revenue from other sources is raised, it would mean a slight widening of the fiscal deficit for Malaysia, which means higher borrowings. But it is very small," Yeah told Astro AWANI, adding that such a spending would be only 0.1% of the country's RM1trillion economy.

Financial costs aside, the impact on Malaysia's credibility, in fact, might be greater. There has been some dent in confidence, especially from Chinese nationals, following their criticisms of Malaysia's handling of the crisis.

Already, analysts have predicted a 20% to 60% drop in tourists arrivals to Malaysia, with some estimates losses of up to RM4.2 billion.

"A tangible impact is the decline in tourist arrivals from China and for MAS. But hopefully as time goes by, it will resume to normal," said Yeah. Investor confidence, impacted by a trust deficit, he said, would also be short term as Malaysia has improved internationally in business rankings.

"These are purely based on perception. What needs to be done is to restore confidence and move forward. Learning and improving our capabilities. If Malaysia can arrest the kind of erosion then the impact will be transient."

Another financial analyst said, there has been no impact whatsoever in the stock exchange, and the world economy is largely positive.

"The KLCI (Kuala Lumpur Composite Index) has not seen any difference whatsoever.

"The unseen costs may some amounts needed to offset the assets that some third party companies are offering. It could be through tax incentives or other means. Or these companies could merely be doing corporate responsibility," he said.

Flight MH370, a Boeing 777-200ER, vanished on March 8 with 239 people on board less than an hour after takeoff from the Kuala Lumpur International Airport.

The aircraft should have landed in Beijing at 6.30am that same day.

On March 24, Prime Minister Datuk Seri Najib Razak announced that MH370 had "ended its flight in the Indian Ocean", according to the raw data information provided by British satellite company Inmarsat.

The first phase of the search ended late last month, with no conclusive findings and assets being pulled back.

The search is now in 'transition' and reparations are now underway for the second phase to begin in August, which will focus on a wider undersea search.

How much has the MH370 search operations cost for the countries involved?

MALAYSIA

- Acting Transport Minister Datuk Seri Hishammuddin Hussein told the Malaysian Parliament that the Government has spent RM27.6 million, including the cost for fuel, food, equipment and personnel.

- Another explicit cost figure is the US$5,000 (RM16,397) offered by MAS to the next-of-kin of the flight's 227 passengers, amounting to US$1.25 million (RM 3.7mil). This is a statutory payment required under international laws.

AUSTRALIA

- At AU$43 million (RM130million), Australia has spent the most so far. Overall, the Australian government has allocated AU$89.9 million (RM272 million) and another additional AU$60 million (RM181 million) for underwater operations in the southern Indian Ocean.

- The Joint Agency Coordination Centre (JACC) overseeing the search will cost AU$2 million (RM6.4million) over two years.

UNITED STATES

- The Pentagon in April said it had already spent more than US$3.3 million (RM11million) and plans were in place to double its original US$4 million (RM13 million) budget.

- The United States Navy has also reportedly allocated US$3.6 million (RM11.8mil) for the deployment of a pinger locator and underwater drone on the vessel that will search for the plane's black box recorders.

CHINA

- So far, China has refused to disclose how much it has spent. It reportedly committed a total of 18 ships, eight helicopters and three fixed-wing aircraft to the month-long search.

- Communist Party-published newspaper Global Times estimated each warship would cost at least US$100,000 (RM322,000) a day to operate.

NEW ZEALAND

- New Zealand has reportedly spent NZ$1.2 million (RM 3.3 million) for the Air Force P-3K2 Orion and 40 personnel to search for 53 days.

VIETNAM

- Vietnam has reportedly spent more than US$8 million (RM26.2mil) in the initial search phase in the South China Sea, but officials have yet to confirm the amount.