Herman Grech
Air Malta losses of €37m bring hope for the future
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.
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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Rob Edwards
Dec 19th 2011, 14:12
Perhaps if Air Malta spent less money on advertising at third tier English football grounds and more money on employing someone in management with a brain, it might make some progress.
city busuttil
Dec 18th 2011, 21:05
I haven't flown with AirMalta for many years, in fact ever since I had a choice. However I might reconsider if it helps the airline. AM should consider a strong campaign appealing to the Maltese to support them.
Joseph Camilleri
Dec 18th 2011, 19:43
Air Malta is simply doing what every airline in Europe is doing... Restructure or go bankrupt. Welcome to the realworld! Air Malta is not a fantasy, it's a reality.
Before the 1987 election hundreds where employed FOR NOTHING with Air Malta (apart from the other few thousands who where employed with the government) ...and thanks to this employment the Malta Dry Docks had to go, and now, instead of getting rid of Air Malta, restructuring is going on.
For example GO are operating at a loss, and this becuase it's a past government company (telemalta) ...which a week before the 1987 election hundreds where employed with it!
You make the math! We are now trying to do well for the mistakes the government made just to get votes to win the 1987 election!
edward ciantar
Dec 19th 2011, 14:31
You, dear Sir, are talking rubbish! 1987 is some 24 years gone by! Why don't you put a PQ of how many people were employed since that time? Why don't you question the so so famous AzzurAir and the cargoless RJs?
So please treat intellactuals properly.
Have a nice Christmas.
Mario Grima
Dec 19th 2011, 19:32
Are you serious? Talking about events which happened 25 years ago and blaming the PL for the way AirMalta and Go have ended is a complete pack of lies. Why did'nt you tell us about the Azzurra investment and the purchase of the RJs which have crippled AirMalta. By the way, in case you are in adeep coma, GO is a completely private company and their performance has nothing to do with 25 years ago.
Mr J. Bonnici
Dec 18th 2011, 18:32
As they say, hope is the last to die.
Reinhard Azzopardi
Dec 19th 2011, 07:54
Exactly. As long as there is life, there's hope!
Joseph Grech Attard
Dec 18th 2011, 18:15
Chairmen are always happy and optimistic whatever the result! How many ordinary workers could one pay with the salaries of the higher management. Are they also in the scheme for voluntary redundancy/early retirement? Or is it just "57 pilots, 53 cabin crew, 21 engineers, 190 ground operators and 190 office workers?" The higher hierarchy is NOT going to be restructured? ?
Joseph Calleja
Dec 18th 2011, 19:15
Mr Grech Attard, you pay me that kind of salary that the chairmen receive and I will utter the same optimistic words. Why do these upper management people always tell us that there is no problem, and everything will be all right. Tell that to the marines because the employees do not believe a word they say either..
C Galea
Dec 18th 2011, 17:22
No mention where all those millions went to Azzure Air and those RJ 70`s .All these ventires started the way downhill for Air Malta
Joseph Calleja
Dec 18th 2011, 17:05
"and weeding out the politics which have weighed it down for years" Finally someone has finally admitted that politics and politicians ran Air Malta. And yes that is what drove our National Airline to poverty and almost into bankruptcy. How come everybody knew that except the government, at least, not one politician ever admitted that until now? Is that why every time we had a general election a slew of new employees were politically employed by the airline? Maybe they never admitted to any wrong doing because they and their families were receiving Freebie Rides. I think the politicians were more interested in their own personal perks than that of saving Air Malta. That is why I think that if Air Malta stays owned and controlled by the government it will eventually fail. In the meantime it is the employee that suffers the consequences, never the management or the government in charge. Air Malta has been allotted €52million euros for bail out money and here comes Finance Minister Tonio Fenech pumping another €20 million euros into the airline. As I always said: How long is that money going to last? Not for long. €72 million euros mean nothing to an airline and all airline people know that, ask any employee. The €52million has already disappeared into thin air. Air Malta is in dire need of new aircraft because the present fleet is getting old. Even if Airbus gives Air Malta a good deal on the new aircraft, Air Malta still has to make payments and those are payments that they cannot afford to make, not in this condition. Good luck to the employees that are paying for it, the hard way and maybe it is irrelevant wishing them Happy Holidays because it does not look good for at least 500 of them. The Top Management and the the Top Union Heads and of course Minister Tonio Fenech can celebrate at will with their families, since this cut does not effect them.. Either way to all Air Malta Employees and their families, " We wish you all a very Merry Christmas and hopefully a better and more prosperous 2012." Everybody else, " Have a Merry Christmas."
Peter Shaw
Dec 18th 2011, 15:29
I can sleep like a baby tonight ! Thanks !
Mr Victor Borg
Dec 18th 2011, 15:00
Mr. Louis Farrugia. Please keep up the good work. Air Malta still provides the best service and value for money to me and my family. Flying Air Malta again from Heathrow in February 2012 at a cost of just under £400 for three adults. Well known budget airline wanted to charge over £800 for the flights and that was not from Heathrow, which in my case, would make me incur an extra £100 in travel costs to and from the airport. Thank you. Victor Borg.
Victor Vella
Dec 18th 2011, 16:45
You are not telling the truth because only Air Malta goes to London Heathrow. So what is this `well known budget airline that wanted to charge you an extra £800`. Do you know that we are living under the PN and our currency is the €. I think you are dreaming or you have drunk a lot of beer. Happy Christmas.
Victor Borg
Dec 19th 2011, 09:15
Victor Vella. Are you illiterate, just plain stupid or both? In my comment, I wrote that I am flying from Heathrow. For your information, Air Malta flights from Heathrow go to Malta only. In the UK, we use the pound sterling as our currency. So, I repeat, I paid just under £400. The two budget airlines ( I try to give you credit to work out who they are), that fly to Malta from the other London airports, did want to charge me more than £800 to fly to Malta. I did not say an EXTRA £800. You said that. So, who is not telling the truth? Who is dreaming and who has drunk a lot of beer? Calm down and do not let your political allegiances cloud your mind, when you feel the urge to reply to other readers' comments.
mark borg
Dec 18th 2011, 14:54
The once GHASFUR TAC COMB ...clocking millions....has now become an GHASFUR TAD DEJN ....to match all other government entities under the Professors of the GonziPN misfits.....
PS those lamenting about competition ...well we knew ahead joining the New Soviet Union or as some call it EU...would bring such scenarios....
Joseph Calleja
Dec 18th 2011, 17:54
So last year, the company received €52 million in emergency bailout funds from the government. This year they are at a loss of €37 million euros. So €52 million - €37 million euros = €15 million euros left which by the end of the year will be used to pay for the salaries and a few perks so that leaves a Big Fat Zero. Now I see why Finance Minister Tonio Borg is willing to present Air Malta with another €20 Million euros of the Tax Payers money (that is you and I) as another form of bail out. How many more bail outs is the Tax Payer good for Minister? I don't dare answer that question, but it will be quite a few more in the years to come.
Adrian Grech
Dec 18th 2011, 14:33
sfurtunatment dejjem il haddiem ibati ta kollhox
Jesmond Farrugia
Dec 18th 2011, 12:09
The point of the Strategic Fleet Review is to benchmarking total costs of the current A320 family fleet against a re-engined version (dubbed the A320neo by Airbus) that promises to deliver substantial advantages over the existing fleet, namely: 15 per cent lower fuel consumption, 2,000 Kgs additional payload or extending range of operations up to 500 nm, cash operating costs that are 8 per cent lower, plus bitrous oxide emissions that are 50 per cent below CAEP/6 levels and noise emissions that are 15dB below Chapter 4 levels (Airbus, 2011).
It may be premature to talk of fleet change. The A320neo is not expected to be in service before 2015 at the earliest. The waiting list of more than 1,000 orders and commitments may push availability to 2018; by which time next generation narrowbody replacements from Airbus and Boeing will start taking commitments for delivery on the 2025 horizon. It all depends on whether Air Malta can make a firm commitment in 2012 and on whether it can secure delivery in 2016 whilst locking in exceptional pricing. In any case, all new aircraft from Bombardier offering A320neo benefits (though with 1,200 nm less range) should become available by 2016.
robert pace
Dec 18th 2011, 11:55
Is anyone able to kep the past managements responsabile? Are the workers to pay for the lack of accountabilty? Is this the justice we preach and teach?? Heh bring in the hypocrits!!!
j brincat
Dec 18th 2011, 11:25
Will the audited accounts be published?
Same goes to Enemalta the accounts of which remain in abeyance since Y2008. Why? Who is responsible to see that these account see the light of the day? No one, it seems!
(jb)
j brincat
Dec 18th 2011, 11:22
"Air Malta losses of €37m bring hope for the future"
Imagine if it finished the financial year with a bottom line running in millions of euro, as happened in the past, what bright future would hold for Air Malta!
A financially strong company once miking millions of euro (Malta lira) in coffers rendered into the pitiful and precarious state that it finds itself today. And thanks to whom?
(jb)
R. Saliba
Dec 18th 2011, 12:26
Thanks to the fierce competition and high fuel/running costs. Remember that a ticket to London in the 80s and 90s was around LM120. What about today? Instead of writing the usual gibberish why don't you enlighten us and tell us any airline in europe that has not done any sort of restructure or merge or whatever.
J Busuttil
Dec 18th 2011, 14:28
@ R.Saliba
Because on way traffic, thinks and writes gibberish.
robert pace
Dec 18th 2011, 18:32
Well fierce competition or just creating an unfair competition? Do you know Profs Saliba how much subsidy we give to the low cost rubbish and airmalta gets none? Do you know how many CEOs and Chairmen went off with bags full? I think you are a one way brain washed person just like your companion below. The restructuring should not mean laying off half the staff my friend. Nor should it mean that the workers get to pay every time with a manangment earning millions not thousands. Thats a good solution isnt it????
R. Saliba
Dec 18th 2011, 20:39
Profs robert pace, Simple question:
how many passengers did Air Malta lose to the low cost airlines? Go on tell us.
Victor Vella
Dec 18th 2011, 11:15
The above continue to show the incompetency of the chairman, the CEO and the board of directors. There is no change from the 2010/2011 accounts. We have heard the usual things all over again. The CE0 and the other foreign legion were paid one and a half million this year just to hear again the incompetency of the management without any trace of performance and results. Whatever they say the PN still want to make a political ball out of Air Malta albeit the PM and minister are hiding behind the backs of these foreign legion of consultants. Everybody knows that top foreign consultants are puppets in the hand of the latent hidden force of Gonzi and those manipulating the machine at tal-Pieta. If the only problem at Air Malta is the shedding of employees there is no long- term strategy. The company is only to stay on the tactical short term strategy without any chance to grow. The chances for Air Malta to survive from its core activities are slim and there is no future neither for the company and the employees that will remain. Air Malta is just an airline of 12 aircrafts at peak season and less than 10 aircrafts at low season. The present government destroyed the company. Air Malta used to earn big profits from the handling of foreign carriers. Now such handling has been passed to its new competitor created by the present PN by ex Air Malta employees after they were given thousands of euros from Air Malta cash flow to leave the company. Air Malta even gave the handling of Emerites airlines worth more than million euros a year to the new competitor to continue with its operations. Now the workers are carrying the burden . Loss of revenue means loss of production and loss of production means less wages for those who will remain and 500 employees to be shed off. All this deadweight has to be carried by Air Malta employees to make other kings. If the PN regime wanted to save Air Malta there were many inroads to make Air Malta continue to be profitable. It is stupid to continue harping the same notes of the RJs and Azzurra. I`m not saying that such scandals did not leave their mark, but there is no sense to cry over split milk. The low cost were not the solution because this year more than 52,000 beds will remain empty. If these beds were given to the Maltese they could accommodate half the Maltese work force. The future of Air Malta and Malta in general is not the millions of money given to foreign consultants, but the removal of this decadent government where corruption, incompetency , and the everyday politics of lies are shown in every sphere of this government operations.
John Micallef
Dec 18th 2011, 09:55
Can someone please provide the readers with the annual P&L results (just the profit or loss) of AirMalta for the last 10 or maybe 20 years? HAs thi sorganisation been trading at a loss and been subsidised for so long?
Peter Murray
Dec 18th 2011, 11:02
Can't help there John but this I know for sure -that since we joined the EU and the airline industry was liberalised Air Malta has registered year-on-year increasing losses-8 straight years now-,but before that it was protected by heavy subsidisation and a virtual monopoly on many routes(Maltese citizens also could not utilise nor purchase air tickets from charter airlines for flights originating in Malta before we entered the EU so were compelled to mainly use Air Malta flights for the most popular routes -lest we forget )> So what's the mad rush to address this mis-management only now?
Peter Murray
Dec 18th 2011, 09:53
Thanks for bringing hope back into our lives -but unfortunately it is accompanied by distressed laughter
Peter Murray
Dec 18th 2011, 09:52
Yes we should all be "encouraged " by these figures as we have all become accustomed to massive losses at Air Malta so what' a mere 37 million more and howmuch will this figure rise too when the redundancy pay=outs are factored in?I would like to personally thank Mr.Farrugia and the rest of the Air Malta board for bringing back into my life!