Air Malta improves its market share

The Air Malta Group yesterday reported an operating profit of Lm5.3 million, with Air Malta reporting a profit before tax of Lm109,000. However, both Air Malta and the group ended in the red, mainly because of losses of Lm7 million in AZZURRAair and "a staggering Lm19 million impairment loss on the seven RJs which the company had to take at one go".

Former chairman Louis Grech said when contacted that "notwithstanding an exceptionally difficult time for aviation, the Air Malta Group achieved a highly remarkable financial result".

A company statement said the operating profit was attained in a period marked by economic recession and accentuated by the impact of the events of September 11, 2001.

"The market in which Air Malta operates was relatively stagnant, but the airline responded strongly, increasing its market share from 57 per cent to 64 per cent. Robust performances were also attained in its tax-free and tour operating business," Air Malta said.

The group turnover amounted to Lm174 million for the 16-month period that ended in July, 2002. Turnover for the year ending in March, 2002, was Lm126 million, an increase of Lm2 million over the same period the previous year.

"Overall, the group reported a profit before tax of Lm332,000 compared with a loss of Lm3.7 million in the year ended March 31, 2001."

The profit and loss accounts show that the airline company registered a loss of Lm481,000, which is again associated to the losses of AZZURRAair and the impairment charge on the sale of the aircraft.

Air Malta said that the "very positive results were achieved after the company had absorbed in its accounts a loss of Lm26 million, comprising a staggering Lm19 million impairment loss on the seven RJs which the company had to take at one go; and Lm7 million, being Air Malta's share of the loss in AZZURRAair."

Air Malta said the problem it faced with the RJs was that their market value had been falling rapidly below their book value and their resale prices spiralled downwards after the September 11 events and after British Aerospace's decision to terminate their production.

"On their own these two negatives could have crippled most companies even at the best of times, let alone in these abnormally harsh market conditions," Air Malta said.

To balance out, the company netted Lm23 million through the sale of its other aircraft in the ILFC deal. This surplus and the operating profit earned during the period served to offset the losses on other assets, especially the RJs.

Mr Grech said that another major achievement was that Air Malta had been able to reduce its borrowings by Lm68 million in practically five years.

"Group debts were reduced from Lm81 million in 1998 to Lm59 million as at March, 2001. This amount was then further reduced to Lm29 million as at the end of July, 2002. Group borrowings currently stand at Lm13 million.

"Cash and bank balances increased from Lm27 million in 2001 to around Lm41 million as at July, 2002. The appreciable rise in the liquidity was a key survival tool in the present turbulent times of the airline industry," Mr Grech said.

Air Malta said it experienced spiralling costs particularly in insurance, security and fuel.

"Air Malta's management, however, rose to the challenge and embarked on initiatives on several fronts. It emerged from this difficult period without shareholders' intervention by way of capital injection or financial handouts, and without terminating the employment of one single staff member, while sustaining tourism," the company said.

Air Malta has entered into long-term leases for a fleet of 12 new A320 and A319 aircraft, at highly advantageous financial benefits over a 12-year period. The first delivery will take place in December this year.

By the end of 2004, Air Malta will have changed six aircraft, representing half of its fleet. The company also entered into a joint venture agreement with Lufthansa Technik.

Mr Grech said Air Malta was on track to join a global alliance within the next few months.

"Air Malta should look very positively towards the future, especially considering the achievement registered by the airline group in this traumatic period.

"The major decisions taken should provide the airline with a smoother ride in future. However, nothing should be taken for granted. It takes very little for a positive position to be transformed into a negative one with far reaching consequences.

"I am confident that with our experience, flexibility, commitment and creativity we will continue to remain a major driving force of the Maltese economy, especially in tourism, at the same time enhancing our shareholders' value.

"But it would be very foolish to assume that the company does not have any inefficiencies, weaknesses or threats. However, I feel that we have been successfully effective in implementing the necessary strategies and to have taken fundamental decisions which addressed deep short term crisis hitting aviation as well as the group's long term goals".