Flying the flag

Air Malta chairman Lawrence Zammit was keen to break his silence on the low-cost airline issue, as Steve Mallia found out.

Lawrence Zammit has covered more ground on the local scene than some of Air Malta's newer aircraft. The 50-year-old has headed the board of five state-owned entities, including Malta International Airport and the Malta Development Corporation, as well as being a director of the market research company Misco, which he co-founded back in 1983.

The captain's seat at Air Malta was always going to be his most difficult, however. Since he became chairman three years ago, virtually every pun in an aircraft geek's manual has been used to describe the state of the national airline - except "flying high". Passenger numbers have dropped in the last year, while more empty seats have taken up valuable space in the sky. Last year it recorded a 4.8 million operating loss , while this year's results shall be announced next week.

But Mr Zammit is still an optimist: "It's no secret that were it not for the rise in fuel costs, we would have been very close to breaking even this year. That's no joke because it means we've taken Lm10 million off costs." Of course, there is no gain without pain. And he is all too aware that the latter has been in plentiful supply at Air Malta's offices. "This has been possible due to a lot of sacrifices by the employees, who have given up increments, a collective agreement increase, half-days as well as accepting new working patterns. On average, employees' take-home pay, after accounting for the statutory cost of living increases, has gone down by around six per cent, compared to three years ago."

Just as a chink of light made a cameo appearance in the tunnel, the government, under intense pressure from the public and tourism industry, announced that it would be giving low cost airlines subsidies - under a different name to make them palatable to the EU - to operate in the shoulder months. And Ryanair pounced by offering one-way fares for the same price as a slice of bread. The theory is that they will service the under-served routes. But in reality Luton Airport is not much farther than London from Heathrow and certainly as close, if not closer, than Gatwick and Stansted.

"That's obviously where the major challenge is for us. But it's important to appreciate we're talking of Luton and not Heathrow," Mr Zammit says defiantly.

Whatever words he holds back for the government's decision - "it tried hard to find a balanced solution and found it" - he unleashes on the private sector: "I would love to know what the private sector would think if an international hotel chain, or bar franchise, were to come to Malta and say to the government: 'Look, we can get you a totally different market segment, but to do that you're going to have to subsidise us'. Would they accept that? That was Air Malta's stand all the way; it's either a level playing field or not at all."

It was also the stand taken by Investments Minister Austin Gatt who on April 27, as the minister responsible for the national airline, unleashed an attack on low fare airlines - Ryanair in particular - for requesting subsidies. So has the government done a U-turn? "The wider context of that speech is more important that the statement itself. Austin Gatt criticised the low cost at all costs brigade. He continues to do that. And I continue to do that."

Mr Zammit also implies strongly - but will not comment further - that others may be using the subsidy issue as a bargaining chip. "You may have an existing airline going to the government and saying, 'look, the only way you can keep this route open is to subsidise us'. Or an existing tour operator saying 'we will only continue to feature Malta in our brochure if you increase your marketing support for us'."

But he does not feel the national airline has been betrayed by its shareholder: "One, our advice was sought on what could be the impact on the airline as a result of low cost airlines flying to Malta. Secondly, my understanding is that if the low cost airlines didn't have one UK route they wouldn't have done the others. Now the government should be asking low cost airlines to put their money where their mouth is. If they have the big marketing reach they claim to have, then let them tap the difficult markets like Spain and Portugal. It's very easy to get people out of the London area."

As well as very dangerous to Air Malta's health. And offering concessions for certain other destinations - like Gatwick, Stansted, Paris or Frankfurt - would be the beginning of the end for the national airline. "If people expect subsidies for more routes, that will have such a significant negative impact on Air Malta which means either that it will have to be supported or it will not be able to survive. That's the long and the short of it."

Support is not a word Mr Zammit applies to the media. In fact he is very angry at what he feels has been their biased and misinformed approach to the situation. "When people say they have been waiting for 18 months for the government to decide it is simply not true. The government was the first one to talk about low cost airlines back in 2001 when it issued a request for proposals for the privatisation of MIA. And journalists have been very keen to say there are conditions linked to our offers. Yet I have not seen one newspaper that says there are conditions linked to Ryanair flights. And there are. Another aspect where there has been total misinformation has been the claim made by journalists that low cost airlines needed a government permit to fly to Malta. This is simply not true and whoever claims this is lying. So the reporting has been very partial."

Then he turns the cannon in more official directions: "We've had inconsistency throughout by most exponents in the private sector and, unfortunately, by other opinion leaders. I include some trade unionists, and some people from the opposition party. And I think that's important because we're talking of alternative government here. We can't have a situation where we've had politicians Sunday after Sunday writing in favour of low cost airlines and all of a sudden we say we've got to take care not to lose Air Malta."

As well as inconsistency he feels that certain people forming part of the low cost lobby group have had a conflict of interest. "One thing that hurt me this summer is people going to whisper in the government's ear that we're reducing our presence on the Malta base. This was a lie, frankly. We put in five per cent more seats this summer; we actually operated more flights out of Germany because Condor did not operate this year. It's very unethical, in my opinion, to say that. Some people have not been declaring their interests." But, even when pressed, he will not say who. "For people in the know it's fairly evident where they lay." That is as much as he will elaborate.

However, the Air Malta chairman also believes that many people have missed the point and insists that instead of having a long-running debate on low cost airlines what people should have been talking about was the real cause of the drop in tourism figures: marketing, according to him, or the lack of it. "The marketing effort of MTA needs to be improved. Instead of focusing more on how to improve MTA's marketing effort, we have allowed the debate on the difficult situation in the tourism sector to be hijacked by the low cost at all costs brigade," Mr Zammit says.

But isn't the cost of getting to a destination a crucial factor? "Yes, though the final price is made up of a number of factors; such as hotels and how much things cost here. Air Malta's average price competes very well with Easyjet, for example. What we don't have is a seat load factor (number of people on the plane) which is as good as theirs. This is why we don't make money and they do. And the number of people on a plane is a result of marketing reach."

Air Malta will never be in a position to charge one euro cent for a one-way flight, like Ryanair, but Mr Zammit is encouraging people to look behind the marketing strategy and look at the hidden costs and disadvantages - such as prices for late bookings, as well as conditions related to luggage, check-in times and connections, and schedule times. "Plus, what about the transport costs of travelling from well outside the London area into the city? We need to look at the whole process."

In the meantime, the restructuring of Air Malta goes on. He first enters reticent mode when asked whether the national airline can or should be privatised, before opening up a little: "If you ask me should the government think of selling off shares in future, I would say yes; should it bring in a strategic partner, probably yes as well, but to relinquish control of Air Malta is too premature in this country. The strategic importance of Air Malta is far more important than the airport to be honest."

But he refuses to apologise for the tough commercial decisions that have been taken, and will continue to be taken. "People can't just expect sponsorships because we're Air Malta, though obviously we'll continue to support, for example, people going up to the UK for medical reasons. And if a route is not profitable, we'll have to admit it's not profitable."

Mr Zammit refuses to make predictions on Air Malta's future, saying the airline is far from emerging from the woods.

"There have been improvements but it's pointless beating around the bush. Any Air Malta employee who doesn't believe we are facing a very difficult situation is living in cuckoo land. If any Maltese does not believe that, he is living in cuckoo land. And there are people out there. I've had a hotelier telling me 'it's not true you're losing money. You're telling people this just so they have pity on you'. He lives in cuckoo land. This summer I felt that we no longer have the consensus that we have had in the last 40 years that the country needs its national airline to develop its tourist industry. I got the feeling that some are doubting the validity of this line of thinking"

If things go wrong, cuckoo land is probably the only destination Air Malta will be flying to.