Gatt tears into low-cost airlines

Investments Minister Austin Gatt yesterday unleashed a scathing attack on low-cost airlines that were asking for subsidies to fly to Malta, insisting that the government was not sheltering Air Malta with state protection.

Dr Gatt kept up his reputation for outspokenness when he used his opening speech at the Amitex fair at the Trade Fair grounds, in Naxxar, to pan the requests of certain budget airlines and denounce the Labour opposition.

"The 'low-cost-at-all-costs brigade' conveniently ignore the simple fact that it is the low-cost airlines that do not want to enter the field of competition," the minister said at the opening of the Air Malta fair.

"It is the low-cost airlines (or, more precisely, a particular one) that are asking for subsidies - a word which is anathema when associated with state enterprises but seemingly acceptable if given to a privately-owned company."

His speech was delivered a couple of weeks after the government announced a series of fiscal incentives to help airlines fly more passengers in the winter months.

Low-cost airlines have become the magical mantra that will supposedly solve all the problems of the tourist sector, Dr Gatt said.

Air Malta competed in a liberalised market in which all airlines could compete without restrictions. If charges were high for low-cost carriers they were as high for Air Malta and for everyone else.

When Air Malta set up new routes in secondary countries it did not ask for any special treatment. It analysed the deals that could be struck, the subsidies that were available, worked out its accounts and went into the market to compete, the minister said.

The irony was that instead of withdrawing state intervention, the government was now being asked to introduce it simply because one low-cost carrier said so.

"We are being asked to introduce subsidies to disrupt the current balance of the open market... While insisting that we are doing nothing to specifically protect Air Malta from low-cost airlines, I find it difficult to see why this government should actively protect the competitors of Air Malta."

While pointing out that the government never shied away from taking tough decisions as long as they were in the interest of the country, Dr Gatt told those present to weigh the costs.

"Why, we are asked, do we continue to protect Air Malta from the inevitable? Is this the country that we have become, where a thousand jobs, a thousand families are talked about so flippantly as if we are not talking of people? What is the government supposed to do - send 1,000 people home because bed nights are down this winter?"

Low-cost airlines, he said, had been admirably innovative in finding solutions within the existing economic and market realities in providing a product at a cheaper price.

The current market environment included the existing costs of using Malta International Airport - it was a real cost that did not emanate from the fact that MIA was privately-owned but from the mere fact that the Malta airport existed.

The opposition suggested this was a reason why MIA should have remained in state control.

"This is laughable, but typical," Dr Gatt charged. It was as "ridiculous" as another argument used by the Labour Party that the government should not have privatised MIA because this did not allow the government to reduce airport charges and give Ryanair the subsidy it demanded.

There could be no clearer illustration of the sheer insanity of the (Ryanair) proposal than the suggestion that has been made to kick Air Malta's cargo facility out from the old Luqa airport terminal and turn it into a low-cost, mass tourism terminal.

"Those of you who remember the cringing embarrassment of welcoming visitors through that Third World gate will soon be able to visualise what sort of tourism destination those who have made that suggestion want this country to be.

"We are past the age of low-cost tourism as much as we are past the age of low-cost industries. It may be good for some Paceville bars; it certainly is not good for the rest of us.

"Does anyone really think that any low-cost carrier can substitute the network that is presently served by Malta? Does anyone really expect any low-cost airline to fly to Lourdes for the benefit of the Maltese?"

He asked those present to reflect on the possibility of other established international airlines eliminating the Malta route.

Even leaving apart the local tour operators who would obviously have little business left, Dr Gatt asked whether anyone had given a thought to the foreign tour operators who today brought the bulk of tourists to Malta.

Air Malta's focus over the next two years must be to achieve the revenue growth levels targeted within its plans and this was the principal target that the government had given Air Malta's new chief executive Joe Cappello, Dr Gatt said.

Air Malta needed to restructure its sales force and its distribution systems to target individual traffic business to a far greater degree than it had so far managed. A new round-the-clock centralised call centre will target individual traffic as well as long-haul traffic.