Issue link: https://maltatoday.uberflip.com/i/773562
14 THESE are dark times for Malta's national airline... or so it seems. Already shy of two EU restructur- ing target-dates, and (by the gov- ernment's admission) in urgent need of a 'strategic partnership' to overcome its financial difficul- ties... news that a planned merger with Alitalia fell through this week must have felt like an axe-blow to Air Malta's roots. Though the problems are com- plex, the main issue remains the exorbitant cost-base of an airline that has (in the past) been treat- ed as more than just an ordinary aviation service. Over the years, Air Malta's staff complement has grown to considerably more than a company would need to remain competitive in such a cutthroat market. Work practices, zealously defended by unions, have over- inflated the company's base ex- penditure... translating into higher costs for the consumer, and there- fore lower competitiveness. These issues are by no means new; but never before have they been more urgent, as time to im- plement the European Commis- sion's restructuring plan appears to be running out. So... has this latest setback sealed the national airline's doom? Is it a case of 'No Alitalia, no party'? Tourism Minister Edward Zam- mit Lewis (also responsible for Air Malta) certainly doesn't think so. "First of all, this government has in my opinion tried to do some- thing that was never tried before. I think preceding administrations understood that the only road for Air Malta – as a very small airline by European and global standards: even more so, at a time when all airlines were undertaking cost- cutting exercises across the board – was to seek a strategic partner. "I know for a fact that previous administrations – in particular the last Gonzi administration – had received offers: there were those who really believed in a strate- gic partnership at the time. This is confirmed by the previous Air Malta chairman Louis Farrugia, who wrote some time ago that he agreed that Air Malta needed a strategic partner. I believe this government has been clear and consistent on this, and in the two years nine months I have been the minister responsible for Air Malta, we began talking seriously about a strategic partner: even if this pro- ject [the Alitalia merger] has failed to materialise..." The issue however does not con- cern whether there is consensus regarding the policy, but whether the policy can work in practice. It is one thing to agree that a strategic partner is necessary; quite another thing to actually secure one. Why did the attempt to merge with Alitalia fail? Was it because of any particular unresolved negotiation issue... or is it simply a reflection of the fact that no other airline would want to buy into Air Malta in its present financial circumstances? Zammit Lewis acknowledges that part of the problem concerns the nature of the airline itself. "Air Malta falls between two stools. It's not a low cost airline, so it doesn't have the advantage of controlled overheads like RyanAir – and it's not Turkish Airways or Emirates, which are unfettered by EU rules, so can take certain deci- sions we can't. We're somewhere in between. So we need to find our own identity. Maybe I'm being a little philosophical... but I believe our choice of direction is right. But of course, it has to be a strategic partnership that is suitable for our needs..." At the same time, however, the government seems to be hing- ing everything on this 'strategic partnership' as if it were a sort of panacea. Aren't there also struc- tural problems? For instance: he describes Air Malta as 'small' (which it undeniably is)... but in terms of what an airline that size actually needs to be, it also has a massively overinflated workforce. "When I say it is a 'small airline' I mean by international standards. For Malta, it is not small. It is a vi- tal strategic asset from a tourism, trade and also social perspective. But in a context of a discussion of strategic partnership with other international airlines... then yes, it is small. This does not mean that we shouldn't do all in our power – and politically, that is what I in- tend to do – to save it, and get it back onto the path of commercial viability." But my question was about what can be done to achieve that goal. Isn't part of the difficulty in merg- ing with other airlines also due to endemic managerial issues... such as the (near) impossibility of downsizing the workforce for po- litical reasons? Or taking any other 'unpopular' decisions, for that matter? "As minister I have no say in managerial decisions... but the management did take courageous decisions: such as the discontinu- ation of the Frankfurt and Man- chester routes. The decision was criticised, but it enabled us to uti- lise the aircraft in profitable routes instead. If the airline was yours, what would you prefer: investing in routes which are profitable, or routes which lose money?" That question overlooks the fact that the discontinued routes were considered important for incom- ing tourism... and this is also part of the 'tourism, trade and social' strategic value of the airline that Zammit Lewis himself mentioned earlier.... He nods. "But I can tell you con- fidently, that while the decisions taken were ones that made sense for Air Malta on a commercial lev- el... they did not negatively affect the tourism sector. Why? Because we have diversified our source markets so much, and because we have availed of the EU's Single Skies Policy, whereby the Europe- an aviation industry has been lib- eralised. So I can confidently assert that over Winter 2016/17 we will have more carrying capacity – not just Air Malta, but other airlines too – and even more in Summer 17/18. Tourism is set to grow. I say this with the utmost responsibility, but this year's arrivals will exceed two million. I can guarantee this. But at the same time – and this is the pity – Air Malta has also been damaged by the fact that it is in the newspapers so much, always in a bad light..." He breaks off to go over the man- datory disclaimers: "I'm not say- ing that newspapers shouldn't talk about Air Malta; on the contrary, that is a democratic right and pre- rogative, and I wouldn't dream of taking it away. But commercially, it affects Air Malta when every negative thing about tourism is as- sociated with the national airline. And it's not true, either. In this administration – and in others, too: the sun did not rise in March 2013 – decisions were taken which may not have been popular. But the fact that we closed the finan- cial year with an imbalance of only €4.2 million is a source of satisfac- tion to me. We are not far from the turning point towards commercial viability. Some challenges remain: challenges that nobody to date has had the courage to face. We will face them." One of those challenges must surely be the spectre of govern- ment interference in the airline's management... "No, I can assure you there isn't any." Not directly, perhaps; but there is evidence that indirect pressures do exist. Chairpersons are after all appointed by the government, and may feel that their hands are tied when taking politically sensitive decisions... Zammit Lewis has been shaking his head throughout. "No, it's the other way round. More than ever before we have reduced the head- count, and we are letting the airline take its own decisions... even when they may not make me popular as a tourism minister. Discontinu- ing the Manchester route did not make me popular, because – let's be honest – certain hoteliers rely on that sector. But as the minister responsible for both tourism and Air Malta, should I aim to please four hoteliers at such a critical mo- ment for the company? Not if the priority is to make our national airline commercially viable. In that sense, there is no political interfer- ence..." All the same, there has been in the past: wouldn't it be fair to say that Air Malta is now saddled with these problems, and this is what is hindering its competitiveness? "Historically, yes, there have been times when Air Malta ad- mitted more staff than it needed. This needs to be addressed. But politically, it must be done in co- operation with the unions, so that the families which depend on Air Malta are safeguarded. I cannot be expected to undo in a few months what has taken a quarter of a cen- tury to accumulate. But I must also take cognisance of the workers, their families... and also the airline itself, which from its inception has always provided a living to a lot of people. This has to be considered, too." At what cost, however? If Air Malta goes bankrupt, those fami- lies can no longer be safeguarded anyway. And if the turnaround point can't be reached precisely because of the size of the work- force: aren't we in a Catch-22 situ- ation? "We need to explore ways to en- sure that the airline can be turned around, without causing too much upheaval. I'm not saying this merely because the Alitalia deal fell through. I don't want to take your readers for a ride, by saying that another airline will step in and buy into Air Malta as it is. It needs to be internally restructured first. No doubt about it. We need to look at the shape it is in, and the shape it should be in. Nobody is going to come in from the out- side and clean up our mess for us. Interview By Raphael Vassallo maltatoday, SUNDAY, 15 JANUARY 2017 Nobody is going to come in from the outside and clean up our mess for us. We have to do that: the management, the board of directors, the government, the employees But commercially, it affects Air Malta when every negative thing about tourism is associated with the national airline. And it's not true, either CLEANING UP NEGATIVITY Deal or no deal for Air Malta?