Operating losses at Air Malta are expected to mirror last year’s figures, despite a whopping €12 million hike in fuel prices, and this “reflects encouraging trends” at the beleaguered national airline, according to chairman Louis Farrugia.

If we didn’t reach certain milestones during the past six months, we would have had problems paying wages this week

Air Malta slashed its route coverage by 10 per cent between April and October, but the number of passengers carried was down by just one per cent. Revenue remained at the same level as last year and operating losses for 2011 are expected to be in the region of €37 million.

“Despite the tough circumstances we are moving well, and this should encourage stakeholders,” said Mr Farrugia, who was appointed chairman last May.

Mr Farrugia was speaking to The Sunday Times days before Air Malta workers start receiving details and application forms related to the voluntary redundancy and early retirement schemes. Air Malta plans to shed about 500 of its 1,200 workers in a wide-ranging restructuring exercise intended to make the airline viable again.

The early retirement schemes were forecast for August but talks with the four unions representing airline staff dragged on for more than three months after the deadline. The schemes are expected to cost the airline about €20 million.

Last year, the company received €52 million in emergency bailout funds from the government and the European Commission approved state aid on condition that the airline is restructured. The plan is make the airline profitable within four years by increasing revenue by €30 million and cutting costs by a similar amount.

“A lot of good, hard work behind the scenes has been done,” said Mr Farrugia, responding to criticism from some quarters that the restructuring process was being protracted unnecessarily.

“If we didn’t reach certain milestones during the past six months, we would have had problems paying the wages this week,” he said.

Three weeks ago, a fine-tuned restructuring plan was sent to the European Commission, which in turn is expected to issue an opinion on the matter for scrutiny by any interested parties by the end of January. Air Malta is expecting Brussels’ approval of the plan by July at the latest, Mr Farrugia said.

Since May, Air Malta has secured bank funding for the interim period based on a business plan and is paying creditors on time, while top management has been changed. In the meantime, routes to certain loss-making destinations have been discontinued, and others such as Libya “successfully” reintroduced. The airline’s success hinges on good commercial thinking and weeding out the politics which have weighed it down for years, the chairman insisted.

“The government, the opposition and all operators need to realise Air Malta can’t keep operating like the past. We need cross-party support. Hoteliers say hey don’t know what’s going on, but by now they should know the rules of the game – think commercial,” Mr Farrugia said.

Air Malta CEO Peter Davies had told The Sunday Times last June that the airline would look “very different” by the end of summer. There are few visible changes to the man in the street, but Mr Farrugia warned critics against underestimating certain difficulties, such as striking redundancy deals with trade unions.

“Everyone wants the national airline to survive but we cannot remain the same. Reducing employees is not enough. We need to fine-tune revenue management, we need proper training, we need more productivity and passion.”

Mr Farrugia dismissed suggestions that Air Malta was looking to mirror the low-cost airline model, especially after it recently introduced a much-criticised €10 online booking fee. One way of Air Malta retaining its legacy carrier tag would be to focus on the “Maltese hospitality” concept as an integral part of its marketing strategy.

So what does 2012 hold in store for the airline’s employees – at least those who emain on board?

The change management consultants, mostly foreign, are expected to be replaced by mid-next year.

“At the end of the year, our work is set out for us. We are right-sizing the company with numbers and attitudes. The employees’ energy has to be translated into revenue. I’m encouraged by some of this year’s achievements, but the hard work is about to begin.”

Air Malta’s year of turbulence

2010: The government requests the European Commission to authorise a loan facility worth €52 million in line with EU state aid rules. The Commission approved the measure temporarily pending the restructuring plan.

January: The Times reports the airline could shed half its workforce.

March: Criticism galore as new Air Malta CEO Peter Davies’s package is tagged at €500,000.

April: Plans to reduce two aircraft unveiled.

May:
• New airline board announced.
• European Commission receives restructuring plan.

June:
• Subsidiary Selmun Palace Hotel’s 58 workers made redundant.
• Mr Davies prematurely says the airline will look “very different” by the end of summer.
• CEO reveals plans to reduce the airline’s workforce by around 500 and cut costs by some €30 million.
• Draft plan seen by The Sunday Times shows 57 pilots, 53 cabin crew, 21 engineers, 190 ground operators and 190 office workers have to go and airline must raise €51 million in bank loans or bonds.

July:
• All freebies for politicians and VIPs are eliminated.
• Pilots order strike in protest. Government warns the airline could be dealt fatal blow.
Issue resolved following meeting with management and the Prime ­Minister.

September: Airline suspends its Reggio Calabria route.

October: Airline says it is planning a change in fleet.

November: Staff vote overwhelmingly in favour of AirMalta’s restructuring plan, including retirement schemes. General Workers Union say workers were put under pressure to vote in favour.

• Airline introduces €10 online booking fee.
• Finance Minister Tonio Fenech an­nounces an additional €20 million injection into the airline.

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