The fall in sterling's value has cost Air Malta over €10 million, the airline's CEO, Joe Cappello, told The Times Business, adding that the global economic and financial crisis affected Air Malta "strongly" in 2008.

Speaking in an interview on the occasion of the airline's 35th anniversary Mr Cappello said that in his 33 years at Air Malta he has never seen such a difficult year.

He said: "We have been hit on three fronts. In the summer of 2008 we were hit by the rising cost of fuel - the price reached $147 a barrel. Later on in the year we were also hit by the drop in the value of sterling against the euro, as 35 to 40 per cent of our traffic comes from the UK, which we sell in sterling. This means that when we convert sterling to euro we got hit by as much as 25 per cent on our revenue in the UK. Then when the price of fuel started falling, so did demand. In January to March of this year we were hit by a fall in demand in our core markets which were all being affected by the economic crisis."

He described 2008 as a year in "which one has to write off" .

Mr Cappello said that although the year-end accounts have not yet been finalised Air Malta was hit by an additional €30 million through the price of fuel in 2008. He adds: "There was a further cost due to the value of sterling which I cannot yet quantify, but it would exceed €10 million. There was no way we could have passed on the additional costs to our clients."

The airline's CEO said that since the 2003 rescue plan for the company which was negotiated with the unions the airline has shed of €30 million in costs and the workforce has been reduced from 1,900 to 1,500 through voluntary redundancy schemes and natural wastage.

"In agreement with the unions we have early retirement schemes, for those aged 55 and over. We have not forcefully made anyone redundant, however, we have made it attractive form people to take up early retirement or voluntary retirement. In a lot of areas we are now at the right numbers," he said.

Mr Cappello acknowledged, however, that there are still areas where the airline is over-staffed.

"I strongly believe that over-staffing can also be tackled by agreements with the unions where we obtain operational flexibility which is so important in order to be in line with our competition. The airline industry is a seasonal business because we operate in tourism - we don't need as many people in winter as we do in summer. This is what we are discussing at the moment with the major unions," he said.

Mr Cappello said the airline has always walked a very fine line between its social obligations and commercial realities.

He said Malta's EU membership gave the airline the possibility of operating within Europe.

"We now operate a number of routes which are not Malta based, such as Catania to London, Munich, Geneva. We also operate between Reggio and Rome. These routes help us market Malta more. The fact that we are building up a base in Italy makes sense strategically, it is a way of helping Air Malta grow. These routes have been successful and are well established."

Mr Cappello said the airline remains strongly committed to the Maltese tourism industry and to Malta as a destination. "It is a cycle - Air Malta helps tourism grow and tourism helps Air Malta grow," he said.

Air Malta's CEO said the company had been preparing for low cost travel long before such airlines began operating in Malta. He said the company knew that these airlines would come to Malta when Malta joined the EU as that meant that any European airline could fly freely within the European Union without requesting authorisation.

He said Air Malta has always been a low-cost airline and it previously used to make the low end of the price range available only to tour operators.


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