The liberalisation of the airline market that was initiated when Malta joined the European Union in 2004 has evolved gradually with the latest development being the setting up of Malta Air, a new airline owned by Ryanair. The first thing that comes to mind is how this new venture will affect the national airline, Air Malta.
The Irish air carrier has a very successful business model based on offering travellers a low-cost, no-frills option. Low-cost airlines have boosted local tourism over the last decade. Travellers have shown a willingness to sacrifice comfort and convenience for cheap airfares. Budget airlines also chase the lowest pay and most relaxed labour regulations when engaging staff, including aircrew.
The setting up of Malta Air has some clear winners. Ryanair is arguably the biggest winner as it can now pursue its creative hiring arrangements to slash labour costs probably with the less legal hassle it has experienced so far in countries like France, Italy, Germany, Denmark, Belgium and Britain, which have all taken court action against the company for circumventing taxation and pay-related insurance contributions.
The Maltese economy will also experience some positive effects as a result of this investment. Of course, one still needs to see the financial details of the agreement to better understand whether the new company will pay the same employment-related taxes as other local businesses. However, the knock-on economic effect of having a new local airline operating from Malta could be significant.
Prime Minister Joseph Muscat, Tourism Minister Konrad Mizzi and Ryanair Group CEO Michael O’Leary went out of their way to dispel the obvious conclusion that Malta Air could eventually replace Air Malta as the national airline. The branding, the strategy of serving more Mediterranean destinations and the transfer of several aircraft to the Malta register make Malta Air a possible clone of Air Malta.
There are questions that remain unanswered, like the level of fiscal and other incentives given to Ryanair to set up the new company on the island. Will the employees of Malta Air pay the same taxes and national insurance contributions as other local employees, including those of Air Malta?
Another question which has so far not been answered convincingly is the strategy of Air Malta. Opening new routes to Mumbai, in India seems to be one of the preferred strategic options. Another option is the provision of services to important business cities like London, Frankfurt and Brussels, where the national air carrier has an established business clientele.
The Prime Minister insisted that Air Malta is unlikely to suffer as a result of the new airline. He believes that Air Malta and Malta Air “can both live happily ever after”.
Civil aviation industry observers have expressed doubts on why the government got involved in such a deal.
The Malta Chamber of Commerce, Enterprise and Industry insists that, given its pivotal role in the country’s economy, Air Malta “cannot be in any way placed in any form of danger”.
The national air carrier had to remain a priority for the government and everything should be done to safeguard its position in the market, it said.
No wonder some fear Malta Air can be a Trojan horse and that Air Malta’s future coexistence with it is more an issue of ‘till death do us part’.
This is a Times of Malta print editorial