Matthew Xuereb
€31million financial loss forces more restructuring at Air Malta
Air Malta's lost €31 million in the last financial year, forcing the government to consider injecting more capital to make the airline sustainable.
Finance Minister Tonio Fenech said talks had already started with the European Commission on a recapitalisation programme, which respected the EU's state aid rules.
However, the minister would not give details on the new restructuring, saying it was premature.
Mr Fenech also confirmed a report on The Sunday Times last week that airline chairman Lawrence Zammit would be replaced by Go chairman Sonny Portelli. Mr Zammit has been chairman since 2003.
Had it not been for extraordinary circumstances, the company would have broken even, Mr Fenech said. However, the increase in fuel alone meant a loss of €18 million, which would have risen to €27 million had there not been any hedging.
The sterling's decline also dealt the airline a heavy blow, costing a further €12.8 million, but, perhaps, the biggest loss-maker was the fact that, in a bid to help Maltese tourism industry, the company increased its flights at a time when tourism was doing badly.
In fact, despite only breaking even on most flights, the airline still increased the number of routes.
Still, the minister insisted that the situation made the airline "financially unsustainable", prompting the government to look into how it could help such an important asset for the country and its tourism industry.
Projections for this year were still in the red but results should be much better than last year's.
The 2004 restructuring programme had worked and, had it not happened, the losses would have been bigger, Mr Fenech said. However, the government now was looking into a fresh exercise for the company to continue cutting operating costs and increase efficiency.
Mr Zammit said ground handling costs had to be addressed as they were 40 per cent higher than abroad, adding that talks about this had started with the trade unions with the aim of changing work practices and improve efficiency.
He said he was satisfied with the achievements the airline had made in his six-and-a-half-year chairmanship, especially through the 2004 restructuring plan which, he said, had already bore fruit. However, he insisted there was more work to be done.
Mr Portelli, who also chairs the Malta Council for Economic and Social Development, said he was entering a commitment with a company facing "serious difficulties" and promised to continue building on what had been achieved so far.
The transition for Mr Portelli to take over the helm of the company will take around three months.
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Robert Young
Jan 30th 2010, 12:29
I cannnot understand how a qualified person in economics take a role as chairman of an important company like Airmalta and in six years in the role he will not find ways and means or a business model to change the financial situation. Six years are enough to change the whole story and in his interview he goes around and around without proper conclusions.
Mr. Zammit you have to admit you have failed and after this chaos you should study what went wrong. You left a disaster finacial sitaution for Mr. Portelli . You own the country an explanation but like the one`s before you (RJ`S) it will goes under the carpet as it has never happened. I recommend you to insert your Airmalta Chairmanship in your CV.
D. Fenech
Jan 30th 2010, 09:40
As a tax payer, I am fed up of listening to losses made by companies continually being kept afloat by the government. We had the dockyard workers milking the taxpayer for years then walking away with a lump sum of redunduncy compensation. Early retirement compensation to ex Maltacom. The bus drivers after years of arrogance and damage to the tourism industry walking away with EU55 million plus 10 year work guarantee. Now Aimalta recapitlaisation programme. Is this another subsidy under a different name?
I have always paid my taxes in good faith. When my employers were not doing well, I looked for another job and certainly did not expect anyone to hand me compensation. I have always driven myself to work so why do I see Airmalta staff being taxied from their homes to perform their duties when the airline is now expecting me, the tax payer to bail them out. Its about time the government, unions, and these big headed employees, who think that the tax payer owes them a living, to come down to the real world. Nobody owes nobody a living.
c. camilleric
Jan 29th 2010, 16:57
Other Airlines in the same predicament have taken austerity measures to curb their loses and return to sustainability. These include wage freeze and restructuring resulting in loss of jobs.. Air Malta has just gave in to wage demands by its employees and now we have this Govt begging permission from the EU to subsidies the loses incurred by our money. Funny is it. ????
Joseph Calleja
Jan 29th 2010, 15:05
@Renald Williams You make a good point, except you neglected to mention what salaries and benefits are paid to AirMalta employees at the moment. Are the salaries in line with other airlines? And please don't forget to mention the free and reduced rate travel benefits granted each employee, cause that's part of the salary compensation. Stop the politics and privatize Air Malta so the tax payer does not have to bail it out with millions of euros. Stop the politics.
JJ.Falzon UK
Jan 29th 2010, 14:51
Ba is in trouble, now airmalta, its the start or the begening of the end for these airlines unless something drastically takes place and re-organize by first reduce the staff level, lower the income of some higher management and last but not least reduce the airfare and fly full and not half an empty aircraft.
N.Aquilina
Jan 29th 2010, 13:55
Just run a check on all the people that were employed with no qualifications just before an election and there you have your money loss! They do not deserve to be there in the first place let alone take home a pay!
Jesmond Micallef
Jan 29th 2010, 13:43
N.Lawrence, Ryanair is a low cost airline. Air Malta is not a low cost airline, it is a national airline just like Aer Lingus, for example. Are you comparing ground handling with respect to the specific airline business unit base ? Ground Handling "Prices" offered by the Ground Handling Company may be indeed the same for all airlines, but the "Costs" might differ quite considerably !!! Rather generic here but interesting to know: Large European airlines have under their "own business umbrellas" large fleets of aircraft split between the low cost concept and the more traditional. Hence these large airlines, who take full advantage of scale economics, may shift their aircraft fleets according to market demands, make it the seasonal travel market, the "permanent" low cost market and the much more permanent "Traditional Fixed Schedule" service that whatever the passenger occupancy is, the aircraft flies, .....the Air Malta type of Operation !!!!!! Keep Flying High Air Malta !!!! I am proud of you.
John Mallia
Jan 29th 2010, 13:36
Air Malta, please stop giving petty food during each flight.. that will save a lot of money whereas it will make no difference to the passengers!
John Falzon
Jan 29th 2010, 13:16
With all due respect to Mr. Sonny Portelli, why do we always have to have the same people being appointed Chairmen on multiple Boards ? Aren't GO and MCESD already more than a good sized bite for one person to manage?
R. Cassar
Jan 29th 2010, 12:35
Well said Joe Bartolo.
renald williams
Jan 29th 2010, 12:32
just for info some Air Malta employees…
since 2004 have had a reduction in their take home pay…
since 2004 have had their reduced take home pay still frozen…
since 2004 have had to work average 4.5 extra hours weekly…
to get the same frozen reduced take home pay…
peace and health to all Maltese
N.Lawrence
Jan 29th 2010, 12:16
Are the ground handling costs the same for Ryanair (who make a profit) or does Airmalta pay more? If the costs are the same then these costs cannot be blamed. Nice to know that the government has PLENTY of money to throw around.
joe bartolo
Jan 29th 2010, 12:14
Some advise to the new Chairman based on common sense:
1. reduce the number of routes and operate only the ones where the planes will be full or nearly so.
2. As a consequence of (1) divest (sell off) any planes that are made redundant
3. Also reduce staff to optimal levels, and ensure those remaining work flexibly
4. Remove incompetent managers
5. Eliminate Politics from the workplace - which might involve elements of (4)
Advantages that I can see:
Less inventory will be needed as a result of plane sell offs
Also, reduced insurance and maintenance costs
Also, less fuel will be used and will need to be stored
Each flight becomes more profitable
A reduced workforce is used effectively and efficiently, leading to lower labour costs
People are promoted on MERIT and not based on connections, therefore the overall morale improves, leading to better performance. Managers built teams, lead by example, drive success.