After almost 20 years of struggling to restructure, Air Malta may be facing its last chance to stay in the air in the overcrowded European skies, without much support from taxpayers.
Competition and airline analysts had little doubt that this time around, the European Commissioner for competition would not be too impressed by any promises of sound business plans presented by the Maltese national airline.
Air Malta’s business objectives are to compete with low-cost airlines and at the same time support the local economy. By offering adequate connectivity even on unprofitable routes, Air Malta will struggle to reconcile those conflicting objectives.
Finance Minister Clyde Caruana acknowledged that any subsidies allowed by the EU would be much lower than the airline needs to continue in business-as-usual mode. Logically, this leads to further cost-cutting measures, including reducing by half the present workforce of about 900 and the relinquishing the ground handling operations.
This latest restructuring strategy will have economic and fiscal impacts that need to be well managed. The first impact is that Maltese taxpayers will still be financing any subsidies that Air Malta will receive, even if the amount will be much smaller than the €290 million requested by the government. However, to this, one has to add the cost of redeploying 420 airline staff to government departments at a cost of near to €15 million a year.
The business community, especially those in the tourism sector, will argue that the reduced size of Air Malta is likely to affect their operations. This is a valid argument made by small island states which depend on good connectivity facilities to promote economic growth.
Still, one must not underestimate the ability of low-cost airlines to move fast to satisfy any reasonable demand.
The new business plan of Air Malta is still shrouded in secrecy. However, some of the comments made by the airline’s executive chairman David Curmi could raise concerns. Curmi argued that “Air Malta will be a European network carrier creating a base abroad and flying within countries, such as flights within Italy”.
The present top brass of Air Malta has minimal airline economics experience. They need to learn fast from past mistakes, including Azzurra Air, an Air Malta subsidiary, that failed venture which had a similar business vision more than two decades ago.
Air Malta adopted too many hollow and unviable strategies in the past decades – strategies based on the visions of politicians who do not understand the realities of the struggling and overcrowded European airlines’ market. There was a plan to merge with troubled Alitalia, or the ambition to become the “favourite airline of the Mediterranean”. All have proven no more than wishful thinking.
Minister Caruana admitted that “the European Commission made it clear it did not trust the government to implement reforms because of past pledges over a span of years that were never adhered to”.
Hopefully, taxpayers will be spared the cost of trusting the government with any new Air Malta restructuring strategies that, if they fail, will have to be financed by ordinary citizens.
The new restructuring plans for the national airline may have a more pronounced element of realism to them, thanks to the strict scrutiny of the EU competition authorities.
Successive administrations have failed to prevent our national airline from crash landing, leaving the latest one to pick up the pieces. The Maltese taxpayers and Air Malta workers are owed an apology especially for the way governments often shamelessly treated the national airline as a job recruitment agency.
One can only hope that the latest strategy will keep Air Malta flying as a viable commercial enterprise that serves the nation without imposing excessive fiscal burdens on it.