Fresh from unveiling Air Malta’s new colours, CEO Peter Davies tells Kurt Sansone it is all about getting the perception right.

Air Malta has passed through a couple of tough years. Was this an appropriate time to be spending almost €2 million on a rebranding exercise?

We are in the process of changing our pricing policy and one aspect of that is to introduce more booking classes

They have been tough years. It is because of this that we have to change the image and the way we undertake our business, particularly by winning the hearts and minds of the 850 people who work for the company – €1.9 million works out at 23c per passenger over the life of the restructuring plan. It is my responsibility in delivering the restructuring plan to bring this company back to profitability. In the context of all the costs we have to make this a good investment.

You call this an investment but how would it be interpreted by workers who have been asked to make sacrifices?

They see this as a statement of pride. The workers are immensely proud of what they do on behalf of Air Malta and subsequently on behalf of the country. Like any human being we need to be rallied by something.

Whatever the symbol is, people are driven because it is a manifestation of what they believe in. Our responsibility is to create that environment where people can be proud with a refreshed brand that represents the true values of this country. You cannot run any company unless you have passionate people, motivated, focused and really want to do their best. If you don’t you will have a second-rate company.

Does this mean employees were not passionate about the brand? Were they de-motivated?

No, absolutely not. But we had to take motivation to even higher levels.

The Airline Pilots Association (ALPA) will not agree with these comments.

Most people like the logo and the brand identity. A lot of pilots do actually like the new brand. I distinguish ALPA from the rest of the pilot community. I have spoken to a number of pilots who expressed their keenness to see the new logo in place. At the end of the day we have to move this company forward. We are reducing our losses; we are improving the number of passengers and our yield. We are in a positive state of mind at the moment.

Is it money well-spent?

Every expense has to be done carefully otherwise you are not a good businessman and in the total package of what we are trying to achieve it is money very well-spent.

Where does this rebranding exercise take Air Malta?

It is all about selling. I am the chief salesman if you like and I have to sell as many seats as possible with the help of some very good people. The brand is about marketing and advertising this airline and this country overseas. It is a basic business requirement to make sure that you promote your company in the best possible way. The psychology of how people buy things is very much affected by how they see and perceive the company and that is why it is vitally important that we get the perception right.

An investment presumes you are expecting a return.

You cannot be specific about the return. Lord Lever once famously said: “I know that half of my advertising is wasted, I just don’t know which half”. You are always going to have some wastage in advertising because some people are not going to see it but the main thrust of what we are trying to do is to promote the airline and demonstrate how proactive and pragmatic we are to attract people to this country.

Would you agree that the new colours look and feel like those of a low-cost airline?

We went through a lot of research to identify what people associate with this country and the two most iconic elements are the Maltese Cross and the luzzu boats. The colours are inspired by these elements. The colours are also shaded by traditional patterns used in the Mosta dome and lace work. Everything about that livery represents Malta and I do not accept the charge that this country is low cost.

But we are talking about the look and feel of an aircraft.

I think it is an elegant portrayal of your beautiful country.

Will ticket prices go down?

We inherited a pricing policy and structure that has been around for many years. We are in the process of changing our pricing policy and one aspect of that is to introduce more booking classes. If you wanted to buy a ticket for €70 but went on the website and the only ticket available cost €110, you will potentially feel cheated. We need to introduce more steps in between.

Over the next few weeks and months the prices will change. Another issue concerns people flying out of Malta where prices were higher than those for incoming flights. We deemed this to be grossly unfair and we made those adjustments. The prices people pay will come down.

How does Air Malta compare with other airlines in this aspect?

As a national airline Air Malta will have to reflect the look and feel of Malta. I do not think it is the right strategy to equate Air Malta with a low-cost airline. We have to be more profitable because otherwise we will not be around. We have to make adjustments by pushing down costs, become more efficient and reflect this through improved services and added value.

You were exploring charging for some in-flight services. What are these?

There is a great opportunity for the airline to sell Malta 100 per cent through the merchandise people will be encouraged to buy. Additionally, not everybody wants to eat the food airlines provide and we should be more flexible here with a reflection on the ticket price. We have to reflect the type of service people want to purchase.

But the moment you start charging for food and other services you will get the low-cost tag associated with the airline.

Everyone talks about low cost and hybrid and legacy carriers but...

How would you describe Air Malta?

It is a good honest airline that flies exceptionally safe and provides good service to people travelling to and from Malta. I will not pigeon-hole the airline. For me this is irrelevant.

On the same morning you unveiled Air Malta’s new image an Airbus leased to a Polish airline was returning to Malta after the company cancelled all its flights. What is the situation today?

OLT Express has not gone bankrupt but it stopped operating because it could not find a working relationship with its principle shareholder. I spoke to the CEO last Tuesday and the aircraft is back in Malta. It is being de-registered in Poland and re-registered in Malta. The aircraft is secure and safe and we got all technical records back. Our pilots have returned and we are looking how to sublease that aircraft as soon as possible. Some companies have shown interest.

According to the restructuring plan Air Malta has to have 10 aircraft. You now have an extra one. What happens next?

We have to manage the process.

The 10 pilots subcontracted to the Polish airline are now on your books. This obviously creates a problem.

They are back on our books and this creates an opportunity for us to redeploy them elsewhere. In the restructuring plan we agreed with ALPA on 110 pilots because we had one pilot too many. We have to manage the situation and are discussing the matter with ALPA.

What are the prospects of redeploying them with other airlines?

My vision for this airline will be to fly to other destinations and not just going north

The airline industry is increasing rapidly around the world and I think there is an opportunity to redeploy them. We have 10 extra pilots and there is a level of anxiety among pilots, which I can understand and which we have to reduce.

For how long can you sustain this situation in view of a restructuring plan that has very strict deadlines and targets?

This is a blip but we have to manage blips every day so we are going through the process of adjusting our finances by seeing which projects can hold back to pay for the additional cost. I am confident we can do it but it is a nuisance.

You are targeting losses of €15 million for the current financial year that ends in March 2013. It is an ambitious target considering the last year ended with €30 million in losses. Are you on target to achieve this?

Yes. The first quarter results are positive and we are just slightly ahead of budget in terms of revenue, costs and profitability. The second quarter also looks encouraging. Apart from the Polish aircraft incident we are on track. In every budget you have to build in contingencies and we hope we will not stretch these too much. Our fuel costs are also under control. Oil has gone down to $106 per barrel and we have hedged round about that price.

How visible is Air Malta’s website?

Not as visible as I would like it to be. There is a lot we need to do. We have changed the back-end booking engine to create more flexibility. It will be re-branded to make it look fresher, more exciting and functional. The internet is key to our future growth. The website is just one of many objects that is broken and needs to be fixed.

What relationship does management have with workers?

It is a very good relationship. We have opened up the communication channels and we have a lot of town hall meetings. The event we had in the car park on Monday night when we presented the new brand identity to employees was attended by over 400 people. We are communicating in a way that people have never seen before. I think communication is vital.

On Monday night there were a lot of people in tears. They were moved when they saw the film because they could see something exciting and dynamic happening to their airline. But they also came up to me and said this was the first time that staff were told something before the press found out about it. When people have tears in their eyes it shows passion and that is what we want to motivate. At the end of the day it is all about numbers but to get to those numbers you have to go through the hearts and minds of the people.

Are you confident the airline will start turning a profit?

Absolutely, otherwise I would not be doing it. I am not a liar or a cheat. I have done this in other airlines before. This is what I do. You need a fair wind and the right plans in place, a lot of support and encouragement. There will be issues, stones and boulders we will have to overcome but life is not a straight course.

Will you stay the full course?

Yes, absolutely.

Some argue Air Malta will have to be privatised at some stage. What is your take on this?

I am not in a position to say whether Air Malta should be privatised or not. All I can say from a business perspective is that we need to make sure that we generate sufficient cash so that the company can continue to grow. In that respect as my chairman said there can be an element of capital investment which can’t come from the government because of the nature of the 10-year restructuring plan.

There is an opportunity for Air Malta to do far more than what it does at the moment. My vision for this airline will be to fly to other destinations and not just going north. That will require investment. Does that come through working with another airline? Do other airlines have an interest in using Malta as a strategic point? Those opportunities do exist and we may need to look at them sometime in the future.

The restructuring plan meant Air Malta had to give up some routes. But does the plan allow Air Malta to increase its routes or shift unprofitable ones with new ones?

The restriction we have is that routes that operate within the EU are governed by what we said in the restructuring plan until such point as we break even. At that point the shackles are off and we can go back to the marketplace. The EU Commission wanted to make absolutely certain that as a result of state aid Air Malta was not in a privileged position.

A restructuring exercise carried out in 2004 gave the airline a lease of life. However, six years later in 2010 the airline had to ask the government for a rescue package that led to the discussions with the EU Commission on a new restructuring plan. What guarantee is there that Air Malta will not find itself in a similar situation some years down the line?

There are no guarantees in life. I was not here in 2004 so I cannot comment on what happened then. All I can say is that I am here today and effectively we have had to undertake open heart surgery without anaesthetic. This is the degree to which we had to make changes at Air Malta. We had to identify the problems and then prioritise them and proceed to start the rewiring and re-plumbing process. Hopefully, my 40 years experience in the field will help us get most of the decisions right. Going back to the EU Commission for help is not an option. We have to make sure this plan succeeds.

Do you feel that being a foreigner with a lucrative package makes people scrutinise your job even more?

Having lived here for over a year now – and I do live here contrary to public opinion – I don’t think the salary has anything to do with it. I am in a position of significant responsibility for an iconic airline. At the end of the day, if we can deliver an airline that is successful and which people can be proud of, then it is money well-invested.