When in 1992 the European Union agreed to create a single market in air transport, legacy airlines could no longer rely on State aid and competition restrictions to protect their market. Air Malta was eventually affected by these changes and had to resort to restructuring efforts so that it would no longer rely on government support.
The national carrier announced its March 2018 results with an air of cautious optimism as it managed to record a net profit of €1.2 million excluding non-recurring items when compared to a €10.8 million loss in March 2017.
Tourism Minister Konrad Mizzi interpreted this return to marginal profitability as a turnaround. Air Malta chairman Charles Mangion, while noting that this was the first profit registered by the national carrier in 16 years, was more reticent in declaring success. He said “the company cannot rest on its laurels and that much more needs to be done to take the company out of the woods”.
A sober interpretation of these results cannot just rely on the 2018 headline figure. Air Malta had as many restructuring programmes as it has had chairpersons. The hub concept, the strategic alliance route, the partnership with Alitalia and, now, the Airline of the Mediterranean are some of the labels stuck to the ever-changing strategic plans. All of these concepts have, so far, brought little financial success to the company.
Most comments coming from Air Malta’s public relations machine tend to concentrate on internal administrative upgrade issues. In recent months, Dr Mizzi and Dr Mangion inaugurated an emergency response room. Earlier, the airline signed an agreement with Ryanair to integrate its reservations system, upgraded their IT system, increased its flights by 8.5 per cent and “paid homage to Malta’s heritage through the use of traditional design and Maltese-themed ceramic crockery”.
All operational improvements aimed to give better service to customers are always welcome. However, Air Malta’s future success will depend on the robustness of its latest strategy. The chairman claims that, together with the CEO and the board of directors under the direction of the Tourism Minister, Air Malta is being “transformed”. A question that needs to be asked and answered is how many of the people mentioned have a solid understanding of the airline industry today.
The European airline industry suffers from massive overcapacity that is quickly seeing some once-promising private airlines going bankrupt as they find it hard to compete with the bigger operators. Having a critical mass of business and a solid market share together, served with a modern fleet of aircraft are critical success factors for an airline to gain height in the competitive European airline market.
Short-term measures like the selling of valuable air slots to other companies, a cost reduction programme and friendly relations with important suppliers like those providing finance and aviation fuel can help for a short time. However, the acid test for the survival of any airline is the sustainability of its strategic plan.
The Airline of the Mediterranean strategic concept needs to be underpinned by a cold and clinical marketing analysis, a robust financial plan and the ability of the top team at Air Malta to interpret competently the dynamics of the present European airline’s industry.
After a wobbly take-off, Air Malta still has to prove it can gain and maintain cruising altitude.
This is a Times of Malta print editorial