Malaysia Airline System (MAS) fell in early trade on Bursa Malaysia today as the market digested the latest news of the tragedy that struck the company.

The crash of flight MH17 enroute from Amsterdam to Kuala Lumpur, reportedly shot down in eastern Ukraine dragged the company’s shares as it is still recovering from the loss of flight MH370.

At 11 a.m today, MAS shares were the top volume traded counter on Bursa Malaysia with its price falling to 18.5 sen or by 20.5% before recovering to 20.5 sen.

MAS which suffered losses for the last 3 financial years is facing immense pressure to improve its financial performance. Its 69% shareholder, state owned sovereign fund, Khazanah Nasional, had announced recently that it was looking at restructuring the company within a year.

This latest incident is a major setback to the company and will make a revival of its fortunes more difficult.

The fact that Khazanah is the major shareholder and has the financial firepower to undertake a massive overhaul of the company does not compensate for the loss of investor confidence in the company.

“The very fact that the government has taken a position that it will not allow MAS to fail has provided some assurance and some kind of floor to its price,” said Pong Teng Siew , the Head of Research of Inter Pacific Securities Sdn Bhd..

MAS currently has a cash burn rate of RM5 million per day according to a report by Maybank IB which was released on June 23.

This could exert pressure on its cash reserves but by the end of 2015 this could increase as much as 5 times and the one year time line set by Khazanah for restructuring could be too late.

Maybank reckons that MAS has to carry out an equity injection by mid 2015.

MAS recorded a net loss of RM935 million for FY2013 and Maybank estimates its losses to balloon to RM1.2 billion for FY14.

In 2013, MAS successfully drove up the daily utilization hour of narrow-body planes from 9 to 11 hours.

The persistent high oil prices also acts against the company. According to Maybank, MAS would consume 15.8m barrels of jet fuel in 2014.. A US$ 1 per barrel increase in jet fuel prices on a full-year accounted basis would add RM51.4 million to costs.

At this juncture , it very well seems that the government assurance of not allowing to fail is the only thing going for MAS and preventing a complete free fall of its share price.

However, it remains to be seen , what the floor of its shares would be. Maybank has a price target of 12.5 sen on MAS with a ‘Sell” recommendation.