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Doubts cloud Malaysia Airlines recovery after abrupt CEO exit

A boy walks past Malaysia Airlines planes on the tarmac at Kuala Lumpur International Airport in Sepang, Malaysia, March 2, 2016. REUTERS/Olivia Harris

By Rozanna Latiff and Emily Chow

KUALA LUMPUR (Reuters) - Malaysia Airlines said chief executive Christoph Mueller would step down little more than a year after joining the struggling carrier in September, an early departure that raises concerns over the future of the aviation veteran's turnaround strategy.

The airline said late on Tuesday Mueller's exit was triggered by "changing personal circumstances". Hired last May on a three-year mission to revive the state-controlled firm after years of heavy losses, the German executive could not be reached for comment.

Malaysia Airlines made no further comment on Mueller's personal situation, but said it has begun the search for a new chief executive. Mueller, 54, intends to remain on the carrier's board as a non-executive director, it said.

The departure amid early signs Mueller's recovery strategy might work is a major blow for a carrier still coping with 2014's loss of two Boeing 777s, separate disasters that triggered a 6 billion ringgit ($1.55 billion) state restructuring package. Though still in the red, the airline has reported improved traffic and on-time-performance and last month Mueller forecast annual profit by 2018.

"Mueller is a war general, he came in at the worst time," said Mohshin Aziz, an analyst at Maybank Investment Bank in Kuala Lumpur. "A change of management can't help, a lot of people might feel things are uncertain."

Under Mueller, who previously steered a financial turnaround at Irish carrier Aer Lingus (AELGF.PK), the airline brought in a roster of experienced executives to head operations, commercial and marketing teams.

With the blessing of Malaysia's state fund Khazanah, the new management also re-negotiated contracts with suppliers and leasing firms, leased new A350 aircraft from Airbus Group (AIR.PA) that were cheaper to operate and refocused on Asian traffic, rather than long-haul destinations.

Malaysia Airlines said that while it looks - externally and internally - for a new boss, it has appointed Chief Operating Officer Peter Bellew, formerly with European budget carrier Ryanair (RYA.I) executive, to the board.

"They need someone with Christoph's vision for the airline's future, the drive to push the changes through, and the nous to manage the politics that come with running a state-owned airline," said one industry source familiar with the company's executives and operations.

"They did well to get Christoph, but it may be even harder to find an adequate replacement."

(Additional reporting by Siva Govindasamy in SINGAPORE; Editing by Clara Ferreira-Marques and Kenneth Maxwell)