Minister confident Air Malta can be saved as EU raises doubts on reform programme
Air Malta proposals include trimming profitable routes including London, introduction of new fees
Video: Mark Zammit Cordina
(Adds minister's reaction)
The European Commission has expressed doubts over whether proposed 'compensatory measures' by Air Malta are sufficient to justify state aid as part of its restructuring programme.
In a detailed report issued today, the EU says it has some 'major concerns' about whether the optimistic forecasts on long-term viability are realistic; whether the proposed capacity reduction involves genuine compensatory measures; and whether aid given by the government violates the 'one time last time principle' in view of a capital injection carried out in April 2004.
The report confirms that as a compensatory measure for possible distortion of competition, Air Malta has offered a capacity reduction of 20% including the surrender of certain profitable or potentially profitable routes. The report says that slot pairs that would be surrendered by 2013 at coordinated airports such as London Gatwick, Manchester, Amsterdam, Frankfurt, Geneva, Catania, Stuttgart, London Heathrow and Munich. Through the withdrawal or reduced frequency, other airlines would be able to benefit from potentially increased load factors and, or, yields.
In its report the commission says that the restructuring plan, the duration of which must be as short as possible, must restore the long-term viability of the firm within a reasonable timescale and on the basis of realistic assumptions as to future operating conditions.
The restructuring plan forecasts the profitability by 2016 to be on a similar level as the profitability of major carriers.
COMMISSION DOUBTS LONG-TERM FORECAST
"The Commission has doubts whether these optimistic forecasts are realistic to achieve, especially in view of the following:
The Commission doubts whether the significant impact of the ancillary revenues both in-flight and pre-flight of at least EUR [9 to 11 million] p/a is realistic, especially whether the expected take-up rates reflect the growing price consciousness in consumer behaviour mainly on short range flights. In particular, the revenues through catering and on-board sale seem to be too optimistic.
"The Commission doubts whether the assumed cost reduction through contract management can be achieved since the negotiations are still at a very early stage for some of the contracts. Therefore, Malta is invited to give an update on these negotiations and the expected savings.
"The Commission doubts whether the assumed market growth of 5.9 % is still realistic. The annual growth survey of the Commission of 23 November 2011 shows that the economic recovery has come to a standstill and that low levels of confidence are adversely affecting investment and consumption due to the current sovereign debt crisis and the situation in the financial sector together with a slowdown in the global economy. The impact has been particularly acute in the Euro area. As a result, GDP is likely to stagnate in the coming year and overall growth in the EU is forecast to be as low as 0.6 % for 2012. In contrast to Malta's assumed growth in GDP of 2.2 % in 2012, the latest economic growth figures by Eurostat forecast a growth in GDP in 2012 of only 1.3 %," the Commission said.
The economic slow down also affects the countries of origin of the foreign passengers flying to Malta, especially from UK (0,7 % growth in 2012) and Italy (0.1 % growth in 2012).
"The Commission doubts whether the assumed yield is still realistic to achieve. In a press release dated 7 December 2011, the International Air Transport Association (IATA) gives a negative outlook for profitability on the European air transport market. Higher passenger taxes and weak home market economies have limited profitability in Europe. European carriers are forecast to generate a collective profit of just USD 1,0 billion, down from the previously forecasted USD 1,4 billion, and an EBIT margin of 1.2 %.
"The Commission doubts whether the assumptions for the base case scenario on inflation are realistic. The Restructuring Plan only includes known price increases such as salaries; otherwise cost inflation is not included. However, e. g. the European Central Bank expects inflation rates for the Euro area of 2,0 % (2012) and 1.9 % (2013)."
The Commission invited third parties to give their view whether the envisaged results at the end of the restructuring process, in comparison to figures of its competitors, ensure long-term viability in the market environment of the air transport sector.
The Commission added that as regards the scenario analysis, Malta has not provided an analysis of the overall impact on the profit and loss situation for both the best and the worst case scenario. Furthermore, the standard deviation analysis is not clear enough and has to be explained in more detail; especially Malta has to demonstrate how and on what basis the standard deviation is calculated.
COMPENSATORY MEASURES
With regard to compensatory measures (for state aid) the commission said such measures must be taken in order to ensure that the adverse effects on trading conditions are minimized as much as possible. In this regard, closure of loss-making activities which would at any rate be necessary to restore viability would not be considered reduction of capacity or market presence for the purpose of the assessment of the compensatory measures.
"Since the overall capacity reduction of 20% also contains loss making routes whose closure is necessary to restore viability,"there are serious doubts whether the overall reduction can be regarded as compensatory measures" the commission said.
It noted that Malta proposed to discontinue or reduce capacity on certain routes which were profitable, or have potential for profitability with the right management and commercial attention and investment.
"The total ASK change related to the routes explicitly earmarked as compensatory measures amounts to 14 % to 18 % of the 2010 overall capacity. The net capacity reduction related to these routes — i.e. capacity change related to the routes explicitly earmarked as compensatory measures minus the capacity increase by additional routes and expansion of existing schedules — amounts to ASK which corresponds to 5 % to 7 % of the 2010 capacity."
In contrast, the commission said, Malta offered an overall capacity reduction of 12.5 % to 15.5 % for "profitable" routes plus a capacity reduction of 5.5 % to 7.5 %] for "marginal" routes to be regarded as compensatory measures. These numbers conflict with the ASK figures provided for the routes explicitly earmarked as compensatory measures.
"The Commission invites the Maltese authorities to clarify this incoherence. The Commission notes that for the route Malta–Verona the contribution margin and the load factor are missing although this route should be counted as a compensatory measure.
"The Commission has doubts whether these routes are profitable. All the routes earmarked as compensatory measures have a 2010 contribution margin below the 47 % to 57 % threshold. The contribution margin of some routes is even negative."
The commission noted that Malta argues that, in order to exclude loss-making routes, a positive contribution margin, regardless of passing the [47 % to 57 %] threshold, is sufficient. Even if the Commission followed Malta's approach, the report says, the capacity reduction would amount to only 8 % to 10 % of the 2010 capacity.
"In any case, the Commission has doubts whether this approach is appropriate as it does not ensure the coverage of fixed operating costs and administrative overheads by the retained bundle of routes."
Malta, it added, argues that some routes which are not profitable today have potential for profitability with the right management and commercial attention and investment. Therefore, Malta provided a contribution margin forecast for FY2014. However, some of the routes will still remain below the 36 % to 44 %, the relevant threshold in FY2014.
The Commission noted that only capacity data until FY2013 had been provided and it invited the Maltese authorities to also submit information on the route network development as of 2014. The capacity reduction carried out until 2013 may not be significantly counterbalanced by future capacity increase.
Beyond the capacity reduction, Air Malta proposes the sale of non-loss making assets as compensatory measures. This includes its subsidiaries Shield Insurance Co. Ltd. (an airline insurance company) and Osprey Insurance Brokers Co. Ltd. (an airline insurance broker).
However, according to R&R Guidelines, the compensation measures should take place in particular in the market where the firm will have a significant market position after restructuring.
"The market where Air Malta has and will have a significant market position is the Maltese air transport market. This does not apply to the insurance sector. Therefore, there are doubts whether the sale of Shield Insurance Co. Ltd. (an insurance company) and Osprey Insurance Brokers Co. Ltd. (an insurance broker) can be considered as compensatory measures."
NEW AIR MALTA FEES
The Commission said that following the approach of many low-cost carriers, Air Malta would charge fees for ancillary services. These will include: differentiated service fees of between €10 and €15 to encourage people to book online; additional bag charge fee of between €35 and €45 for any second or subsequent bag carried by passengers; seat reservation fee of between €9 and €11; a loounge access fee of between €9 and €11; and a paid catering service.
MALTA'S LOCATION
The Commission said Malta's peripheral geographical situation causes problems with respect to accessibility to the rest of the EU and as a result the country is extensively dependent on air transport. This is important as in the case of Malta, air travel is the only viable mean of business passenger transport apart from being essential for other vital services, including medical related travel. Against this background, an own contribution of 45.5 % may be appropriate in the present case.
"However, the own contribution must be real, i.e., actual, excluding all future expected profits such as cash flow."
As regards the sale of subsidiaries, the Commission said it is not clear whether the sales will be carried out by an open, transparent and non-discriminatory procedure. The values should have been established by independent evaluation. However, these evaluations have not been provided to the Commission. The Commission invited Malta to submit further information about the envisaged sale procedure and to provide the mentioned evaluation reports.
ONE TIME, LAST TIME STATE AID
Finally, the, the commission said, state aid must respect the condition that it is "one time, last time". A company that has received rescue and restructuring aid in the past ten years is not eligible for rescue or restructuring aid.
It noted that in April 2004, before accession to the EU, Malta carried out a capital increase of EUR 57 million. This measure was not considered as rescue and restructuring aid by the Maltese authorities who considered the capital increase to be compatible with the market economy investor principle (MEIP).
The Commission was informed about this measure at the time in the context of pre-accession cooperation. Since the measure was granted before Malta's accession to the EU, it was not necessary for Malta to seek the Commission's approval prior to implementing the capital increase in 2004.
"However, in line with consistent Commission practice, the Commission will take account of restructuring aid granted prior to accession for the application of the "one time, last time" principle in subsequent cases of restructuring aid."
"The transaction in question involved the transfer by the Government of real property (land and buildings) to Air Malta under a long-term (63 years) lease agreement in return for obtaining additional shares in Air Malta. This real estate had been formerly held by Air Malta under rental agreement.
"At that time, the Maltese authorities considered that this capital increase did not constitute State aid because it had been carried out in conformity with the MEIP at market price, that the private shareholding in Air Malta had not been diluted by the capital increase (i.e. the minority shareholders had participated in proportion to their shareholding) and that the transaction was not related to rescue or restructuring Air Malta which was not a firm in difficulties at that time."
The Commission said it was necessary to establish whether Air Malta received an economic advantage, which it would not have obtained under normal conditions.
"The Commission considers that the 2004 capital increase might be in conformity with the MEIP, in which case it would not constitute State aid and should not be taken into account for the application of the "one time, last time" rule. It invites the Maltese authorities and third parties to provide comments."
RESTRUCTURING PLAN'S COST
The total cost of the restructuring plan is €238 million, of which €66.2m will come from the sale of land (which is already in process); between €9m and €12m from the sale of subsidiaries; between €9m and €12m from the sale of engines; between €20m and €25m in bank loans and €130m in government equity - including the €52m given to the airline last year.
MINISTER'S REACTION
In his first reaction to the report, Finance Minister Tonio Fenech said he was confident that with the new management in place, the restructuring plan and the negotiations undertaken with the unions and financial institutions, government will be given the go-ahead to pump in money and save the airline.
When asked about the Commission's concern that the restructuring plan's targets were too optimistic, Mr Fenech said that the first six months of the current financial year (which ends in March) showed that the turnaround had started.
"This is a sign that a complete turnaround is possible," he said.
The minister said that the publication of this report was an important and normal step in this process and he expects the Commission would complete its evaluation by May or June if the number of submissions is reasonable.
Mr Fenech was speaking in a video conference from Brussels after a marathon meeting of Eurozone finance ministers yesterday that was followed by another meeting of EU finance ministers this morning.
See full report in pdf below
Attached files
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Joseph Calleja
Mar 5th, 21:28
Why on earth is the government letting Air Malta die a slow death? The end is inevitable and it is very obvious that the only profitable survivors are the highly paid management. Please save Air Malta by privatizing it, so it can start from scratch and become a profitable airline again. At least let Air Malta file for bankruptcy and save the TAX PAYER a whole lot of money. We cannot keep beating a dead horse.
pat muscat
Feb 22nd, 14:01
How can Air Malta be ever saved if it falls under the responsibility of a Minister, who like us is a 'cuc' Malti? Ara is-salarji taghhom sewwa jamministrawhom, b'xi zieda min taht ukoll: imma dik storja ohra!
vincent a galea
Feb 21st, 21:06
I say Air Malta MUST be saved not CAN be saved....
Malta's good name is also at stake here !!
Joseph Vassallo, (Bugibba)
Feb 21st, 20:31
All through this present saga and years before it started, I opined that the Airmalta group would be broken up into small viable lumps while the rest of the operation will be left to rot in the sun. Mogul competitors do this with all sorts of businesses. They buy the carcass and sell what they don't want in dressed joints.
Has the government found its 'hatchet-man' in Peter Davies? He joined tiny Air Southwest in January 2009, oversaw a £600,000 drop in profits, then sold it in May 2010. It operated four 20-year-old turbo-prop aircraft serving domestic routes and had 145 employees, i.e., less than a third of the Airmalta redundancies.
Mr Davies also restructured SNBA (erstwhile DAT/SABENA) in 2002 which he handed to Philippe Vander Putten for it to merge with Virgin Express in March 2006. So, that didn't take long either.
Both these outcomes could be either good or bad, the point being that both were sold soon after Peter Davies became their CEO and without generating a profit.
The outcome for Mr Davies's Airmalta has yet to be seen. What can be done when the piper-payer dictates the tune? I think he has a 3-year contract so I hazard a guess that Airmalta will last at least that long.
This makes me wonder why other aspirants for the post of CEO withdrew; could it be they comprehended the undertones but did not want to be seen leading the horse into the knacker's yard? I'm hoping that one of them will write an autobiography. I look forward to an interesting read.
Someone here mentioned creative financing/accounting. First Mintoff gives Airmalta property worth millions for a nominal pittance and then Airmalta sells it back to Gonzi for millions, dilapidated and worth a pittance. Another political stronghold milking the nation dry with golden handshakes..
Initiatives to create a good customer-base were always lacking; Airmalta was every government's vote-catching medium . We had three old rented aircraft sustaining a workforce of more than a thousand?
Airmalta's allegiances overwhelmed Maltese travellers (it was then relatively few who travelled, unlike today) but of course, our visitors had choice and voted with their feet.
Small hotels and guest-houses struggled hard to maintain their customer-base and were severely castigated, their efforts undermined by bad policies. Airmalta sold 2-week stays for less than it charged us for a seat. Mr Cappello and Captain Harris might even remember some of my remonstrations.
How many viable Airmalta assets have been devolved, if any, and to whom?
By my yardstick, this is utter madness. Nearly thirty years ago, I was treated with derision when arguing that Airmalta should be thinking in terms of offering discounts for early bookings; yet now, decades later, the later a pre-booking is made, the higher the premium they charge. Not exactly timely, but isn't that the same as giving a discount for early bookings? We've gone the full circle apparently and so we try to hide the real tariff among the extras.
The future is probably un-booked shuttle (like Gozo ferry) with a hefty premium if you pre-book your seat.
Airlines will abuse their captive market without promoting volume sales because customers don't mind paying for value but positively abhor being ripped off.
Meanwhile, Airmalta is breaking up and someone will gain by it. When everything has gone belly-up, travel will become expensive again and those with their finger in the pie will benefit most.
Carmel Cilia
Feb 21st, 18:09
Kull ma kellu il-pajjiz spicca fix xejn. Il-Baqar jehilbu spiccaw bhal fil holma ta Giuseppi baqar niexfa. Is- snien tal -gid li kienu mibnija fuq self sfrenat(Power station mhux ghadu dejn wara 20 sena bla misthija) issa gew segwiti min snin tal ghaks. Gonzi.P.N kull ma qieghed jipprova jaghmel hu li jtawwal il-bicca sa l-elezzjoni li gejja imbaghad it-tradiment tal-pajjiz ikun komplut u ikolli nghid bil ko-operazzjoni ta l-oppossizzjoni li bin nuqqas taghha ta protesti fit toroq qeghda tilghab il-loghba tal-gvern. Miskina Malta taghna.
Rocco Camilleri
Feb 22nd, 08:36
Veru kollu li qed tghid Sur Cilia. Mur gieb lil missierijietna u lil Mintoff li ghadu haj x'kienu jaghmlu dawn. Veru irid ikollok wiccek joqghodlok ghal kollox biex thalli dan kollu ghaddej qiesu ma' qed jigri xejn. Fejn hi 'Malta l-ewwel u Qabel Kollox ? Taf x'sar illum 'Il-BUT L-EWWELu QABEL KOLLOX' ta' l-irjus il-kbar. Tghid mhux qed johorgu l-gharaq ta' gbienhom ghallina u l-pajjiz. Iktar safar fil-vojt milli xoghol ghal pajjiz ghamlu dawn fl-ahhar 24 sena, kif trid ma' jehilbuhiex lil AIR MALTA !!!!! imbad biex taxxaqa igiebulna xi CEO barrani imhallas bil-miljuni ghax qallulna li ahna 'Cwiec' . Il-Hutu minn rasha tinten u mhux ghax 'cwiec' u mhux, ghax allura Cucc kulhadd qed jirrizulta f'kull tmexxija. Mela sew l-ewwel tghidx kemm fahhruhom lin-nies Maltin li bnew il-vapuri li ghadhom jahdmu sa' llum imbaghad ghajruhom u tefawhom il-barra, u min kien responsabbli ta' Tender fallut tal-'Fairmont' jahrab u qiesu ma' gara xejn . Nahseb li spicca fil-Qamar biex ghadhom ma' sabuhx.
martin brincat
Feb 21st, 17:30
Next , What about Arriva in Malta?
Victor Gelfo
Feb 21st, 17:14
Subsidies goes against Eu rules. And after all its our hard rarned money that is going down the drqin. Such companies should long have been privatised.
Godfrey Grima
Feb 21st, 19:44
RuinAir gets around €11m in subsidies and discounts here in Malta. I am told that throughout the EU they get around €800m! Air Malta gets Zilch.
Patrick Zammit
Feb 21st, 20:09
Bailing out other countries also goes against EU rules (Maastricht Treaty), yet we are giving away hundreds of millions of Euro, money which probably, we will never see again.
Charles Cremona
Feb 21st, 17:09
A very pessimistic and realistic report by the commission which does not bode well for the future of Air Malta, the writing is on the wall despite what Mr Fenech says.
A. Schembri
Feb 21st, 16:48
L aqwa li CEO qed jiehu nofs miljun fis sena hux ghax mhux malti....ghandha gvern fejn jimxi biss fejn jiehduh l interessi taghhom stess....
Joe A. Borg
Feb 21st, 16:37
In simple words you are being told politely to get rid of it !
Then we will be totally at the mercy of foreign operators as happened following the closure of Sea Malta
Lawrence Fenech
Feb 21st, 16:28
GonziPN and clique treated AirMalta like a cow, it has now run dry except for the CEO's at the top.
Anthony Paris
Feb 21st, 16:24
It sounds as if there is not much of the turnaround proposal that made sense to the EU commission. Well done to the minister, consultants and senior management. You have proved that whether we pay peanuts or not, in Malta we always get monkeys.
E. Azzopardi
Feb 21st, 16:20
In the future, as far as I know, AIR MALTA must pay all the money that the government, that is, THE PEOPLE, are "lending " to the airline. We have a recent case of MALEV, Hungarian Airlines where the EU demanded that the airline pays back some €135 million of state aid. We know what happened to MALEV. I trust, for AIR MALTA's sake that all mathematics are in place.
M Sciberras
Feb 21st, 16:17
Just as I feared, the European Commission is going to be the final executioner of KM. 1) It is taking far too long for the Commission to reach its conclusions. You have to be intimately familiar with how the EC works to realise just why this nightmarish bureacracy is the last thing KM needs. The people who have worked on this report on behalf of the EC are civil servants who work a strict 37,5 hr week. They will have little or no real experience in business and industry but oh God, they are well versed in byzantine regulations and covering their backsides - the requests for further information mentioned here are common delaying tactics used by the EC as they make sure every i is dotted and every t crossed. On the shoulders of such rests the fate of the Maltese economy, which will grind to a halt if the national carrier stops flying tomorrow. Help us God! Despite some fine words, the EC has made NO allowance for the fact that KM is the airline of a tiny island nation and expects a real full contribution from the airline just as if it were any regional airline in Germany or France. It is not. It is virtually the only communication artery of Malta. 2)There is also the issue of blatant double standards. Forget the banks and stick to the airline industry - I need only mention Alitalia, and say no more. 3) KM cannot afford to give up ANY of its profitable routes. The airline is and will remain too small to achieve sustainable profitability with oil at prices above $100 a barrel because it can never hope to achieve economies of scale while retaining the wide network needed to service Malta's tourist industry and business. So let us just be clear and honest about this. KM's huge profits years ago were made when the price of oil was a fraction of the price it is today. The airline's business model has to be that of agressive constant cost reduction if it is to maintain its wide network. 4) Increasingly I am of the opinion that the government should let KM go bankrupt and immediately set up another airline, in the same way the old Swissair was allowed to bankrupt and a new airline, Swiss, rose from its ashes. As members of the European Economic Area, the Swiss too realised they had the commission to contend with in their calculations, even though they are not members of the EU. Bankruptcy and setting up a new airline with leased aircraft, even the same leased aircraft, can happen in a matter of weeks. And it will avoid this humiliating endless haggling with the civil servants of the Commission. Let this be a lesson to malta. Ultimately it was Maltese mismanagement and especially Nationalist government incompetence that brought KM to its knees, and then high oil prices and LCC's contrived to keep it there. KM underlines the importance of keeping our own house in order while we are in the EU and benefitting from the Single Market. We have now learnt, I trust, the inherent wisdom of keeping the Commission and its officials at a safe distance
Carmel Farrugia
Feb 21st, 18:12
Mr Sciberras, well said. It was not only Swiss Air that went that way but also Sabena and Alitalia.
A Galea
Feb 21st, 16:13
What happened to the Ernst and Young restructuring plan?
It would be interesting to know the exact figures, running in tens of millions, that were flushed down the drain.
Rocco Camilleri
Feb 21st, 16:10
Veru ghandna ghax nghidu proset tassew lil EU li flok jghinuna f'din il-materja ta' l-uniku transport bl-ajru li ghandha Malta tghamlilna l-bsaten fir-roti u jgiebulna kull skuzu biex zgur ikkisrulna din l-azjenda li baqalna tant bzonnjuzu ghall pajjizna. Ara ghall Grecja qalu lil kulhadd biex jghati sehemu fil-'BAILOUT' imma tafu ghaliex ghax pajjizi bhall Germanja, Franza u forsi ohrajn il-Grecja ghandha d-Dejn maghhom u jekk tfalli tolqot lilhom ukoll. Sur Gvern hemm bzonn nifqulhom bis-serjeta dawn l-irjus il-kbar ghax il-qalsiet baqalhom x'jehdulna. Veru tal-misthija u spiccajna minghajr sinsla jekk din se' tkun l-ahhar daqqa bhal tad-Drydocks. Pajjiz spicca minghajr hafna jekk mhux kollox ta' l-infrustura li kien irnexxielu jibni b'tant gharaq u sagrifficji.
Lyn Avonwood
Feb 21st, 15:29
Double EU Standards. When other countries banks are involved etc. Nobody complains about bailing them out.
Malta as an island nation, and is dependent on the services of Air Malta and other carriers to service the island.
Cutting it off would be like severing an arm, yes you can live without it , but it would be painful.
Seems like the bureaucracy in Brussels, has double standards on where support is given. Why not let Greece fail then ??
Joseph Calleja
Feb 21st, 16:30
" Why not let Greece fail then ?" Maybe they should, because soon as this bail out money is spent they will definitely come back for more. It has happened before and it will happen again. They can always depend on the EU to bail them out. Air Malta started out with a 20,000,000M million bail out, all of a sudden it is becoming 238,000,000M million euro bail out. Where it stops nobody knows?
Carmel Farrugia
Feb 21st, 18:14
Letting Air Malta go bankrupt does not mean remaning without a national airline. Alitalia, Sabena and Swiss Air went bankrupt and from their ashes there rose new strong airlines without the shakles of the old work practices, old debt etc.
Godfrey Grima
Feb 21st, 15:27
While the above are indeed conflicting views, google (airline name) 2010 losses and you will be surprised to note that almost all world airlines are on a losing streak. To name a few examples:
Air France - €330m
Brussels Airlines - €70m
Alitalia - €94m (first half 2011)
Austrian Airlines - €63m (first half 2011)
LOT Polish Airlines - $44m
SAS - €59m (first quarter 2011)
The list goes on and on with similar trends worldwide.
(source
http://www.aviationbrief.com/?p=2969)
Although I do appreciate the present re-structuring efforts following years of use and abuse of AirMalta in the last 20 odd years, I also do think that the announcement of profits in 3 (now advanced to 4) years from now is a bit too optimistic.
Having said that I strongly believe that Air Malta must be, and will be saved.
m. borg (slm)
Feb 21st, 15:45
As far as I know Airfrance which operates together with KLM (Holland) have gobbled up Alitalia. If Alitalia is still losing money I am sure that AF-KLM would simply unload the loser.
Adrian Attard
Feb 21st, 16:30
Dear Godfrey,
The carriers you mentioned are established in countries that have clout in the EU. Unfortunately, Malta does not have. Can I say more? Damned the day Malta joined the Eu.
Joseph Calleja
Feb 21st, 15:25
" Chief executive Peter Davies said: "Air Malta's airport slots at primary airports including Heathrow and Gatwick are not for sale." That was only yesterday. Today we hear otherwise from the EU. How gullible and a bunch of Cwiec does the highly paid management of Air Malta think we are? Well maybe we are. Any government that is willing to pay millions of euros to buy their own assets is very questionable and might even justify the word CWIEC. And to make matters worse they want to use those millions of euros to build a brand new office building for the executives because the offices they occupy now are obsolete. What is going on Dr Gonzi? Where are you leading us to? What kind of a scam are the government and Air Malta pulling here? I am aware that none of the politicians bother to read these letters and comments, but maybe they should. I know there is such a thing called creative financing, but this is highway robbery. And total cost of the restructuring plan is €238M million . What a rip off? Paying out all those millions of euros to buy your own property is like the government is willing to buy my igloo in the middle of the Sahara Desert. I said from the start that Air Malta needs to be privatized and or sold to private investors. Stop squandering the TAX PAYERS MONEY. Air Malta has terminal cancer and no medicine is going to save it. The only people that are benefiting from all this are the highly paid fat cats at the top. Never heard of anything more ridiculous, property owner to pay millions of euros to buy his own property. Creative financing? CWIEC?
Ms Maria Vella
Feb 21st, 15:16
It is a pity that Air Malta is going the low cost carrier route......full of hidden costs and a shoddy service - if there is one thing I couldn't complain about was the service.......sad
Joseph Calleja
Feb 21st, 16:11
It takes more than a lot of good service to be able to fly an airline. You cannot neglect an airline like Air Malta for 6 years or so and then start pointing fingers. This government was aware of all this but neglected to act in time. Incompetent management and a government who was asleep at the wheel. The government is the owner of Air Malta and should have acted on the first sign of trouble, not wait until it was too late..
m. borg (slm)
Feb 21st, 15:10
After recruiting a foreigner instaed of a cuc malti to overseer the restructuring of AirMalta and after the 500 jobs envisaged to be axed has come about the honourable minister for finances has not managed EU to let Malta to help it with its problems.
The horror of it all whilst we are made to fork out millions of euros to bail out Greece who contribute nothing to the welfare of the Maltese Islands the EU forbids us to start charity at home.
One wonders if the present government is providing the EU with erroneous data on porpose so its dream to privatise the airline and hand it to their clique of friends materialises.
Joe Grech
Feb 21st, 15:03
It is being widely said that a number of Air Malta higher paid employees who opted for the early retirement scheme obtained many thousands of euros as a result. This when, even prior to their leaving, arrangements had already been made for these lucky employees to be employed immediately with MITTS and they have in fact already started employment there. So they got about e50,000 plus a new job! They can hardly complain that they were badly hit by the Air Malta problem....far from it. If things are indeed as explained then they actually benefitted. Not so the lesser fry!
Minister Fenech, does it make sense for Air Malta to pay thousands of euros to these ex-employees when they have already been employed at MITTS? Was all this done above board or were subtle moves carried out behind the scene to ensure that some employees (the blue eyed boys ?) were not negatively affected?
Is the General Workers Union aware of all this and is it contemplating making any objections?
Joseph Calleja
Feb 21st, 16:21
The GWU was very aware of the deal made with the employees, because they were part of the bargaining parties. What is in it for the GWU? The GWU does not give up that easy without a motive. If I happened to be one of those fortunate employees to get all that retirement money, I too would grab the money and run. Was it mentioned anywhere that those same retired employees who accepted about e50,000 plus a new job still carry with them free flying benefits for life? It wasn't such a bad deal after all, and the TAX PAYER pays for it all.
pat muscat
Feb 21st, 14:56
When Air Malta was founded, PN quickly retorted that the planes were' ghasafar tac-comb'; and that is how they are going to end! It hurts that Air Malta was brought down to its knees, by the creme de la creme of Maltese politics; the PN, and that this PN, nothwithstanding being full of 'sappi tutto' and no' cwiec ma ghamlux wahda li hi wahda tajba'! NB. Skuzawni: ghamlu xi haga kbira :imlew Malta b'muntanja ta dejn: aghar minn dak ta Don Gonsalvo Monroy seba mitt sena ilu!
D. A . Agius
Feb 21st, 14:54
How come in their report Air Malta's share in Lufthansa Technik's actually produced a LOSS at 10Million Euros (hopefully, only 8% of it being Air Malta's cost, which still is slightly less than a million.). Didn't such investments mean a guarantee of future income?
Secondly, there is also mentioned that a HolidayMalta, a UK based company, was responsible for almost a 2Million loss.
BUt the sales that are planned are those of the two insurance companies which actually register a profit!
Secondly, the commission also mentions that the Air Malta Property which is being sold to Government will be used by the Government for the Aviation Park. Is the Government getting the land to be ready to give it out to 3rd parties? Why not have Air Malta develop the land/location to be in a better position to compete?
R. Cilia
Feb 21st, 14:34
The European Commisioner has expressed doubts but Tonio Fenech is confident......... So who should we believe now? You have certainly lost crediblity Mr.Fenech..All this even though there is not a "cuc malti" at the helm!..Pull the other one Mr.Fenech!
Geoffrey Farrugia
Feb 21st, 14:17
The Times just yesterday reported Air Malta stating that its slots are not for sale. Less that 24 hours later we read quite the opposite! Which version is correct? Is it possible that whatever happens in this country is clouded in mystery and lies?
The only point to Air Malta's advantage in the report is Malta's location and our dependance on air travel. From what I read though Air Malta's restructuring plans are over-optimistic in many assumptions and the Commission is not swallowing the bait!
The Commission might have its own reasons for pushing to get rid of our airline. But I hope that Air Malta stays...whatever shape it will have in the future. This is not a case of partisan politics, both parties used and abused Air Malta since inception. Air Malta is the only way we can keep our independence intact. God forbid we are made to depend only on other airlines for our travelling.
Adrian Attard
Feb 21st, 14:54
Absolutely NO. If the company is losing money, it should wund down once and forever. Don't worry - we will not remain isolated on this rock - other carriers will follow in - the bridge with mainland Europe will still remain. After all, the Maltese are not being priviledged by using Air Malta.
William Calleja
Feb 21st, 14:00
So.. despite that the EU commission have in vast detail and at great length not only cast doubt on the plan but also given several points of evidence on how it expects it to fail miserably, the minister's only response to this is 'I firmly beleive that my plan will work regardless of how many experts we get from abroad pointing out its stupidity and absurdity"
Lucienne Dimech
Feb 21st, 13:58
Stop wasting our money airmalta please.
m. borg (slm)
Feb 21st, 15:12
Lucienne it is not airmalta wasting our money but the pn government. Until recently airmalta was doiung fine until blue eyed boys, cwiec nazzjonalisti maltin were put at the helm.
Not really cwiec in fact.
Joseph Vassallo, (Bugibba)
Feb 21st, 13:45
Wasn't it only yesterday that Airmalta's CEO stated categorically that selling the Heathrow and Gatwick slots does not feature in the restructure and that these slots are not for sale? http://www.timesofmalta.com/articles/view/20120220/local/air-malta-s-slots-are-not-for-sale-airline.407761
This is the opposite of what is being said above, so someone is clearly either misinformed or misinforming.
Would The CEO grant us the courtesy of returning to state whether it is he or the EU commission that is misinforming or misinformed?
If the CEO was wrong, it can be construed that he wilfully misguided the public in order to give advantage to others with conflicting interests and who might be privy to inside information, and that is illegal as far as I know.
So Mr Davies, we urgently need your reassurance that everything is above-board, please.
Joseph Vassallo, (Bugibba)
Feb 21st, 15:07
Well, come on then! If you want our support you have to show some respect for the public not treat it as ignorant.
Carmel Farrugia
Feb 21st, 13:39
There is only one solution to situations like this, this country cannot afford to have another Dockyard which milked millions from the Maltese people. Close Air Malta and re-open with new shareholders and new systems new work practices and without ground services. We should look at the experience of other companies vide Sabena, now Brussels Air, Alitalia now Alitalia CAI, and Swiss Air now Swiss International Air Lines.
m. borg (slm)
Feb 21st, 15:15
Mr Farrugia with Fairmount debackle Tonio Fenech forked out more money in one year than the malta drydocks did in 10 years.
Apparently nationalists do not have an idea how their party works,. First cripple the company, then subsidize it till the people start grumbling then shut it down and turn it over ot friendly private companies and the goats will then start clapping.
Carmel Farrugia
Feb 21st, 18:07
Mr Borg, Fairmount or no Fairmount 50% of the National Debit has been taken up by the Malta Drydocks and the Marsa Shipbuilding. Fairmount or no Fairmount the Malta Drydocks was unsustainbale. As regards to Air Malta it too is unsustainable. Once the subsidies to Air Malta stopped by the removal of the monopoly it had through the introduciton of air liberalisation then also Air Malta is unsustainable. Its work practices are antiquated and uncompetitive for the year 2012, It will have to close down this year, the next or the next. The quicker the better so a new airline can be born from its ashes. The government must have the courage to do so. If not the PN government then it will be the a PL government to do so.
Ray Pace
Feb 21st, 13:31
So afterall, Airmalta is following the "low"cost airlines where it comes to luggage, booking and meals....and discontinuing/reducing slots in prominent airports.....well airmalta has already dug its own grave along the years and know it is burying itself. If the list of airports mentioned is truthful, then God help Malta. Are they serious removing the Catania slot?
j brincat
Feb 21st, 13:30
And we are paying exorbitant fees, running in thousands of euro to these foreign nationals because they don't have that ' Maltese Cwiec' in their DNA and yet EU has DOUBTS about their restructure plans!
Come tell me another!
Quo vadis GonziPN? Besides photo sessions there are much serious matters at hand that need to be seen to urgently, unless, unfortunately, it's Bye, Bye, Air Malta! Remember that are hundred of jobs (families) at risk!
(jb)
Joseph Vassallo, (Bugibba)
Feb 21st, 15:32
In truth j brincat, there is an ocean of difference between saying "Mhux ser nahtar xi cuc malti" and "Mhux ser nahtar xi cuc GHAX malti".
The first means that the minister would not install a Maltese CEO because all the Maltese are incompetent (cwiec).
The second means that the minister would not install an incompetent CEO, just because he happens to be Maltese.
I was not there so I don't know which of the two, the minister said.
BUT... forget your party-piece and 'GonziPN' for a moment...
Instead, why don't you labour the point that yesterday Peter Davies categorically stated in this website, that Airmalta's slots (very expensive and sought-after assets) are not for sale? Today the EU commission is reported to be saying the opposite.
There could be conflicting interests and I want reassurance that there aren't any. We all know that inside-information influences major deals, in most cases adversely against the vendor and shareholders.
Mr John Montague
Feb 21st, 13:05
The following extract from the EU's Air Malta report contrasts somewhat with Air Malta's recent statement that these slots are not for sale.
Interesting reading........
(28) Furthermore, as of autumn 2011, Air Malta has started to discontinue or reduce capacity on certain routes which are offered as compensatory measures according to the Community guidelines on State aid for rescuing and restructuring firms in difficulty (11) (hereinafter, “the R&R Guidelines”). This will also release the pertinent slots in a number of foreign airports, with Air Malta thus forgoing any grandfather rights it currently has on these slots. By 2013, […] slot pairs will be surrendered at coordinated airports (12) such as London-Gatwick, Manchester, Amsterdam, Frankfurt, Geneva, Catania, Stuttgart, London-Heathrow and Munich. Through the withdrawal or reduced frequency other airlines will be able to benefit from potentially increasing their load factors and/or yields.
D. A . Agius
Feb 21st, 14:29
Probably the EU actually believes what the Opposition rather than government or Air Malta is saying.. .
Which might be wrong now, but right in the future.
What I would be more worried about is the sale of non-loss making routes and interests. Excuse, me, but why sell or stop interests which give you an income? Isn't it like shooting yourself in the foot?
Lawrence Fenech
Feb 21st, 13:03
The only "optimistic forecasts" are the extravagant salaries of the foreign CEO's leaving 500 employees yawning and will probably end with AirMalta being sold to a foreign investor for pennies like all the other corporations. This system started with one of our previous banks.
Tony Busuttil
Feb 21st, 13:03
Every one knows that Air Malta is unsolvent case. Even the CEO knows this and his not Maltese cwiec. As long as we paythem in hundreads of thousands ewros they are keeping us as their carrot. I will bet that withing 12 months they will vanish. How come in 3 years this company which is smaller than a burger shop will make profit?
Jay Oatmon
Feb 21st, 12:58
Air Malta seems to be just another 'sacred cow' setup which was overmanned and used to give jobs to insiders; and paying too much for almost everything.
I believe Air Malta also suffered from severe theft/pilferring for many years from their duty free stores and supplies - and this was simply disregarded.
Trying to change the mindset at Air Malta will be the same as the dockyards fiasco - with entrenched positions, and special favours/situations knocking back financial common sense, and hard work by the aircrews.
I believe the aviation business is almost always in crisis, and expecting Air Malta to perform against very stiff competition is unrealistic, unless it downsizes every year for a decade.
joe vella
Feb 21st, 13:48
the pilfering was not only from duty free etc
anything that went into the bonds and had an attractive or resale value to it was up for grabs
ask the importers (especially the ones involved with newsprints, books and clothes) - there were innumerable complaints and exposures but the matter was never tackled seriously by the people who ought to have acted
m. borg (slm)
Feb 21st, 15:20
The biggest two money drainers was Joe N Tabone's buying of the Avro Jets that cost the company million and millions of Euros some of these planes are still rotting on some british runway somewhere in UK. The second was the Med avia project which was unprofitable and money wasting.
Fabien Sant Fournier
Feb 21st, 12:52
Just booked a 1 way flight for a 3rd party Malta-Sofia, but should have been Sofia-Malta.
Air Malta refused to make an exception to their penalty fee for a simple reversal of route for this honest mistake! Not only that...the 2nd route was cheaper than the 1 I had paid for..they refused to apply this credit!
Air Malta you are a DISGRACE to the tourism industry. Your call centre staff have no idea how to deal with a complaint and your lack of a manager available to handle a complaint is beyond belief!
Your shoddy customer care and adoption of an LCC fee structure will ultimately lead to your demise.
N Zahra
Feb 21st, 13:15
Flying is now a rules-based industry. The treatment you received would be the same under any carrier. Just get used to it. Don't make mistakes. (I've made several on different carriers and had to pay for them too...)
TuffyDavies Davidson
Feb 21st, 14:49
As a foreign visiter & a frequent flyer to Malta i often used to book with AM, but as you say they are quite expensive and just like you i find their customer care service and also trying to get any refunds back from them & i must also say most of the time mistakes are done also from their side, however as you say getting a refund from them(Typical Maltese) is just like trying to draw blood out of a stone, it impossible, needless to say i too decided finally not to book with them anymore and now happily making use of other carriers much - much cheaper for the same service, must admit not as good a service but then again i am still gaining fares wise. Verdict AirMalta to me is now a dow dow dead as a door nail.
Joseph Vassallo, (Bugibba)
Feb 21st, 15:04
It just cost my niece nearly €1,000 to urgently fly to London because Airmalta refused to credit her with her surrendered (unused) return booking of a flight she thought she did not need but subsequently needed anyway. They made her pay again for another ticket. Does that make sense to anyone?
This is not what can be called 'customer care' and there is no mitigation, especially in low season and when a chosen few are still benefiting from free or subsidised travel.
Last summer, they tried to pull the same trick on another niece of mine and on her family but had to redeem the situation to pre-empt the social websites going viral against Airmalta. This had already started and next, it would have been the UK papers.
Because the family were marginally late arriving at the airport (because of a fatal accident and motorway closure that Airmalta was kept informed about) Airmalta wrongly sold or allocated (to whom?) their seats before check-in closure even though the party had completed an online check-in. "Viva chi regna" or "looking after their own", depending on who was allocated the outgoing seats, I suppose. But that cost my niece €1,000 for one-way tickets with a low-cost airline.
Next, they wanted the party to pay another €1,500 for their already-paid-for return seats, claiming that because the outgoing journey had been 'missed', the return seats were assumed to have been 'surrendered' even though the party were at the airport in time, arguing to be allowed on board.
With the airline's left hand not knowing what the right hand was doing, they wanted to resell the return flights as well, and my niece spent most of her holiday successfully-arguing her issue with them.
How's that for customer care? Or is it 'opportunism'?
Fabien Sant Fournier
Feb 21st, 15:32
So is the hotel industry, which I am an operator of, but when I have had clients in a similar situation I have waived cancellation/change fees. As a result not only has this created repeat business but these same clients have gone on to give us raving reviews due to our great flexibility and service.
Compare this to the disgruntled ex-client Air Malta have now created...
m. borg (slm)
Feb 21st, 15:42
Makes you wonder if this shoddiness by customer care is being made on purpose. To have a date change due to an emergency I was charged €500+ which together with the previous cost a Malta-AMS-Malta flight cost me over €800 . A sum that would have seen me going from UK to New York plus accomodation and some spending money.
joe vella
Feb 21st, 12:46
the above is very exhaustive and rather damning
they are certainly not 'maltese cwiec' sur tonio fenech- at a first glance maybe, the highly paid execs you have hired for air malta are slipping into the same category !
it appears that the impression given to the maltese public about an exhaustive and well presented case, that has overawed the EU commission so much that agreement was a matter of course, is not such a well founded and organised document at all !
It appears there are several lacunae and a lot of presumptions that the commission has stumped
who drew up the report? and how much did they get for it?
N Zahra
Feb 21st, 13:18
It looks intentional to me - a stalling tactic. My guess that it's in the hope that they can kick the can down the road past the election date next year.
Adrian Attard
Feb 21st, 13:40
You are spot on Mr. Vella. The fleet of foreign executives hired by this Governement happen to be all acquaintances of Mr Peter Davies. All of them have preteneded to be all aviation experts including Mr Davies himself but are only a bunch of idiots who do not understand nothing about the airline industry. Two things they know for sure: a) how to get paid and the rate at which are being paid and b) how to complete the bankruptcy of our national airline.
K CASSAR
Feb 21st, 12:41
Another one bites the dust! If not by sale by mismanegment!