Issue link: https://maltatoday.uberflip.com/i/753405
7 funds, Zahra insisted they were not comparable to subsidies and that they were, in essence, replacing the funding that used to be given to trav- el agencies and tour operators when they still controlled 100% of air travel bookings. With most air passengers today booking their flights directly with the airlines online, the money that used to be spent to help tour op- erators with their marketing and promotion of Malta, was now being given to those low-cost airlines that linked Malta to new, undeveloped destinations. And that is primarily why so many LCCs fly to second-tier (less popu- lar) destinations. But that does noth- ing to counter the criticism of those who say that LCCs are using these funds to compete with legacy air- lines on main routes. A case in point is that Ryanair of- fering flights connecting Malta to Brussels's Zaventem Airport and Catania's International Airport, two of Air Malta's most popular routes. But Zahra believes strongly that Malta needs Air Malta and that the country would suffer greatly – "And how!" – if the national airline were to fold up. "In an ideal world, Air Malta would retain 50% of the market, with other airlines operating to and from Malta not gaining more than 10%," he said. But the situation is already way beyond that, with Ryanair chipping away at Air Malta's share year on year. "And yet, I remain optimistic that the situation can, and will in fact, be salvaged," Zahra said. Philip Fenech, president of the Tourism, Hospitality and Leisure Sector of the GRTU, the small and medium sized enterprises chamber, was more vocal in his criticism of Air Malta. "I always believed in low-cost air- lines and the benefit they could have for our country," he told MaltaTo- day. "But back then, everyone was over- protective of Air Malta, and it took me three years of meetings and ne- gotiations with the authorities be- fore low-cost airlines were allowed in." Fenech insisted that if Air Malta, and the authorities, had understood how LCCs operated and how they would influence the industry, they could have taken steps to ensure Air Malta would be in a position to sur- vive and compete against them suc- cessfully. "Not enough was done when we could have done so much, and when we still could," he said. "Despite the continuous efforts in the last years, not enough has been done to make Air Malta sustainable." As to whether LCCs and legacy air- lines did not compete on a level play- ing field, because of the funds given to LCCs under the regional develop- ment programme, Fenech said these funds were indispensable to help de- velop emerging markets. "Let us not forget that these funds are only given to assist airlines devel- op new routes and not to compete with other airlines on established routes," he said. But Fenech acknowledged that Air Malta – and other national airlines like it – often served a more noble purpose beyond the romanticised notion of having one's own national airline. "Sometimes, a national airline would have to look beyond market forces, and choose a destination that – while not financially beneficial to the company – could be of extreme importance to the country," he said. That onus fell on national airlines alone, since other airlines would on- ly consider financial viability when deciding which routes to operate and where to base their aircraft. Iain R. Tonna, president of the Federated Association of Travel & Tourism Agents (FATTA), agreed that low-cost airlines were an impor- tant part of the mix for accessibility to and from Malta, particularly for the tourism sector. "I don't believe low-cost airlines per se are directly driving other air- lines into financial difficulties," he told MaltaToday. "Arguably it is more the subsidies that the low-cost business model attracts which cre- ates an imbalance leading to an un- even playing field." Tonna said he did not believe that any specific low-cost airline was to blame for Air Malta's financial woes. "It was more the sluggishness with which Air Malta reacted to the mar- ket developments and responded to losing its protection and the EU's open skies policy," he said. Tonna said that granting funds to LCCs while the government was not permitted to assist Air Malta ignores the social responsibilities that Air Malta willingly performs. "I certainly subscribe to the idea that the EU law permitting subsidies to airlines under regional develop- ment programmes and that prohib- iting state subsidies to companies such as airlines conflicts glaringly with the principle of a free market and a level playing field." Tonna said it was clear that cer- tain LCCs had a strategy to attack Air Malta's key routes, and that al- though – officially – no subsidy was being paid directly for these routes, he believed that the funds being given to promote other routes were indirectly assisting these competitive routes too. "The subsidies are certainly sup- porting the basing of Ryanair aircraft in Malta and this also assists the air- line to fly on unsupported routes," he said. Tonna said that FATTA had al- ways advocated a cautious approach on the mix of airlines servicing Mal- ta. "The 'low cost at all costs' ap- proach was dangerous and depend- ence on any single airline was not desirable," he said. "It seems that the scales are now tipped in this direction and our de- pendence is on a carrier that has no real commitment to Malta if it weren't for the subsidies it is getting. "Unfortunately this is the situation we feared, and we believe Malta is now between a rock and a hard place when it comes to negotiating subsi- dies," he said. maltatoday, SUNDAY, 20 NOVEMBER 2016 News The Banking Arrangement is supported by the InnovFin SME Guarantee Facility, with the financial backing of the European Union under Horizon 2020 Financial Instruments and the European Fund for Strategic Investments (EFSI) set up under the Investment Plan for Europe. The purpose of EFSI is to help support financing and implementing productive investments in the European Union and to ensure increased access to financing. Approved and issued by APS Bank Ltd, APS Centre, Tower Street, B'Kara BKR 4012. APS Bank Ltd is authorised by the Malta Financial Services Authority to act as a licensed Credit Institution under the Banking Act 1994. Terms and Conditions apply. The InnovFin SME Guarantee is a scheme run by the EIF, through which SMEs from eligible business sectors can benefit from lower cost finance, on the basis of a 50% loan guarantee. Facilties range between €25,000 and €2.4 million. The scheme is locally managed by APS Bank. INNOVATE NOW 2122 6644 apsbank.com.mt The explosive pace of technological innovation in everyday life can be traced to 1949, when German engineer Werner Jacobi developed the first microchip. 18468 APS INNOVFIN MASTER ARTWORK.indd 3 06/10/2016 4:33 PM low-cost at all costs?