Immediate tourism growth possible 'irrespective' of low cost airlines

Analysis has shown that there could be immediate growth in the tourism industry both with and without low cost airlines, Tourism Minister Francis Zammit Dimech said yesterday.

He was speaking at a business breakfast organised at the Radisson by Business Today on the future of low cost airlines. Judging by the high turnout of representatives from every sector of the tourism industry, the debate on their short-term and long-term impact is far from over.

Dr Zammit Dimech said the government wanted to ensure that low cost airlines would not become a "dangerous" monopoly that pushed out established operators, but a "new partner". Malta "... at its peril (would) become totally dependent on low cost carriers that would not hesitate at all to dictate to us new terms and conditions whenever it so suits them," he said.

The Labour shadow minister for tourism, Evarist Bartolo, warned that traditional operators, ranging from tour operators to airlines and hotels, had to adjust to the new realities of internet booking and cheaper travel - or vanish.

However, the pressure on low cost airlines is considerable. While traditional carriers need to fill 65 per cent of the seats to make a profit, low cost carriers need at least 90 per cent occupancy to stay in the black, Mr Bartolo said.

"Ryanair, Easyjet and Air Berlin have to find 75 million new passengers a year just to cover the expense of buying new planes and that is why they are searching frenetically for new viable areas where to expand," he said.

"They cherry pick the most delicious routes. They know very well how to take care of their own interests. We do not need to do that for them. We need to take care of our own interests."

Mr Bartolo said this was the crux of the debate: Since the majority of Malta's destination markets use traditional distribution methods, it would not be wise to alienate them. However, it is not up to Malta to try to encourage low cost airlines to operate from new destinations that Malta wants to break into.

"(Airlines and tour operators) will squeeze each other out and we must be careful not to take the wrong step and end up being the biggest losers," he said.

"It is in small markets that incumbent airlines and tour operators are more likely to reduce capacity and even withdraw in the face of increased competition from low cost airlines."

He suggested that the solution was subsidies to incentivise all those interested in bringing in tourists, saying that Air Malta should survive to avoid Malta become dependent on operators whose loyalty was based merely on their "bottom line".

Both Air Malta, represented by chief operating office Joe Cappello, and Malta International Airport, represented by chief executive officer Peter Bolech, insisted they were all in favour of competition and increased traffic. However, both stressed that this should come from a level playing field.

Mr Cappello listed a number of low cost airlines' shortcomings, such as their lack of inter-connection with other airlines, the lack of cargo and their low appeal to the lucrative conference and incentive industry.

"It is true that there would be a spike in traffic, but we would not expect it to last for more than 12-13 months. After that, it would probably rationalise and the market will find its own level - albeit with new players in the field," he warned.

Mr Bolech queried whether low cost airlines create new traffic or merely re-route existing tourists. While low cost airlines claim that 60 per cent of their traffic is new market share, other studies paint quite a different picture.

He said that MIA had offered discounts of 50 per cent to any airline wishing to operate a reasonable schedule from underserved or new destinations but none had come forward.

"Contrary to the colourful claims made in the media, Ryanair is simply not interested in Malta. Low cost airlines make their money from short hops to where they can operate three rotations a day. They would only be able to operate two rotations a day to Malta because it is further away, so the route would have to be very successful to be profitable."

The director general of the GRTU, Vince Farrugia, took up the point of volume, querying why Malta was insisting on 1.5 million tourists as being the sustainable limit. "What will we do if the limit is reached and another tourist wants to come over? Tell them to go home because Malta is full?"