Kurt Sansone
Air Malta’s low-cost troubles
Air Malta has suffered because of low cost airlines like Ryanair. Photo: Chris Sant Fournier
Air Malta suffered as “a direct consequence” of the introduction of low-cost carriers on the UK routes but the airline’s management was “unable to react” to the competition, according to the draft restructuring plan.
Low-cost carriers started operating in 2006 when the government introduced a route support scheme, which was scheduled to last five years, to subsidise airlines that opened new routes in a bid to increase seat capacity and boost tourism.
However, the restructuring plan drawn up by government consultants Ernst and Young says Air Malta did not reap any benefits from the scheme despite it being open to all airlines.
“Air Malta has not realised any direct benefit from this scheme due to its high cost structure while the scheme has enabled competing carriers with more competitive pricing to increase passenger numbers and gain market share,” Ernst and Young say.
The report says that low-cost operations on the UK routes, particularly Ryanair and Easy Jet, meant Air Malta suffered significant reductions in fares and contributions across the board. It also highlights the company’s shortcomings in not being able to respond to the new challenge posed by its competitors.
“A commercial company would have taken steps to reduce the network by dropping less profitable routes and find new opportunities to grow as there are a number of underserved markets to operate to. However, the company simply did not have the appropriate commercial skills to act proactively,” the report says.
Analysing airport statistics for the period between 2006 and 2010, Ernst and Young say passenger traffic at Malta International Airport grew by an average of 5.2 per cent per year. However, the report says growth in the UK market was just 17,000 passengers per year for the whole period. As a result, the increased market share enjoyed by Ryanair and Easy Jet came at the expense of other airlines, most notably Air Malta.
Ernst and Young say Air Malta’s inability to react in an effective way was compounded by a confused product offering that tried to reduce prices while still providing services unavailable on low-cost carriers at no premium.
“Since the growth of low-cost carrier operations in Malta, the company’s product positioning and market offering has become increasingly confused. Its service is still promoted as quality, yet, it is not clear that customers perceive this quality as they remain very price sensitive on key routes. This has meant that the company continues to provide quality based products but on many routes has a pricing structure which has been set to compete with low-cost carriers rather than reflect its premium offering.”
The report says Air Malta was reluctant to change prices in some markets to reflect the difference of the service provided and the convenience of its schedule.
The “premium” services mentioned in the report include catering options, free carriage of baggage and access to a number of airports with premium locations like London Heathrow, which are not offered by its primary competitors Ryanair and Easy Jet.
Ernst and Young argue that the pricing strategy “promotes a perception of a homogenous product” when significant differences exist in terms of quality of service between the company and its low-cost competitors.
The report also highlights Air Malta’s strategic role for the country saying it is one of the few airlines that can convert seats for the transportation of stretcher cases and incubators.
“Air Malta provides essential social support for health care... and essential business links to Europe’s most important business destinations such as London, Frankfurt, Brussels and Paris,” the report says, noting these airports were not served by low-cost airlines.
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Rocco Camilleri
Jun 30th 2011, 20:58
It's a pity that our 'National Airline' has been brought to this state. This was all to the 'Air Malta' management given their posts by the PN government who did nothing for the competitiveness by the Low Cost Airlines and Dr.Gonzi's team themselves. This shows the government short sightness in every economic field. All the burdens are being shouldered by the people themselves of what any colour are.
George Reeves
Jun 30th 2011, 19:11
The ONLY people to blame for Air Malta being in the situation it's in now is the GOVERNMENT, thank's to them giving all the FREEBIE flight's away the Maltese public and all the tourist that have flown with Air Malta over the years as I have, have been paying higher fares than really needed because we have been subsidising the FREE FLIGHT'S. I flew with Air Malta every year with my wife and children for year's till Easyjet came along, so now I go for the cheapest option. Air Malta as quoted by others isn't something special, you get cramped seating and the meals are not always as good as they could be.I can understand how a lot of Maltese are annoyed at a Brit being in charge, but at least he might not be under the GOVERNMENT'S thumb as much as a Maltese person would have been. Feel better for that and don't worry I love visiting Malta so I'll be back again this year flying with Easyjet because they were £190 cheaper on the three flight's I booked, and I can spend that on my holidays instead of my travel.
Mr Victor vella
Jun 30th 2011, 21:49
Dear George in Maltese we say `int ahna jew m`ahniex`. If you do not understand Maltese find someone to translate that for you mate. You said that you and your family traveled by Air Malta. How can one take you so serious when you said` Air Malta as quoted by others`. IF you and your family traveled by Air Malta there is no sense to quote others or you had so good experience traveling by Air Malta that you have nothing to say but to quote some pcielaq Maltin..
George Reeves
Jul 1st 2011, 15:40
Dear Victor,
If you read my comments properly, it CLEARLY states, " I flew with Air Malta every year with my wife and children for year's till Easyjet came along", and with reference to my comments about Air Malta not being anything special, if you read all the comment's made on this subject as I did, it was a Maltese person that made that comment originally, I was just agreeing with them.
Victor, I have been travelling to Malta every year since the late 60's, well before Air Malta came into being so as you can see I do know what I'm talking about. I even E-mailed Air Malta with complaint's in the past and they haven't even bothered to reply.
We have a saying in England;-
PUT YOUR BRAIN INTO GEAR BEFORE OPENING ONE's GOB!!!
Mr Victor vella
Jun 30th 2011, 18:25
In the first draft of the Fatima report sent to Brusells E&Y blamed the low cost airlines for the demise of Air Malta and they critisize the PN for the irresponsible way the regime handled the issue of the LCCs without giving any care of what and how they are going to affect the National airline. They gave a stern warning to the government as employer that giving unequal ground will put Air Malta in hot water. And today Air Malta is not in hot water but dead beneath cold water. In the second Fatima report this issue was not mentioned any more. What happened? Ask Mr Davies who is leading Air Malta Management by leakages. This is a new type of Management brought by the foreign brains employed by the Gonzi PN regime and the fidili Maltin are paying 500,000€ a year for a failed malicious type of management.
Charles Micallef
Jun 30th 2011, 15:38
It will always come down to the same incompetence from whoever was responsible for the Airline at the time, and this because successive CEO's did not even have a clue as how to react to combat the LCC's, now if they had to deal with a political issue, they would have passed with flying colours as that were the only credentials they had for their appointment! (cwic maltin according to the minister who appointed them........! )
Alfred Fenech
Jun 30th 2011, 15:17
Low cost airlines are a must for Malta. Prices with Air Malta being too high. We have to be competitive and not milk the maltese infavour of FOREIGNERS. Outsiders come cheaper here and back than we can travel to their country and back. Of course one can always rope in Mr A. Mizzi who did a very good job at the helm of Air Malta. Failing that we can always request somebodies BASUSLU the like Mr Tabone.
COME ON YOU LOT....You are paid money to be competitive and not to cut off pilots and workers to get some savings. What are we a herd of GOATS
Brian Newbould
Jun 30th 2011, 14:03
This is all very sad but times do change. We have flown with Air Malta for many years. They were nearly always on time, they had good modern planes with decent leg room and lovely cabin crew. They also flew from our local airport; Leeds - Bradford (LBA) only 13 miles away. We cannot comment on individual fairs, although at a glance they seemed expensive but what are you comparing them with? The final cost of a 'low cost' airline when everything Air Malta includes is added to the basic 'headline' price? Being treated as human beings not cattle? We nearly always book with their very efficient holiday company Malta Direct and find the 'package' excellent all-in value when combined with our two regular 4* hotels.
This route finished about two years ago and as another correspondent stated Ryanair stepped straight in due no doubt to the massive population of the area and its potential, not to mention other large towns around the nucleus of this high density population. People are not prepared to risk the poor weather, speed cameras, heavy traffic and the possibility of disastrous hold-ups and trudge over the Penninies to Manchester with the thought of looking forward to a repeat performance on the return leg and then have to pay for the pleasure of it all with extra taxi or airport parking fees.
Personally we now 'bite the bullet' and travel 90 miles north to the more easily accessible and far more pleasant and smaller Newcastle Airport adding to the cost and time of each holiday but as my wife who has travelled Europe and beyond for the past 18 months said ' its worth it simply not to fly with Ryanair as our holiday starts the minute we step out of the front door'. I too would not in principle fly with Ryanair. We like to know EXACTLY what the price is going to be, a desire of which is making a comeback here in the UK as people are becoming increasingly fed-up with all the 'extras' and the actual final costs. What will they think of next? Perhaps..................
'This is your captain speaking. We are now landing at Luqa, weather is sunny and 26 degrees with a slight N.W breeze. We hope you all heard that weather report as a 10 euro surcharge will by added to your credit card for that 'extra' announcement which will imply a further processing charge of 10 euro. We hope you have a pleasant stay in Malta'.
Back to the point: I totally agree Air Malta should also have marketed itself far, far more; created a 'product' as a niche 'better' airline and stopped playing around sponsoring football teams and the like. But it did not as it did not react to the whole deteriorating situation.
In the end I really do hope they pull around and survive if not just to 'cock a snoop' at the 'Low Cost' (sic) cattle trucks of the skies but in today's climate its??????????????
Mark Duffy
Jun 30th 2011, 14:02
i cannot believe that Air Malta pulled out of Birmingham, a route that is now serviced by ryanair with 92% capacity loads, this was a popular route and well serviced in the winter as well.
K Busuttil
Jun 30th 2011, 12:56
Air Malta is not competitive. There are no direct routes servicing all of Scotland as they were cut from the service for no apparant reason. It has happened with other well-frequented routes in the UK. Now through codeshare maltese and toursists are expected to stop over for hours on end in London and pay at least twice as much as a direct Ryanair flight would cost. People are not stupid. Loyalty here or there, if you can get a direct flight at half the cost who would fly with AirMalta??!!
Complete mismanagement if you ask me...
A Camilleri
Jun 30th 2011, 12:48
while air malta was giving free rides to rich people, i for one started using low-cost airlines, and the difference in the journey is nil, the meals on air malta are not even worth havin.
Gordon Lawrence
Jun 30th 2011, 12:44
i liked using air malta to fly from glasgow it only took three and a half hours, but since they stopped flying from there and gave it to BMI you have to go from glasgow to london change over and now it can take seven hours, and they wonder why people are going to ryan air and easyjet
Mr Jimmy Magro
Jun 30th 2011, 12:22
Is this report available only to The Times of Malta?
Has a copy been laid on the Table of the House of Representatives?
Has the report been discussed at the MCESD?
Is this availabe on any website?
Or this is another case of friends of friends?
Mr Victor vella
Jun 30th 2011, 22:28
Dear Jimmy Magro these are very good questions. I fear that this is a tactic used by the foreign brains and Air Malta`s employer. They let such information to be leaked so that they can see the reaction of Air Malta`s employees. The worst hit by such management by leakages were the pilots. Until last Saturday they said nothing but on Sunday when the leak turned to a cascade they even threatened to take industrial action. As far as I am concerned when the GWU had an industrial dispute with Air Malta under the present Nationalist government it used to take the GWU to court amid the media hype against the GWU. Under the regime of JN Tabone I do not know how many times he took Air Malta to court. As far as I am concerned the company`s pilots have any industrial dispute with Air Malta. So they have any right to strike. One could expect the government to take the necessary steps to take such illicit action to court. To-date the company had taken any steps. If the situation remained as it is then your questions will take more weight. Then one can say that the company is accomplice in such premeditated matter. The GWU could take the necessary steps to safeguard its members while the hypocrisy of this government continue to be the hallmarks of a ruthless bigot against the GWU. .
lyn nobbs
Jun 30th 2011, 12:19
Unfortunately Europe and the U.K. are suffering from the economic downturn and IF a holiday is affordable it will be based on low prices. We much prefer Air Malta but the pound in the pocket rules I'm afraid.
Mr C Cassar
Jun 30th 2011, 12:51
Those in the Uk find the Eurozone expensive because of the dire state of Sterling (£), down some 25% against the Euro. Those in the Eurozone don't have that problem.
Malta really needs to turn and focus it's efforts on Eurozone countries, especially Germany which right now has a booming economy and uses the same currency. The UK market is history I'm afraid but the Eurozone provides a much, much larger market (7 times larger than that of the whole of the UK) for Malta to tap into without currency worries.
Time for Malta to move on now it has the Euro and cater for other Eurozone visitors.
Ray Mifsud
Jun 30th 2011, 19:48
It is true that the euro zone is 7 times larger. But are you saying that we should abondon the UK market?Thousands of british tourist goes to europe for there holidays. They still have to exchange the sterling to euro.
I am sure that our loss will be someone elses gain and for sure we cannot afford to loose this market.
Hotels should give incentive to those tourist who re visit. It is done abroad when using the same chain of hotels. All you have to do is register and everytime you book you are credited with points.
Who know, UK might change their currency to euro in the next few years?
M. Bezzina
Jun 30th 2011, 12:05
With all due respect but when there were no competitors with AirMalta their ticket prices were terrible high(and they are still high by the way)I remember paying LM300 to fly Malta-London Heathrow......very terrible and then you see an airline like Condor offering passengers a 10Euro ticket to fly to Dubai....i am very sorry !!Regulate yourself according to the present situation.
Carmel Zammit
Jun 30th 2011, 11:58
What the report seems to have omitted is the fact that Air Malta gave up certain routes which were well patronised even in the winter months only to be swooped upon by the low cost carriers in a few weeks time. For instance why did Air Malta give up the route to Glasgow? Why was Ryan air allowed to operate
from Bradford which is only 30 mins away from Manchester airport when the later was served by Air Malta. Again why was Ryan air allowed to operate from Luton (London) when London was and still is served by flights to Gatwick and Heathrow? Why do we have to wait for Brussels to let us help our airline when our same government already helped and is still helping other airlines that crippled Air Malta? What happened to sovereign Malta? Is this what our joining the EU was intended to produce - rendering our government incapable of acting in the interests of its own citizens?
A Camilleri
Jun 30th 2011, 12:50
Why not go round the island and ask the the bars, restaurants and so on.
vincent a galea
Jun 30th 2011, 11:54
I keep asking the same questions over and over again:
How much money do the tourists on Low Cost Airlines leave on the Islands?
How many bed-nights do they spend here?
How many 5 Star hotels benefit from their visits?
Do they frequent the local restaurants for lunches and dinners (and I do not mean ĦOBS BIŻ-ZEJT outlets or pastizzi and qassatat!)?
Mr Mario Mercieca
Jun 30th 2011, 12:02
It doesn`t matter much.....not all outlets are five star plus the people who travel on low cost airlines may have saved some money in their flights which they spend on the island.
Ray Gatt
Jun 30th 2011, 12:06
What's your point exactly?
Ian Hodgson
Jun 30th 2011, 22:37
Yes tourists do spend good money I saved over £900 on my ryanair flights Airmalta cost over £400 each Ryanair was £120 each and that £900 will be spent in bars and restaurants I have rented a house this time but I like 5 star hotels My favurite is the Corinthia palace in March I stayed in the phoenicia if Airmalta was willing to compeate with Ryanair I would still be flying with them but it does leave me with a lot more money to spend. Ian Hodgson
edgar agius
Jun 30th 2011, 11:29
It was the MHRA that pressed for low cost and the Minister reluctantly accpeted as he was aware of the direct hit to Air MAlta
adrian dimech
Jun 30th 2011, 11:11
Why everyone is targeting the indians , pilots , engineers etc etc and the chiefs who were responsible for managing airmalta getting big thousands and benefits, these , where are they .!
Andrea Portelli
Jun 30th 2011, 11:11
It seems like with many other sectors in the Maltese economy, AirMalta is yet another which doesn't fully respect competition. In a free-market economy it is the survival of the fittest as well after all.
"The report says Air Malta was reluctant to change prices in some markets to reflect the difference of the service provided and the convenience of its schedule."
It seems AirMalta is still stuck in the past where it still believes that many of its clients prefer being pampered rather than just getting from A to B without too much frills. I'm no expert or anything mind you, but in my opinion AirMalta seriously needs to revise its prices otherwise other airlines such as EasyJet and RyanAir will continue emerging on top
Thomas Mc Lear
Jun 30th 2011, 11:01
Re Air Malta.I come to Malta quite often on holidays.When low cost carriers like that horrible,nasty Ryanair started on the uK,malta route,i said to a very good maltese friend of mine,that the money spent subsidising a low esteemed and hated airline,would be better spent on Air Malta.Ryanair ,started a route from Bournemouth-Malta.After one short summer season,the subsidy was taken away.So,what happened?Ryanair pulled off the route.I think that route like these,should be looked into by Air Malta,which is,by the way,my airline of choice,even though i must travel to London or Bristol.Malta should be proud of it,s national airline
Ray Mifsud
Jun 30th 2011, 11:59
That is what Ryan air is going to do in Reus Spain. They have operated as a base from there since Oct 08 and now they gave an ultimatum till oct to agree with their terms. I thing that what it did in France too.
I would not mind the competition but if played on the same levels. Should the subsidising cease they will be out the next day.
Paul Kew
Jun 30th 2011, 12:06
No problem with Ryanair. You get what you pay for.I personally don't mind paying £100 less for my flight and not having to travel 60 miles to Manchester on the dreaded M62. When Air Malta flew from Leeds I used them but they only flew in summer, at least Ryanair fly all year and at half the price of what I used to pay.
Ray Mifsud
Jun 30th 2011, 20:26
@Paul Kew
No one is disputing that you get what you pay for.
The facts are that the tax payer has to pay for LCC subsidies.
S. Camilleri
Jun 30th 2011, 10:57
Partly true ... but the problem was made worst by the stupid administration of the grant schemes. How can any level headed individual grant SIGNIFICANT subsidies to operate to a so called underserved region (West Midlands - UK) when Air Malta was already operating flights to airports barely 50 miles distant?? What kind of incompetence was this?
Of course you get the 'cheap' low cost flights ... because they are subsidised by our grants at the expense of Air Malta. So its a double whammy on the tax payer. Paying the grant to low-cost carrier to operate these routes and bailing out Air Malta from the mess these grants created. Hekk sew!!!
p.s. I am NOT an Air Malta employee.
Mr Peter Murray
Jun 30th 2011, 10:54
LONDON Airports not served by low-cost airlines.Erm hello - yes they are! If Ernst a nd Young are referring to Heathrow then they are correct but London officially has 3 airports and in any event given the mess Heathrow is in and the amount of delays,excessive waiting time and congestion who wants to fly there anyway?Air Malta's management was apparently "unable to react" to LCC competition -well of course they couldn't as they were,and remain ,incompetent and inefficient government appointee dinosaurs .Never mind running a company -they couldn't run a bath!
Ray Gatt
Jun 30th 2011, 12:02
It is mentioned that London Heathrow is not served. I say Peter Murray for AM Chairman.
Mr Slim Bartolo
Jun 30th 2011, 10:36
No excuses please, AM.s management just haven't got a leg to srand on. too expensive and trying to get rich quick thatsd the problem my friends.
Mr John Borg
Jun 30th 2011, 10:31
The line that says it all is: "airline’s management was “unable to react” to the competition".
Management should have done just that, every person who knows a bit about management can tell you that THE ONLY CONSTANT, IS CHANGE!
The airline is in misery becuase of two reasons:
1. Management was poor
2. Management had to deal with government override, even with many unemployed being given jobs there just for political agendas being met.
Mr Mario P. Sciberras
Jun 30th 2011, 09:56
I would prefer to fly using Airmalta, but on the 1 st of June a flight for 2 to London was quoted at Eur 1200 (appx) the equivalent by Ryanair (all hidden costs included) Eur 400 (appx). Can you blame me for choosing the low cost airline.
charles tabone
Jun 30th 2011, 09:37
Surely, the outcomes reflect the great number of blue-eyed cwiec that successive PN governments put in high and strategic levels of management. Tabilhaqq Partit tal-PAPPA ghal ta' gewwa.
Noel Barry
Jun 30th 2011, 10:52
Mr Tabone, it seems that you are not well informed who the top management were and still are. For your information the majority of top management were all Mintoffians, socialists, labourites, but not blue - eyed cwiec, as you called them. Please do your homework well before posting here. I know because i worked there.
Mr Pat Hobson
Jun 30th 2011, 11:16
@Barry. You must be joking, right?!!!!
Mr Pat Hobson
Jun 30th 2011, 11:17
@Noel Barry. You must be joking, right?!!!! But not a good joke just the same. How about J. N. Tabone, and these last 10 years who were directing and managing Air Malta?
Greta Rapinett
Jun 30th 2011, 11:36
1987 - 1996 - J N Tabone
1996 - 2004 - Louis Grech
2004 - 2011 - Lawrence Zammit
The first loss was made in 2002/2003.....hmmmm
Ray Gatt
Jun 30th 2011, 11:58
@ Pat Hobson - Louis Grech (PL's MEP)
Noel Barry
Jun 30th 2011, 12:05
Mr Hobson, I said top management and not Chairman.
Robert Camilleri
Jun 30th 2011, 13:10
@ noel barry!! int bis serjeta qedt tghid !! mela vera ma tafx x kien qedt jigri madwarek???
Noel Barry
Jun 30th 2011, 14:22
Robert Camilleri naf sew x'qed nghid u jekk int kont tahdem hemm, toqghodx tinheba wara subajk u taparsi ma tafx x'kien qieghed jigri. Jien ma nafx int kontx tahdem hemm jew le, imma jien kont ili nadem hemm minn qabel l-air malta, minn Jannar 1967 u naf sew x'qed nghid.
Robert Camilleri
Jul 1st 2011, 15:52
@Greta Rapinett
insejtu zmienek int???
Charles Micallef
Jun 30th 2011, 09:12
They wasted all these many years to take action and stop the company bleeding to death, and like "Nerone sat back and watched Rome burn" ......and in three years time they are going to employ yet another "cucc malti" whose only qualification required will be that he or she will be a member of a particular political party................!
Please stop treating us as idiots, after all we know what qualification one needs to become a Cabinet Minister, a smart suit, preferable a respected doctor, lawyer or architect, start visiting the local political party club, share a few beers with the locals who will then put their name forward to the party, contest the election, win the seat, and before you know it, one is qualified to become a Cabinet Minister with a very lucrative salary package, perks galore, and lets not forget the gas gasling limo and who will then take responsibility for one of the country's departments, and it does not stop there, they will then start engaging their loyal friends, family and their relations to make sure that they gain more votes and are re-elected at the next general election, and not if, but when some of them cock things up big time, the taxpayer has to dig deep into their pockets to make good for their incompetence, now does this sound like the downfall of Air Malta anyone?
Mr joe vella
Jun 30th 2011, 10:57
cannot agree more
reading between the lines of what has been reported by the auditors the whole matter is a litany of failures by chairmen, boards of directors, top managers
all guzzling good money to help the company on its way to a nosedive!
and the buck instead of moving up towards the big brass who put them there moves in the opposite direction towards the taxpayer's money!
Mr R ferriggi
Jun 30th 2011, 09:07
it is very clear, without the need to spend millions on consultancy fees,,,, that the main problems that have Airmalta as it is are:
1. the huge number of suckers feeding of the airline. this includes bot hthe ariline workers and the MEPs.
they had oh-so-good.
not to mention airmalta used as a political ''bait'' before elections.
2. bad decisions in the last years.
Kieron O'connor
Jun 30th 2011, 09:33
Mr Ferriggi I think the words you are looking for are, "Political Interference".
Airmalta was protected in a local monopoly for many a year, now they are subject to an open and free market where consumers make there own choice and who to fly with and it cannot surrvive unless it is run as a proper independent business.
It will have to get "Lean" in a hurry.
Mr twanny borg
Jun 30th 2011, 09:02
il-low cost airlines gabu hafna turisti u maltin saru jsiefru bl-irhis u mhux dawk il-prezzijiet esagerati tal-airmalta biex jaghmlu tajjeb ghan-nies zejda specjalment kaptani. kif jista' jkun li kaptani jridu jonqsu aktar mill-cabin crew?. mhux ta b'xejn qed joqomsu!! jekk trid l-airmalta taqleb low cost. il-poplu ghalhekk ivvota biex malta tidhol fl-eu biex jispicca l-monopolju. jew inkella l-airmalta taghmel l-istess li haddiema jaghmlu aktar minn xoghol wiehed inadfu, jaghbbu u jhottu l-bagalji, isuqu l-coaches u l-kumplament. il-pl, gwu u ohrajn iridu jhallu kollox kif inhu u l-poplu jhallas. ma niehu xejn bi kbir li l-piloti jaghmlu minn kollox biex ikisru t-turisti basta jibqghu jpappuha. il-piloti qed iwahhlu fl-mia imma anki jekk kieku veru l-fatt jibqgha li hemm izzejjed u jridu jonqsu.