When the Air Malta saga is discussed, the “mistakes” of the past often dominate the debate.
Finance Minister Clyde Caruana goes further and says that he plans to “stop this madness”.
In an attempt to do so, the government is planning to offer the airline’s pilots a handsome golden handshake of between €750,000 and €1 million each, with the cost to the government of correcting those past mistakes running into the €200 million figure.
But are the future plans of Air Malta really good enough to save the national airline from yet another massive injection of public money in the coming years?
The past political and operational mismanagement of Air Malta is well known. Michael O’Leary, Ryan Air’s CEO, made a very depressing comment about the national airline.
Speaking to Times of Malta, he said: “Ryanair have been asked if we want to buy Air Malta. No, we don’t… We don’t need loss-making airlines.”
Caruana added another depressing comment on the burden Air Malta has been throwing on local taxpayers. He promised to make “brutal reforms” to turn around the airline’s fortunes, adding that “over the years, Air Malta has been burning assets and hiring ‘hundreds’ of workers it did not need, burning through €40-€50 million annually”.
Understandably, the new €200 million outlay is worrying to taxpayers. The business lobby argues that “the salary expectations of hundreds of Air Malta employees are not commensurate with the competence and willingness to be productive”.
What is even more relevant to taxpayers and the public is whether the national airline will be able to compete in Europe’s crowded skies and, if it can, at what cost.
Here we have two projections. The finance minister and the chairman of Air Malta, who both have limited knowledge of aviation economics, believe that a slimmed-down Air Malta can make it.
However, the competition authorities in Brussels have still not agreed on a state aid package for the restructured airline that starts from the unenviable position of bankruptcy.
Another prediction comes from O’Leary. He told the aviation magazine Simple Flying that he does not expect Air Malta to be profitable.
He added, “Even when it is bankrupt, which Air Malta is, the government will find a way to keep it alive. I do not think that Air Malta will disappear but I think it is going to prove to be very difficult to make it break even. It will never make a profit.”
The commercial logic behind O’Leary’s arguments is more convincing than the wishful thinking of Caruana and the Air Malta management. He justifies his bleak prediction by saying that Air Malta’s fleet relies on only eight aircraft. “The lack of planes means the carrier is unable to offer the maximum competitive routes and will be undercut by low-cost giants which can offer cheaper services across Europe by basing more planes in the country instead.”
The current geopolitical developments are forcing most airlines to rethink their business models. High inflation is likely to affect the spending power of most consumers in Europe in the coming years. This will impact all airlines, not least the national carriers that have to compete with more nimble low-cost carriers.
No one has been held accountable for the past strategic and operational mistakes made by Air Malta and the politicians in power over the years. But the biggest risks faced by the national airline and the taxpayers that finance it is that of unrealistic plans and additional costs to keep the airline flying.