Air Malta posts Lm6.3m loss

Air Malta announced an operational loss of Lm6.3 million for the year ending March 2006, as the national airline grappled with a 71 per cent increase in the price of fuel.

Escalating fuel costs, in fact, wiped out Air Malta's operational profits, even if the air carrier managed to slash costs across the board, statistics released yesterday have shown.

Had the airline not embarked on a rescue plan, operating loss would have shot up to some Lm19 million, driving Air Malta out of business, according to Investments Minister Austin Gatt.

Despite the far-from-rosy situation, Dr Gatt made it clear the government has no intention of privatising Air Malta for the time being.

Unveiling the figures during a news conference, Air Malta chief executive Joe Cappello said the rescue plan drawn up in an attempt to drive the airline out of the doldrums has been a success, but not enough given the current economic circumstances.

Turnover is down from Lm101.8 million to Lm99.2 million leading to a reduction in gross profit from Lm6.9 million in 2005 to Lm5.6 million in 2005.

The number of passengers carried dropped from 1.56 million in 2005 to 1.49 million though there was an increase in intra-EU and UK base passengers.

The fuel bill reached a steep Lm18.1 million for the year ending March 2006, with airline officials saying the €36 fuel surcharge imposed on every ticket is clearly not enough to recoup the hefty fuel bill.

Due to stiff competition in the market, Air Malta was forced to slash its prices leading to a drop in revenue, Mr Cappello explained.

Non-fuel costs were down by no less than Lm12.1 million in a year, to stand at Lm74.2 million, made up mainly of a reduction of Lm8 million in operational costs. A reduction in staff meant Lm2.5 million savings in payroll.

Air Malta chairman Lawrence Zammit said the cost-cutting commitments made at the time of the rescue plan agreement with the trade unions have been fully met a year in advance.

Among others, a total of 155 workers have applied for the voluntary redundancy scheme. But the chairman underlined the need for more changes in work practices.

"Air Malta is not out of the woods yet... The good news is that we are very positive we can achieve the full turnaround," Mr Zammit told reporters.

As expected, the arrival of major low-cost airlines to Malta featured prominently during yesterday's news conference.

Dr Gatt sees no problem with Air Malta sharing the market with low-cost airlines. However, he cautioned against taking any steps that would make it impossible for the national airline to survive.

"I simply can't understand how certain prominent people persist in saying that low-cost airlines are the solution to everything," he charged. When asked, Dr Gatt was adamant that his drive to protect Air Malta did not mean the government was reluctant to assist the introduction of budget airlines to Malta. He also insisted he did not have conflicting views with the rest of the Cabinet members about the matter.

"Yes, we're prepared to open up other routes to low-cost airlines, especially if that means Air Malta stops operating to the loss-making routes. But then none of these (budget) airlines wanted to fly to Girona, for example.

"Air Malta is a strategic asset to the country. It's very easy to destroy, but very difficult to rebuild," he warned.