The headline news following Air Malta’s publication of its results for 2017 is not so much that the airline is losing over €1 million per month, but that it is changing the strategy adopted only five years ago. An analysis of 2016 and 2017 accounts is of limited interest if one does not understand the long-term plans of the airline.

In a press briefing linked to the publication of Air Malta’s results for 2016 and 2017, Transport Minister Konrad Mizzi said that despite losses soaring from €4 million in March 2016 to €13.1 million in March 2017, the airline was projecting a break-even situation in March 2018. Dr Mizzi blamed the adverse effects on hedging agreements that worked against the company. The carrier also suffered a drop in revenue which the minister attributed to the ‘product offering’. Air Malta is now segmenting the price offered to customers who have a choice of what optional services they buy.

Little has been revealed on the airline’s new strategy. For the past five years, Air Malta sought the support of a strategic partner that could give it the necessary clout to compete in the overcrowded European airlines market. Alitalia soon proved to be the wrong partner as in the middle of 2017 the Italian carrier found itself in deep trouble, and its future is now in doubt.

Another change in strategic direction that Air Malta is adopting is the introduction of new and recently abandoned routes to raise revenue that is so vitally important to cover both fixed and variable costs. The previous chairman’s determination to cut costs by scraping unprofitable routes did not lead to the desired results.

The hiving off of Air Malta’s landing rights in Heathrow and Gatwick could be an indication that the government’s intention is eventually to form a new airline that could follow a growth strategy possibly with another strategic partner, but without diluting the value of the London airports’ highly priced landing slots. In any case, Air Malta must have collateralised its debt to the banks by a charge on these slots.

Management seems to be addressing some operational issues quite efficiently. The signing of some collective agreements while costing more for the airline will hopefully introduce more flexibility among staff especially pilots. The hiving off of non-essential personnel to a government-owned entity is another sensible move to help the airline concentrate on its core competencies.

But this new strategic direction does not guarantee success. Legacy airlines have been trying to reinvent themselves by adopting some of the low-cost strategies of airlines like Ryanair and Wizzair. At the same time, national carriers kept most of their routes open, even if some of them were incurring substantial losses.

Another challenge for Air Malta will be its IT infrastructure. What Air Malta customers see when booking online is a system that lacks the user-friendliness of those used by some other airlines. Brand loyalty is not high in the airline’s industry, and customers look mainly for a safe, economical and hassle-free means of travelling when deciding which airline to use.

Unfortunately, Air Malta had some failed take offs in these last years. The current strategy will hopefully be the right one for the national carrier that must compete with successful airlines in an overcrowded market.

This is a Times of Malta print editorial