With 17 months left for Air Malta to reach its restructuring targets, chairwoman Maria Micallef made an important point a few days ago: “We need to get out of restructuring mode and start thinking of long-term sustainability beyond 2016.”
Air Malta made a loss of €16 million, thereby missing its restructuring target to slip into the black. That cannot be ignored. However – provided the figures have been presented correctly – it has also been able to recover from a loss of €79.3 million just three years ago.
Accusations have been made that things started to go awry in 2013 under the new government. But beyond the political bickering, which we should put behind us for the good of the airline, in 2011 the airline spent 0.76 cents more for each available seat kilometre than it could earn and that has now been brought down to 0.27 cents.
The are two ways to break even: reduce costs and/or increase revenue. Costs have already been cut by €30 million over the past three years and there will be further opportunities to do so as other contracts, like catering and aircraft leases, come due.
The airline will, no doubt, start negotiations as early as possible and not allow itself to be held to ransom at the eleventh hour.
It would certainly help if the Malta Tourism Authority and Malta International Airport could assist without infringing State aid rules, whether by offering marketing support or by offering discounts. It must hurt that low-cost airlines – which abandon Malta or cut frequencies in winter when it does not suit them – should get help but Air Malta does not.
Revenue is harder. Ancillary revenue accounts for as much as a quarter of revenue for low-cost airlines and Air Malta passengers are going to have to face the possibility of having to pay for meals, as well as for value-added services like seat allocation and priority boarding, just as they do on low-cost airlines.
Passengers are also going to have to accept that this small national airline cannot fly to every destination that has potential as a tourism or business market. If a route does not make money, it has to go. True, the Malta Tourism Authority is going to be very unhappy but what is the alternative? No national airline at all?
The airline must retain existing passengers by ensuring an optimal experience, from the first visit to the website to arrival at the destination.
Acquiring new passengers is something altogether harder.
The new CEO, Philip Micallef, spoke about day-return flights, more dynamic pricing systems to ensure no seat gets wasted and attracting foreigners to get married here.
This is all well and good but the long-term viability of the airline relies on economies of scale which will only come from expanding the carrier, something the government clearly cannot afford. A strategic partner must be sought, one needing Air Malta’s invaluable slots at key European airports. Etihad bought Alitalia for that reason, a boat we should never have missed.
What it needs is an adolescent or established airline which would relish the chance to instantly extend its long-haul network to a few dozen European destinations, with the windfall of tourism and business this would bring through Malta.
Work has to start now but the airline needs a full board helping the chairwoman. The dead wood must go.