After more than two decades of futile attempts to revitalise a perennially struggling Air Malta, the European Commission has finally decided that the latest restructuring plan presented by the national airline is not feasible.
This decision means a new national airline has been cleared for take-off, hopefully without Air Malta’s heavy baggage.
National pride and economic patriotism have delayed the demise of Air Malta since the realities of the liberated airline industry in Europe posed questions for the viability of a small national airline business model.
The various Air Malta restructuring exercises have cost taxpayers hundreds of millions of euros. Admittedly, Air Malta carried the tourism industry until the low-cost carriers entered the scene.
Air Malta chairperson David Curmi has now told this newspaper that the airline has created a five-year business plan and is close to concluding with the European Commission. “If we stick to this plan, we will have a national airline that makes business sense,” he said.
Curmi did not delve deeper into the fundamentals of the new business plan. He confirmed that the Commission preferred Malta to take the route recently travelled by Italy and emulate that country’s model by setting up a new airline. He said the new airline would “not compete on price but on service” and that it would “never be a low-cost carrier”.
The challenges that will face Malta in this new venture go beyond the current economic uncertainties affecting EU member states. Luckily for the new airline, it is being launched when the worst effects of COVID are over.
Still, the war in Ukraine persists and could affect the airline industry in Europe in the foreseeable future. In this year’s first three months, two relatively small European carriers – Flybe and Flyr – have already collapsed. Flyr is a Norwegian low-cost carrier launched in June 2021 that operated a fleet of 12 aircraft to European destinations.
The new national airline – we don’t know its name yet and Malta Air is already taken – must learn lessons from the circumstances that brought Air Malta to its knees.
While political meddling in the company’s management was undoubtedly an endemic and debilitating weakness, the economic realities of the European airline industry have arguably had an even more serious impact on Air Malta’s operations.
The industry has excess capacity and mergers aimed at consolidation are inevitable. Lufthansa’s interest in partnering with Italy’s new airline ITA is motivated by the desire of the German national airline to have another hub in Rome’s Fiumicino.
Air Malta has too often tried to sell itself as ‘the solution in search of a problem’, projecting itself as an airline hub for the Mediterranean area or an effective feeder for large airlines that dominate the European market.
Ryanair CEO Michael O’Leary recently told Reuters “We are definitely, post-COVID, entering a four- or five-year period of consolidation”, adding that he believed the sector in Europe would move towards having four large airlines: Lufthansa, Air France-KLM, IAG and Ryanair.
One hopes that O’Leary’s prediction turns out to be incorrect and that the weaknesses in some carriers compared to the strong performers are not as bad as they seem.
The government must ensure that political patronage no longer prevails in the new airline’s management. Curmi’s words in that regard – “We have the full support of the shareholder but absolutely no intrusion” – are promising.
Moreover, the new airline must be led by a team of directors and senior executives who have deep understanding and experience of airline economics that go beyond general management skills.