Air Malta Group made a loss of Lm25.8 million in the financial year ending July 31, 2003, including losses of Lm8.86 million from its core business of passenger and cargo operations.

Company chairman Lawrence Zammit told a press conference yesterday that prospects for the current financial year were more or less the same. Concrete results of the rescue plan, designed to reduce operating costs, would start to appear in the year after that, he said.

As a group Air Malta posted profits of Lm332,000 in the 16-month period ending July 31, 2002. Losses in the company's core business in that period had amounted to Lm3.71 million.

It is the fourth consecutive year that Air Malta has made losses in its core business. Air Malta intended to start closing the financial year at the end of March, Mr Zammit said.

Up to July 31, 2003, earnings by the group had reached Lm123.9 million, down from Lm173.7 million in the period April 1, 2001 to July 31, 2002.

He explained that results registered for the period up to July 2003 were hit by losses of Lm14.2 million (2002: Lm7.2 million) from AZZURRAairSpA.

In addition, a provision on onerous contracts of Lm7 million has been made to reflect the shortfall in income and the additional costs which were expected to arise on the Avro RJ aircraft previously subleased to AZZURRAair.

Efforts are in hand to lease or sell the Avros to other companies although this was not an easy task.

Mr Zammit said that subsidiary companies, which included shops at the airport, had left a profit of Lm2.7 million in the period ending July 31, 2003 compared with profits of Lm3.7 million for the previous 16 months.

Passengers in the corresponding periods had dropped from 2.3 million to 1.5 million.

Mr Zammit said that over the past 10 years the airline industry had gone through enormous changes which necessitated better management, more efficiency and cost control, which, unfortunately, for some reason or other, did not happen at Air Malta. The company was faced with continually falling profit margins and passenger yields accompanied by soaring costs.

He said that faced with this situation, Air Malta had received a brief from the Ministry of Information Technology and Investment to draw up plans to reverse the situation to profitability in its core business. This meant a change in the company's culture and the need to ensure that the company's operational set-up reflected the realities and necessities of today.

There needed to be radical changes in the workings of the airline, clients needed to be put at the centre of operations and the concept of team work needed to be strengthened, he said.

Mr Zammit also referred to the "acceptable and just" agreement reached last May between Air Malta and the four unions representing its employees.

The four-year agreement, which provided for a three-year moratorium on increments among other measures, was designed to help the company get back on its feet by cutting costs.

Mr Zammit touched on the planned course of action, mentioning among other measures action designed to save Lm400,000 from administrative expenses including the abolition of allowances for senior management and directors' remuneration.

Another Lm500,000 in savings was expected from a reduction in the cost of in-flight services through a radical overhaul.

Savings of Lm1.35 million were envisaged from a re-organisation and restructuring process of outstations and better utilisation of IT.

Direct operating costs are to be cut by Lm1.5 million through the rollover of the new fleet and the adoption of advanced technology as well as savings from maintenance costs on the company's fleet.

Other action include the removal of half-days in summer and measures that promote greater efficiency.

It is estimated that by the end of the third financial year of the agreement with the unions, Air Malta will have saved Lm3.75 million each year.

"We are at a crossroads and, though cautious, I am confident that with the right attitude we will meet the challenges and the obstacles to compete with success and return the airline to profitability in the near future," Mr Zammit said.

Air Malta's chief executive officer, Ernst Funk, spoke about the airline's vision to continue to be the largest generator of tourism while providing the Maltese travelling public and industry with the right selection of airline destinations and connections.

"In order to reach breakeven in three years, Air Malta has to close a gap of approximately Lm10 million in its core business through the initiatives in its recovery plan," he said.

He added that at the end of the third year, Air Malta would still be short of breakeven by approximately Lm1 million and so the company would continue to work to close the gap.

Asked whether he has received any resignations from Air Malta pilots, Mr Zammit said he had not but he was aware that there were individuals who were considering resigning.

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