Had it not been hit by rising fuel prices and a drop in the value of sterling in the financial year 2008-2009, Air Malta would have broken even, chairman Lawrence Zammit told The Times Business.
"The fundamentals of the company are not bad," Mr Zammit insisted. "From published data, we can say that the cost per available seat kilometre is similar to that of EasyJet. Where they do better is their seat load factor - they obviously have a better marketing reach, which we can never hope to match."
There is mounting speculation that Air Malta plc is around €25 million in the red in the run-up to the company's annual general meeting early next year when, it is rumoured, Mr Zammit intends to hand in his resignation. Last week, Finance Minister Tonio Fenech said the government's trust in the chairman was "unquestioned".
Regardless of his own personal intentions, Mr Zammit's tone is not one of a chairman who has loosened his grip on the reins, although he does describe himself as not "indispensable".
"The financial year 2009-2010 is characterised by lower prices and dampened demand," he added. "In spite of the recession, we have strived to maintain passenger numbers and, by and large, we have achieved this objective. Last summer we operated 12 aircraft on Malta. This was contrary to the trend of other airlines - no other airline increased capacity the way we did. We took the decision to support the tourism sector. Again, there was no recognition of this effort from tourism stakeholders. Instead, we got more routes for low-cost airlines at a subsidy. We need to understand that when we see a route operated by a low-cost airline being sold for €10, the income for that airline is a minimum of €35 as one needs to add the subsidy it receives from Malta. To this, add the subsidy received from foreign airports. We took the knock of lower prices on the chin and soldiered on."
Air Malta envisages further pressure on pricing in 2010, but the national carrier will seek to maintain and even increase passenger numbers, Mr Zammit added.
Mindful of the fact that governments and airport authorities will give security considerations even more attention following the terrorist attempt on a Detroit-bound Northwest Airlines flight on Christmas Day, the chairman hopes airlines will not be made to foot the bill for tighter security operations.
Air Malta, he said, is not far off from its ideal size after shedding over 600 employees in six years, and outsourcing many operations including IT, call centre, aircraft cleaning, catering transport, and revenue accounting on the basis of service level agreements and "clearly identifiable and proven cost-savings".
Some cost centres have been converted to profit centres. The in-flight magazine used to be a cost, he pointed out. Now it is a source of revenue.
"We have also proven that we have increased productivity significantly. Six years ago we had a staff complement of just under 2,000 employees and operated 11 aircraft. This year we operated 12 aircraft with under 1,400 employees. That makes it an increase in productivity of 35 per cent. We want to increase productivity further, but any shedding of staff will once more be done not by using strong arm tactics, but by approaching the issue in the most humane way possible. That has been our record so far and I want it to remain so.
"Contrary to what some people claim - albeit that they should and do know better - we did not start our restructuring because of the advent of low-cost airlines. Our restructuring started even before any low-cost airline was on the horizon. Frankly, asserting the contrary is an insult to the employees and management. It is also an insult to people like Austin Gatt, Tonio Fenech, Josef Bonnici, Louis Grech and Karmenu Vella who have all contributed in one way or another to the airline's restructuring."
Pointing out that negotiations with the General Workers Union about a collective agreement resumed recently after stalling earlier in the year, Mr Zammit said some employees had not seen a salary increase since 2003. So how did the airline retain its best people?
The chairman said the airline had some very loyal, long-standing employees - for several, their employment with Air Malta represented a career which explained the low levels of mobility.
"However, this does not mean that we do not lose some good people," Mr Zammit offered. "Isn't this an issue for any employer? The important thing is that one has replacements available for those employees who leave the company. So far, we have managed to nurture these replacements. In any case, no one is indispensable and that includes myself."
The cost-cutting, he stressed, continues relentlessly, and targets individual cost items from ground-handling contracts with foreign airports to better prices for supplies. The "secret", he explained, was not just about cost-containment but a real effort at eliminating costs without jeopardising safety and passenger comfort.
"For example, we continue to cut the need for overtime every month. We have designed new uniforms at no cost to us, whereas the last time new uniforms were designed, it cost the airline thousands of Malta liri," the chairman pointed out.
Air Malta currently flies to over 50 destinations in Europe, north Africa and the eastern Mediterranean and new routes are planned as investment in existing ones continues. Mr Zammit explained the airline invested heavily in the Malta-Paris (Charles De Gaulle) service last year and flies Malta-Zurich daily. It is now hoping to launch two new routes to Genoa and Turin this summer.
"These are just examples of what we have done in the last two years. However, this was not our only investment in routes," Mr Zammit said. "We have developed routes for the last 35 years and today there is very little recognition of this effort. We hear praise of the new routes being opened by low-cost airlines at the Maltese taxpayers' expense, but I am very saddened to note that, even in official statements, the investment in route development by Air Malta finds no space. Worse still, after our investment at no cost to the taxpayer, we then get some faceless bureaucrat who seeks to encourage other airlines to fly these routes and offer them subsidies.
"I appreciate that the government is committed to support Air Malta as much as Air Malta is committed to meet the needs of the Maltese tourism and our commitment is there to be seen and appreciated. The latest events in Rome are quite an eye-opener on the commitment of low-cost airlines. When the Italian authorities decided to clamp down on certain issues with low-cost airlines, the low-cost airlines threatened to move out. Imagine what would have happened had the flights been the only links between Malta and Rome.
"Over the past years Air Malta has always shown that its first loyalty is to the country. We are not after preferential treatment but an equal playing field to be able to compete fairly and to continue to serve Malta's main economic nerve."
Asked whether there were plans to modify Air Malta's business model in any way, Mr Zammit said that, unless the airline's role changed, the business model would likely remain the same, maintaining a commercial focus and high levels of efficiency.
Often described as a national strategic asset, the airline is not only the major operator in the tourism sector but also provided support to the manufacturing industry through its cargo operations and an important link for the connectivity of Maltese society, he said.
"One must also not ignore our social responsibility through our support to Maltese people who require medical treatment abroad, our support to educational, cultural and sport events," Mr Zammit added.
"Just one consideration: Changing our business model would definitely mean removing our support to Maltese people who must go abroad for medical treatment - people suffering from cancer or some rare disease that cannot be treated here. Who will help such people in the absence of Air Malta? What will all those undermining Air Malta tell these people and their families?"