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The Austrian high flier

Malta International Airport chief executive Julian Jaeger has ended his four-and-a-half year stay in Malta to take up another post at Vienna airport. He speaks to Kurt Sansone on the eve of his departure.

The aircraft collection on the cabinet in his office has not yet been packed but it will be accompanying Austrian Julian Jaeger when he settles in his new Vienna office.

After four-and-a-half years heading Malta International Airport, the chief executive is moving out but his new role at Vienna airport, which is the principal shareholder in MIA, will still keep him in touch as he will be responsible for the company’s foreign subsidiaries. In this way, Malta will still be in his sights, even if at a distance.

Mr Jaeger is packing up his belongings but his departure comes at a sensitive time when MIA has had to bear the brunt of criticism from Air Malta pilots for what they claim are the airport’s exorbitant charges.

The criticism comes as the national airline undergoes a restructuring process that could see it shed more than 500 employees.

Airline workers have insisted that before jobs are shed the company should renegotiate third party contracts, which they claim have sucked the airline dry.

And with Air Malta paying MIA some €20 million a year in charges the airport company ended up in the crossfire.

Mr Jaeger admits he was surprised how MIA featured so prominently in the Air Malta debate and insists the airport is the least of the airline’s problems.

MIA represents less than six per cent of Air Malta’s total cost, he says. “We can’t make or break them with that amount.”

But why was MIA at the centre of controversy?

“I don’t know the reason but I feel the criticism was exaggerated,” he says, pointing out that the company tried to stay out of the debate as much as possible.

MIA did not meet with the pilots’ union, he says, because it would have been inappropriate holding talks with a union that represents workers in a client company.

Pilots were the most vocal on the airport charges and even threatened to go on strike over the matter.

“There was a lot of aggro from the pilots but we only commented to correct certain statements that were factually incorrect,” Mr Jaeger says.

One of the incorrect statements, Mr Jaeger says, was that Air Malta paid €350,000 a year to rent out a briefing room at MIA that pilots used before their flight. He says the amount represents the fee paid for all the property used by Air Malta at MIA, including the offices used by ground handling operations, the ticketing office and the flight operations.

“It is Air Malta that signed these agreements after all and nobody forced it to do so,” he says. The central issue is the impression that airport charges in Malta are exorbitant but Mr Jaeger flatly denies this and insists the last time they were reviewed was in 2006.

“The charges are competitive and there is no intention of increasing them,” he says, insisting they are in line with the European average.

A report by government-appointed consultants Ernst and Young on Air Malta restructuring had commented on the relatively high passenger charges at MIA, which represented almost a 50 per cent premium on the average charge of comparable airports analysed by the company. However, Mr Jaeger sounds a word of caution when comparisons are made with airport charges in some of the other countries.

“Spanish and Greek airports are heavily subsidised, and Trapani in Sicily is a military airport with all infrastructure paid for by the government. It is unfair to compare us with these airports. MIA invested €50 million in infrastructure alone with no government help.”

Despite the flak it received the airport company will not ignore the restructuring process happening at Air Malta.

The national airline carries half the passengers that pass through MIA, making it the single most important client.

In the first six months of the year Air Malta carried 48 per cent of traffic that passed through the airport.

Mr Jaeger says Air Malta is an important customer and a strategic asset for the country and the economy.

“It is for this reason that we are willing to play our part in helping the airline through this difficult period and not because we did anything wrong in the past.”

He says MIA is still in talks with Air Malta’s management over existing contracts.

“Good progress has been registered and we hope to conclude in the near future,” he says, without lifting the lid on the nature of negotiations.

He insists, however, that irrespective of what is discussed with Air Malta, any decision MIA takes will have to be “objective and non-discriminatory”.

Translated in simple terms, it means the airport cannot give Air Malta preferential treatment or charges because that would breach EU competition rules.

So what is the point of discussing anything with Air Malta?

“We are discussing new incentive schemes, which will be open for all airlines, but we also have separate commercial agreements with Air Malta and these are being reviewed,” he says.

Mr Jaeger dismisses the argument that Air Malta should be given a bulk discount because it is the airline that carries most passengers at MIA. This option has often been floated in aviation circles even by low-cost competitor Ryanair.

“It is legally impossible because similar arrangements in the EU were shot down by the European Court of Justice and we had also told this to Ryanair when they were pushing for bulk discounts,” he says.

Given that MIA enjoys a monopoly on such a small island, it is no wonder that observers eye its actions with suspicion. This may also be one of the reasons why the company is on the receiving end in the Air Malta saga.

Mr Jaeger smiles and frankly admits it is not a disadvantage to be a monopoly. But he also insists it carries a lot of weight.

“Given our status we cannot simply increase charges since these have to be approved by a special committee that includes other stakeholders such as government,” he says.

Being a monopoly, he acknowledges, also carries with it a negative perception since every action is interpreted as an abuse of the dominant position.

“MIA’s operations are heavily regulated and the company has never abused its position,” he says, underlining the fact that MIA faces stiff competition from foreign airports.

Another concern linked to the Air Malta restructuring process is the proliferation of low-cost airlines aided by government-sponsored route development schemes whereby airlines operating new routes would be subsidised.

Air Malta workers argue that some of the new subsidised routes have eaten into the market previously serviced by the national carrier.

The Ernst and Young report also made the point that the advent of low-cost airlines had a negative impact on Air Malta.

Five years ago when tourism operators clamoured for the introduction of low-cost airlines like Ryanair and Easy Jet, MIA had reacted very cautiously, warning against the country being too dependent on low-cost carriers.

Eventually, the company yield­ed and started offering route development schemes in conjunction with the Malta Tourism Authority.

These were also supplemented by government schemes.

Today, low-cost airlines have not only helped increase tourist numbers but they also represent a 30 per cent market share of passengers passing through MIA.

Was there a policy change at MIA that accompanied a shift in management’s tone on low-cost carriers?

“The company has always insisted on a level playing field in the sense that any incentive scheme has to be open to all airlines,” Mr Jaeger says.

MIA works closely with the tourism authority, he adds, to develop new routes and encourage airlines to put Malta on their itinerary.

As for the current mix of airlines, Mr Jaeger insists the current composition that sees Air Malta with a 50 per cent market share and low-cost carriers holding 30 per cent “is not bad”.

“Obviously, there is no perfect mix and this is always changing given the nature of the aviation industry,” he says.

And the current mix has reaped positive results for MIA, which last year handled a record 3.3 million passengers, an increase of 12.8 per cent when compared with 2009.

Aircraft movements last year also increased to 28,936 or 10 per cent more than the previous year.

The company employs 375 people and is forecasting 3.4 million passenger movements by the end of this year, an increase of 3.2 per cent over 2010. They are results Mr Jaeger is proud of, and he heaps praise on the company’s all-Maltese management team, which he des­cribes as “excellent”.

“We kept our costs under control and increased our revenue from the shops. We got our house in order,” he says.

Under his wing MIA expanded with a complete overhaul of the retail space in the arrival and departure lounges.

This strength­ened the airport’s allure as a retail and restaurant hub for non-airport users, something which is set to consolidate further when the Sky Parks business centre is finished.

The business centre being built on the land adjacent to the petrol station has long been on the drawing board but Mr Jaeger believes the centre will be complete by year’s end.

The business centre is part of the outgoing chief executive’s legacy. Soon after taking over at MIA, Mr Jaeger piloted a scaled-down project that capitalised on the fact that Vodafone was looking for new premises to house its headquarters.

Vodafone is still the only major client to take up office space but Mr Jaeger is convinced more contracts will be signed in the coming months.

“We had recognised that there was a lack of large quality office space and the business centre will satisfy that demand but it will also offer services that non-airport users will make use of, strengthening the airport’s role as a commercial and retail hub in the south,” Mr Jaeger says. He looks back at the past four years with satisfaction.

“It was a great experience and I do not regret a single day of my move to Malta.”

And just like a leaf out of the tourism authority’s poster campaign promoting Malta’s beauty, he singles out the island’s culture, history and hospitality as the lasting qualities that impressed him.

As he speaks well of the island he has made his home, a friendly nudge by MIA’s public relations officer reminds him of the food, particularly fish.

Mr Jaeger laughs. “I have never eaten so much fish since it is not easy to get good fish in Austria.”

But it is not just platitudes that he dishes out. There has to be more consistency when people deliver services, especially in restaurants, he adds.

“If I had to criticise anything it would have to be the lack of consistency, the lack of proper enforcement of traffic regulations and the road infrastructure that has to improve,” Mr Jaeger says. There is little respite for him though as he takes up his post as a member of Vienna airport’s management board.

“There are a number of challenges that I have to face, not least the opening of the Sky Link terminal in June next year that was beset by delays,” he says.

And as if Air Malta’s problems were not enough, he will also have to contend with the difficulties facing Austrian airlines, Vienna airport’s largest client.

Cost reductions are also on his agenda, hopefully transferring the formula used in Malta to his new place of work.

“I also have to oversee the construction of a third runway in four years’ time and make sure that Vienna airport remains a medium-sized hub for west-east travel,” he says.

MIA has temporarily appoin­ted its chief financial officer Austin Calleja as chief executive to fill in the void left by Mr Jaeger. The appointment is a stop-gap measure and Mr Jaeger says there is no hurry to fill in the vacancy.

“I leave with the knowledge that there is a good management team in place able to run the company. I will still be involved remotely because my new responsibilities include the foreign subsidiaries.

“No successor has been appointed yet but I believe the post will be filled by the end of the year,” he says.

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