‘We must grow all the tourism cake’
At 34, Alan Borg has just been appointed the first Maltese CEO at Malta International Airport. He speaks to Kurt Sansone about his vision for the company and its contribution to what he terms the cherries and the base of Malta’s tourism cake.
You are the first Maltese CEO since MIA’s privatisation. How does it feel being in the driving seat?
I was only officially appointed CEO last Tuesday and haven’t had the time to think it through. But considering my age and all I think it is a positive step in the right direction. I have been at the airport for eight years and have seen different aspects of the airport’s development from a commercial point of view and I believe I was ready for the step up.
The sudden resignation or removal of your predecessor caught many by surprise. What happened?
Markus Klaushofer was chief executive since 2011 and over the three years we had some fantastic accomplishments. We had record traffic numbers year after year. We opened Sky Parks and opened the Malta Airport Foundation, which is responsible for taking care of tourism-related embellishment projects. Overall it was a very good three years. There is nothing more I can add to that. I was the Chief Commercial Officer at the time and not privy to any information that led to the change. Markus and I had a fantastic relationship but it is now time for us to look forward not backwards.
There was a debate recently sparked by Corinthia’s Alfred Pisani, who urged the authorities to shift focus to the higher-end of the tourist market. However, others in the industry like Michael Zammit Tabona insist the sun and sea tourist should remain a crucial part of the mix. What is your take on the matter?
Tourism is like a cake; you need the cherry on the cake but you also need the base of the cake. You cannot focus on just one segment. We need to make sure that from a business mix point of view we keep our options open. The UK is a market where Malta remains popular for its sun and sea while in France we are popular for history and culture. I would not differentiate people by their quality. It is all about what we want the tourist to be here for. A cake has cherries and has a base. At the moment we have a very strong base and also some cherries. We should grow all the cake not just one particular segment.
MIA has started to try to target the cherries as well with the recent refurbishment of the VIP lounge that will be used by paying businessmen. Where do you see that segment going?
I think general aviation [private aviation] has a bright future in Malta. Obviously, you cannot base the tourism strategy around our general aviation strategy because it is a speck of a percentage of the total throughput but Malta deserves an infrastructure to drive the high quality segment of general aviation. Government was kind enough to allow us develop part of the area [the ministerial lounge] as a general aviation commercial area. But I would not see this as targeting high end passengers. It is an experience we want to offer but I don’t think it will make a significant difference to the overall tourism profile.
Where do you feel the country needs to improve?
The government definitely needs to continue to improve the tourism product. We have to continue pushing Valletta. The capital has a fantastic opportunity: It is the easiest way or the most attractive way of pushing Malta as an all-year-round destination. You can go to Valletta on a Thursday, leave on a Monday, or a Sunday. You can just stay there because Valletta has the history, the culture, the shopping and the good food. I agree with the government in pushing for hotel beds in the city, which means Valletta will take on a life of its own and we should market it as well. The strategy in this aspect is correct because it is one way of increasing tourists in the shoulder and winter months.
When you look at the overall product there is a lot to be done. Road signage has to improve because it could be challenging for a tourist to get from one place to another. We need to improve the quality of our beaches. We need a number of infrastructural works and with the right frame of mind we will get there.
More than four million passengers passed through MIA last year. Aircraft movements increased by almost five per cent. Is the airport infrastructure capable of handling these yearly increases or will it have to expand sometime in the future?
It is our responsibility as the only airport in Malta to make sure we develop depending on the size of the throughput. If there is any investment that has to be done, we will do it. We have an ongoing project to extend the terminal by increasing the non-Schengen departures area by 50 per cent. This means we will have three more gates on the departure side. We also have a new Schengen arrivals corridor that will lead into the general arrivals area.
We are shifting the terminal to cater for the significant inroads made in the non-Schengen markets. Turkish airlines alone recently announced it was going up to 13 flights a week from eight so we need to make sure we have the right infrastructure in place.
From a runway perspective, we have the same system as Gatwick and we handle much less aircraft than they do. I think that answers the question.
Can MIA handle the volume of commercial flights and the flight academies that have mushroomed around the runway? Do you see one impinging on the other?
No. From a runway perspective most of the microlights use the secondary runway, which is not used for any of our commercial aircraft. I don’t see this as a stumbling block from a commercial point of view.
Aviation-related revenue for the first time last year dropped below the 70 per cent mark. It is MIA’s strategy to reduce dependency on this one source but what would you say is the ideal balance between aviation and non-aviation revenue?
We can make Air Malta and Ryanair happily live together
On the aviation side of things we have worked very hard with the Malta Tourism Authority and government to continue to drive seat capacity. More seats on the market mean more tourists.
We will continue to push this but at the end of the day if, for whatever reason, Malta does not remain attractive, it will be difficult to convince airlines to come here. So for us the non-aviation side of the business is an insurance policy from a revenue point of view.
Sky Parks is not dependent on whether Malta remains attractive or not and we intend to continue developing in this direction. We have a master plan application at Mepa, which we hope will come to a conclusion soon and once we get the go-ahead we have exciting plans for that area.
We hope to keep growing the non-aviation business but we also want to keep increasing our turnover in general.
However, what is even more important is the quality experience we want passengers to enjoy. Our strategy is focused on delivering positive experiences to our passengers. After all we are the first and last impression visitors get of Malta.
You speak of customer experience but one of the least popular decisions taken some years back was the introduction of a fee to use airport trolleys. Will you be reversing this?
One of the first things I did when I took over the office in an interim position was to ask my team for an independent audit on passenger satisfaction to determine how they are receiving our services and where we need to improve. If the audit shows that anything we are doing annoys passengers, we have to revise our decision and we are ready to do that. The audit will take its time but I would consider it a works in progress.
Air Malta accounts for almost a third of MIA revenue. Do you have contingency plans in hand if the national airline folds?
When it comes to Air Malta all options are still open. But we remain hopeful and have total confidence in the current management and administration at Air Malta that the airline will make it. To a certain extent, though I admire Ryanair’s business model – it revolutionised air travel in Europe and last year registered growth without increasing seat capacity – they should not underestimate us Maltese. We can still make Air Malta survive and I believe it can be a niche airline. We have to keep in mind that when compared to other flag carriers Air Malta does not have the advantage of long-haul flights that make up for losses on the short-haul network.
Ryanair has become the second largest airline, after Air Malta, to operate to and from MIA. Is that a problem?
No. Over the years the government and MIA made a tacit effort to have a balanced business mix. Ryanair’s network today hardly overlaps with Air Malta. There is some overlap but it is not significant. We can make them happily live together. But at the end of the day Ryanair is the low cost airline in Europe. If we do not have them here we will be losing out on a huge opportunity.
Air Malta’s suspension of flights to Tripoli and Benghazi had a negative impact on travel to and from Libya. Is MIA seeing any hope of a resumption of service to Libya even by other airlines?
Our understanding is that Air Malta review their position in Libya on a weekly basis. It is up to Air Malta to take responsibility for the decision whether to operate the routes or not. It is a big responsibility and MIA will not be encouraging or pushing anyone to take that decision. However, our expectations this year are that we will not see any commercial flights to Libya. They are off our forecast. When we talk about a two per cent growth in 2015 we are not taking Libya into account.
Are there plans to tap the US and Chinese markets with direct flights?
When you talk about route economics of a long-haul flight and a short-haul flight you are talking of a three-fold increase in expenses. If any airline operating a Boeing 737 or an Airbus A319 or an A320 [the relatively smaller aircraft such as the one operated by Air Malta] tried to operate a long-haul flight the costs would triple when compared to larger airliners. But there is also another consideration that Malta’s domestic market is just 250,000 passengers.
Today we have the connectivity to cover most hubs. There is a daily service provided by Emirates, a twice-daily service by Lufthansa and Turkish airlines will be increasing its flights to 13 per week. We have Air Malta servicing most hubs, including London Heathrow.
I don’t think that having a direct service is crucial for our connectivity to the US. There is enough connectivity present at the moment and from a cost perspective selling Malta for a direct link to US and China is a significant leap for any airline to take just because the cost is so incredibly high.
You are talking of a nine-hour or 10-hour flight. We convince airlines to fly the route to Malta based on demand. How much will the demand be for a flight from New York to Malta? The airline will probably see it less risky to have another London flight and any person wanting to come to Malta could board a connection flight there.
Vienna Airport is one of the main shareholders at MIA. Are they in for the long haul because we hear rumours that they may be considering selling out?
I’d like to tell you to ask this question to the shareholders. Ultimately, I am not here to speak on behalf of shareholders. But let me say that the vision of MIA remains that of investing in the airport itself, the infrastructure, the landside part and continuing to encourage airlines to come here. At the end of the day this is what matters most and this commitment is there.
We are the third best connected airport in our class and I intend on improving this
At what stage is the plan to develop the airport grounds into a commercial/business park?
We presented our final plans and the data requested by the planning authority. We are now waiting for a final meeting with the case officer to understand what reservations there may be, if any, before the project goes up to board level.
Concerns over the impact of the project on the surrounding communities were raised by Gudja and Luqa residents. Will MIA be listening to them?
I have no intention of shying away from any of the commitments undertaken by my predecessor, who had promised a few months ago that MIA will listen to its neighbours. A number of meetings were held since then and I will honour all commitments undertaken by the former CEO.
MIA has set up a number of subsidiary companies to tap solar energy. None of these traded last year. What are your targets?
We are currently going through an internal process to understand what we want to achieve out of these projects. It is a commercially plausible project for us but we will not be as aggressive as we intended to be in the first place.
Within the wider context the prevalent security concerns must be weighing down on business. What bearing does this have on MIA?
We need to be vigilant but not alarmed. In 2011 [the Libya revolution that overthrew Muammar Gaddafi] we passed through a significant challenge as a country and airport. We work very closely with Aviation Security Malta, the government agency trusted with airport security, which in turn maintains close contact with the police and the Security Service. Ultimately we have to be ready for any eventuality but while maintaining vigilance we must not create alarm.
Where do you intend taking MIA?
Passenger quality, investment in infrastructure and services are paramount. We will continue to invest in the terminal building and the landside part of the airport grounds. Sky Parks 2 – the master plan project – is a significant project for us that will involve relocating the petrol station and creating more parking spaces and I would like it to materialise. This year we will be number-crunching the project and take the necessary decisions. But together with Malta Tourism Authority we have to continue ensuring that Malta remains well connected. We are the third best connected airport in our class and I intend on improving this.