MaltaToday previous editions

MT 8 May 2016

Issue link:

Contents of this Issue


Page 11 of 55

maltatoday, SUNDAY, 8 MAY 2016 12 News MIRIAM DALLI NEWS that Alitalia will be taking a 49% stake in Air Malta was welcomed with cautious enthusiasm, especially after it was confirmed that the Abu Dhabi-based airline Etihad Air- ways would not be buying a direct sharehold- ing. The Italian national airline Alitalia forms part of the satellite of airlines owned by Eti- had Airways, which has been in advanced talks with the government over an equity invest- ment in the ailing Air Malta. Air Malta is in the final year of a five-year re- structuring plan that the previous government had agreed with the European Commission in 2012 in return for its approval of around €130 million in state aid. Audited figures an- nounced during the October meeting show that the airline posted a loss of €16.4 million for the year ending March 2015 and is set to reduce its losses to €4 million by 2016. Etihad is not new to such agreements as last year it saved Alitalia from bankruptcy, rein- forcing the Gulf airline's reputation as a "res- cue investor" for ailing airlines. In December 2014, Etihad bought 49% of loss making Ali- talia in a €1.76 billion rescue plan, giving it ac- cess to Europe's fourth-largest travel market and 25 million passengers. But the news has also raised concerns on whether Air Malta will be getting the short end of the stick. "Why didn't Etihad take a direct sharehold- ing? Although it is projecting a breakeven, Ali- talia is a loss-making company," GRTU dep- uty president Philip Fenech told MaltaToday, questioning whether the relationship with Alitalia would benefit the national interest or whether Alitalia was simply "looking inwardly to strengthen itself". Terence Mirabelli, a veteran travel and tour- ism journalist, admitted his surprise at the Ali- talia deal. "I think I was as surprised as everyone else when it was announced Alitalia was buying into Air Malta. Then again, it does give Etihad leverage because Alitalia is an EU airline. The other question is where is Alitalia getting the money from – it was virtually broke not so long ago." In April, Alitalia announced that it had re- duced its losses by two-thirds last year since going under Etihad, with plans to return to profit in 2017. With its extensive restructuring programme, Alitalia pared its losses in 2014 by €381 million to post a loss of €199.1 million. The airline carried 22.1 million passengers in 2015, a load factor of 76%. Air Malta posted losses of €16 million in 2015, a reduction from the €76 million when the national airline began its restructuring plan in 2012. Philip Lingard, a regular contributor on avia- tion affairs, also noted the financial situation of Alitalia. "The government's choice for Air Malta is either a strategic deal or oblivion. So it is no choice," Lingard opined. "Settling with Alitalia is perhaps not the most obvious choice – they are themselves still loss-making and are behind on their own recovery plan so will it be a case of two ailing airlines combining, hoping they can lean on each other for support?" Lingard argued that, from the narrow Mal- tese perspective, a direct deal with Etihad would have been preferable: as a non-EU car- rier, its ownership is legally blocked at a 49% maximum; as EU carrier, Alitalia can buy 100%, subject to EU approval. "Etihad's own management has the track record of taking another small European flag carrier – Air Serbia – and achieving a spec- tacular positive turn around so the portents would have been good. But then the CEO of Etihad has the reputation of being the tough- est negotiator in a very tough industry and as every day passed, the Air Malta position was weakening," Lingard said. Tourism Minister Edward Zammit Lewis has promised that the memorandum of un- derstanding with Alitalia will be tabled in parliament in the coming weeks, something which the GRTU is looking forward to, to gain a better understanding of the deal. Philip Fenech has argued that a balance should be struck between safeguarding em- ployees but also keeping in mind the broader role held by Air Malta. "The airline is not there just for the workers it employs but the economy in its totality: the tourism sector and the daily routes which are important for connectivity, including cargo and routes used by people for other busi- nesses." Mirabelli, on the other hand, sounded confi- dent that Maltese customers may see minimal changes. "I don't believe Maltese customers are going to see much difference in the way of standards of service – perhaps Alitalia will demand that the baguette is exchanged for a panino," he quipped. "Air Malta's pricing structure may be altered to compete more with the low cost charters that already operate to Malta." Fenech adds that Air Malta takes a good part, 45%, of the incoming passenger market while the other 55% is a mix of other airlines, putting Air Malta in a position of dictating priority routes (it currently operates 37) whilst striking a balance with the competition faced by the other airlines – including low-cost giants like Ryanair, who have opened up Malta to countless 'un- derserved' routes. "Air Malta must keep on prioritiz- ing the incoming routes to Malta or risk losing hold on priority routes," Fenech warned, and says that ide- ally the airline should increase its fleet – cur- rently nine – and not limit itself as a 'service airline' for Alitalia. A win-win situation for the two airlines would be maximizing the economies of scales: the airlines could get better prices on fuel and hedging deals, and craft better pricing, or combine to win savings on spare parts. Another sticking issue could be Etihad's, or Alitalia's demands, for Air Malta pilots to fly more hours in the year. Air Malta pilots fly an average of 600 hours a year, compared to the maximum 900 hours some European counterparts fly. "The airline industry is a very difficult one," Fenech says. "We see the continuous collapse of so many and still strong growth for the few dynamic ones. Malta needs to wake up to the reality of these dynamics and not remain in- sular and inward looking. We do not compete alone anymore and cannot look the other way on competitive international cost structures." What's good for Malta, but not for Air Malta Philip Lingard argues that there are two sep- arate issues sometimes mistakenly conflated: what is good for Malta and what is good for Air Malta. "They are definitely not the same thing. Access to Malta is critical to the coun- try, but that doesn't mean we have to have our own flag carrier." He cites as an example Cyprus, which en- joyed unprecedented growth in tourism num- bers and passengers arriving the year after Cyprus Airways collapsed. Then here is Malta International Airport, which aggressively mar- keted itself with a growing diversity of carriers, more than doubling the number of routes over the past decade. "Provided that Air Malta's Heathrow and Frankfurt landing slots for direct Maltese traf- fic are protected, there is no particular over- riding national interest at stake: Air Malta is very nice to have but not essential for the country's wellbeing," Lingard claims, perhaps controversially. Because as he sees it, Air Malta's main chal- lenge will be cutting down on its staff and achieve major efficiencies. Like Lufthansa, he suggests, whose regional subsidiaries work on a ratio of 30 heads per plane and 50 in the head office: for Air Malta that would mean 260 staff, when it currently has some 900. "On its own, Air Malta simply does not have access to the buying power Etihad has, with 700 planes under management. Ryanair takes delivery of more new aircraft every six weeks than there are planes in the Air Malta fleet; the same number of potential passengers that view the Air Malta website in a year visit the Ryanair website in a matter of hours. "The underlying fundamentals of the travel business are that there is no future for a stand alone debt-burdened Maltese-owned Air Malta." A new football pitch is to be built in Marsaskala, that will be used by the village football team and the general public alike. The pitch will be built on undeveloped land near the Marsaskala family park and will cost around €1.5 million to construct, with the bill to be footed by the government and the Malta Football Association. It will be available for use by both the village football team, which plays in the fourth tier of Maltese football, and the general public. During a visit to the family park, the parliamentary secretary for sports, Chris Agius, recounted how the football pitch had initially been proposed as part of the original development plans at Zonqor Point. The pitch proposal was shelved after Prime Minister Joseph Muscat announced a smaller footprint for the 'American Institute of Malta' at Zonqor, with the rest of the campus located at Dock 1 in Cospicua. Marsaskala FC had back then expressed its disappointment, arguing that Marsaskala lacks football facilities despite being home to around 20,000 residents. The football club's president, Luke Spagnol, hailed the football pitch project as "a dream that is becoming a reality". "Today is the day that we have all been waiting for," he wrote on Facebook. "When I was a child, we always had this dream and it is now becoming a reality." Rendition of football pitch that will be built in Marsaskala Alitalia to the rescue, but what's in it for them? "There's no future for a standalone debt-burdened Maltese-owned Air Malta" Skalini finally get football ground

Articles in this issue

Archives of this issue

view archives of MaltaToday previous editions - MT 8 May 2016