Air Malta flying high, but...
The directors and management of Air Malta discreetly made a big do of the fact that the ailing company achieved an operating profit of €0.4 million in its latest reporting period. That is quite understandable. Long periods of winter gloom and darkness followed by some breaking out of the sun warms the heart and gives fresh courage.
God knows Air Malta needs a boost, even if it is not certain that operating profit has allowed for accruals, such as required through the agreement with the pilots’ union. Nevertheless, those responsible for the national carrier were totally right to express caution.
The out-turn was made possible, among other things, by the downsizing of staff made by the airline in recent months, including shifting from permanent employees to contract or casual personnel. In this area too, there is still a long way to go. The positive operating out-turn cannot be taken as definite clearing of the sharp bend in the river.
There is a long way to go. Even without filling out the picture further and pointing out that the bottom line after other costs is still in the red and will remain so for quite a while, even if further positives are recorded. Directors and management will go after such positives driving along a number of important and converging lanes.
Expenditure has to be controlled further, squeezing out remaining excess, waste and incorrect pricing. Revenue has to be drummed up. Fewer flights as part of the restructuring programme have to be compensated for by higher load factors. That is perhaps the most challenging of what remains to be done. A dynamic challenge which cannot be met by meeting some figure set according to a continuously updated business plan.
Higher load factors have to be sustainable, in the same manner that whittling of expenditure has to be ongoing, not made of one-offs. Load factors will not depend on Air Malta’s efforts alone, such as to try to carry more commercial cargo than at present.
Load factors depend to a considerable extent on the state of the tourist industry. Allowing for the international environment, that is largely influenced by the efforts of the Malta Tourism Authority and hoteliers to promote and sell Malta. It requires an ongoing – that word and concept again – collective promotion and selling effort.
That was strongly made during the outgoing tourism year, not least to exploit reduced fortunes of competing destinations like Greece, Cyprus and Egypt, where rather parlous socioeconomic conditions also boosted the cruise passenger arrivals.
It is part of Malta’s destiny to live at least in part off the conditions in the surrounding Mediterranean area. For that reason, expect arrivals from Libya to increase quite dramatically once our neighbour returns to greater normality and if our visa offices there are boosted with the human and other resources required to handle within reasonable times a growing demand by potential visitors to the Maltese islands, with some or many planning to go on from here to other Schengen areas.
The potential for Air Malta, and for the operating airport company, is positive. Much will depend on how it is exploited. In this regard the effort spearheaded by the Minister of Tourism should continue to have a telling effect.
That is very much required. Along with the relative euphoria, it is important to note that hoteliers and others in the tourist trade, while confirming that they have had a reasonably good year, are adding that profitability still has not recovered enough to compensate for the decline they had to put up with in recent years.
Needless to say the tourism industry does not depend solely on Air Malta. Other mainstay airlines and the low-cost operators also account for a very sizable chunk of our arrivals. They too have to pull their weight, which might not be operable from the same angle as that of Air Malta.
In this regard, there are some signs that the national carrier is, to an extent, planning to take on the low-cost operators on their own pitch.
While understandable since that is the principal growth area, such a strategy could turn out to be a mistake. The low-cost airlines have to be more competitive, flexible and potentially more aggressiveness than Air Malta. It might be less than advisable to test them.
Those who depend on Air Malta for their livelihood, staff and to a considerable extent the rest of the tourist sector, will be anxiously awaiting the accounts for the next reporting period. They should not be surprised or downhearted if the operating out-turn is not as good as the €0.4 million profit in the recent report. Hopefully, it will be that. But it takes time for a trend to develop.
Even after that happens, Air Malta will have to dance on its toes, so to say. There is and can be no room for complacency.