Air Malta in third surcharge amid oil price concerns

Fares on all Air Malta scheduled flights are due to go up again after the airline announced an €8 fuel surcharge from July 15 on all its scheduled routes with the exception of flights to Sicily.

This is the third fuel surcharge imposed by the airline in just over a year, bringing it up to €16, as the price of crude oil continues its inexorable rise.

The fuel surcharge on tour operating fares will be applied gradually from October, with the airline sensitive to the fact that this sector is the "main driver" of tourist traffic.

Ernst Funk, chief executive officer of Air Malta said: "We need to close the gap and attempt to stabilise our operational budgets. We know that we could be losing some traffic but we must first and foremost protect the survival of the company.

"We had to take this corrective measure to realign our expectations in line with the turnaround plan. Most of our competitors have already started to take similar measures and we expect others to follow."

He said Air Malta understood that it has a commitment to the Maltese community in general and in particular to the continued growth of tourism to the islands. It was very sensitive to the impact that this measure will have on incoming tourist traffic.

"Therefore, we are scaling in this surcharge (on tour operating fares) as from October, with a lower surcharge in winter and with the full surcharge introduced on these fares as from next summer," said Mr. Funk.

He said the airline was not very confident that jet fuel prices will see substantial drops from the current levels and was being vigilant in order to make the necessary adjustments if and when needed.

"We are obviously concerned with the present situation and further escalations can derail the massive efforts that have been made to turnaround the company. It is for this reason that we have to maintain vigilance to protect our bottom line.

"Apart from watching the price of fuel on the international market, we are constantly updating our fuel and currency hedging policies to reflect today's realities. We are also applying very rigorously our fuel burn policies to ensure the most effective way of managing the consumption of this commodity."

Air Malta said that the constant rise in the price of crude oil, which has now reached over US$60 per barrel, is continuing to have a negative effect the financial performance of the global airline business.

In order to deal with the continued hike in fuel costs most airlines including Air Malta had, over the past year, applied fuel surcharges in an attempt to realign their revenues and operating costs.

Air Malta estimates that its fuel bill has over the last 12 months doubled in spite of attractive fuel hedging agreements that the airline had successfully managed to conclude in the past and which counteracted some of these increases.

With the latest surge in jet fuel costs some of the larger airlines have already started to announce further fuel surcharges on their fares, it said.