Issue link: https://maltatoday.uberflip.com/i/204636
6 News maltatoday, SUNDAY, 3 NOVEMBER 2013 After Davies, what's How can Air Malta squeeze out more cost to achieve breakeven by 2016? CEO Peter Davies suggests more productivity and pilots flying more hours. But his contract expires next year. Will his restructuring plan achieve fruition without his guidance? THE jury is still out on whether Peter Davies is ready to extend his contract beyond April 2014. At 64, the Welshman might just as well decide to call it a day. Under a €230 million restructuring plan mandated by the European Commission, he managed to stabilise Air Malta's balance sheet and halve the airline's losses from €78 million in 2011 to €30.9 million in 2013. He was tasked to see the airline breakeven by 2016, but his €500,000 contract expires by the next financial year: it's no secret that the new Labour government is eager to see a Maltese chief executive step in his shoes. The question is whether Davies will be asked to shepherd his successor as he takes on the reins of the restructuring programme. Tourism Minister Karmenu Vella was not present for last week's presentation of the Air Malta financials. He said the reduced losses were "positive" but that any trend of suc- cess would become evident in 2014 and 2015. But a cursory glance at Air Malta's last two years – increased revenue, lower staffing, the inspirational rebranding – would suggest even to the harshest of critics that the airline is on the right track. "We're not rejoicing, we're not fantastically elated. But we're confident that we've done a good job so far, even though there are more losses to reduce," Davies says. "I'd probably use Churchill's words to say that a pessimist sees the difficulty in every opportunity, and an optimist sees the opportunity in every difficulty. It's a journey: I'd be concerned if we were flying to Moscow and our plane was heading towards Casablanca. But if we're over the Alps, then we are on the right route." So far, Air Malta's journey has been driven by enhanced revenues, with more passengers flown, and more cash coming in from ancillary services. Years back, dismal on-time performance had the airline "at the bottom of the pile" as Davies says. Now it's edging towards an 85% punctuality rate that is saving it more nickels and dimes. "It's a number of processes to cut down on wastage, keep the costs under control, and improve our efficiency," Davies says of the airline's cost-cutting mission. So what will it take to keep the airline en route to breakeven? Under the €230 million restructuring plan, the airline levelled out the balance sheet, rebranded itself and even moved out of its colonial military headquarters into the open-plan Skyparks offices, and paying retirement pay-outs to keep staffing down. But Davies says that, even when eventually a new CEO takes over, the airline cannot afford to keep its foot off the pedal. "We've done a huge amount in improving our revenue, and we need to increase passengers in the winter and shoulder months. We have a more attractive airline and that has had a great impact on encouraging people to come here. But the future is about driving out more cost: and that's about the way we do things, doing them better, using technology to make things more effective, how much more we can squeeze out of our suppliers, and how we can change our modus operandi to make sure we are as efficient as possible against the product we provide." Davies chimes in with the ultimate in low-cost driven models. Ryanair. "We'll never get down to their cost base. It's impossible. Because their style of operating an airline is absolutely different," he says, citing the fact that their pilots fly some 900 hours a year (close to the maximum EU limits – Air Malta's fly an average of 600), and that their cabin crew turn around an aircraft in 25 minutes, ensuring that more aircraft is in the air, faster. In short it's about productivity (not to mention, in the case of Ryanair, lower salaries and the fact that trainees pay their own way…) "They also have advertising all over the aircraft, and don't even carry safety cards, minimising weight. You