On March 8, the Beijing-bound Boeing 777-200 vanished mysteriously from civilian radar screens, less than an hour after departing Kuala Lumpur, with few clues as to what exactly happened. Search efforts are under way in the Indian Ocean, where the flight is widely believed to have ended. About two-thirds of the passengers on the missing flight were Chinese nationals.
Chinese tourists are a key driver of growth in Malaysia's tourism industry, Krystal Tan, an economist at Capital Economics, said in an email, noting their arrivals in Malaysia have risen an average 16.7 percent year-on-year for the past three years, compared with total arrivals average growth of just 1.5 percent year-on-year.
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Amid the search for the missing flight, the country has stopped promoting its Visit Malaysia Year campaign, but the over 200 events associated with it appear set to go on as planned.
Previous Visit Malaysia Year promotions in 2007, 1994 and 1990 boosted tourist arrivals by 19 percent, 11 percent and 54 percent respectively, compared with a long-term compound average growth rate of 8 percent, according to a Credit Suisse report from February.
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"The sad events of MH370 raise doubt about the government's ability to meet its tourism goals" of boosting arrivals by 12 percent this year under its Visit Malaysia Year campaign, Circosta said.
Companies linked to air travel, such as Malaysian Airline System, AirAsia and Malaysian Airport Holdings (MAHB), will likely suffer in tandem.
"We estimate a substantial decline in visitors and throughput from the region," UOB KayHian said in a note last week. "Malaysian aviation is not the sector to invest in for the next six months." It noted China accounted for 6.3 percent of MAHB's throughput.