20 April 2005

The Web

Of low-cost airlines, hubbing and the Euro

Hoteliers and tourist operators have been clamouring for the introduction of low-cost airlines to Malta but this enthusiasm is more contained at Malta International Airport. Chief Executive Officer Peter Bolech is not overwhelmed by promises made by budget airlines of manna falling from heaven as far as incoming passengers are concerned.
He insists that during MIA’s discussions with Ryan Air the one million passenger mark was never brought up by the Irish low-cost carrier.
At the helm of an airport that handled more than 2.8 million passengers in 2004 and buoyed by the results of an international passenger satisfaction survey that put Malta International Airport in fifth place among European airports, Bolech talks of the company’s ambition to turn Malta into a Mediterranean hub for East-West travellers

The IATA global monitor report has ranked MIA as fifth among European airports for passenger satisfaction. To what do you attribute this success?
We created the Customer Enthusiasm Programme with the intention of making our people more aware of the need to have happy customers. Hadn’t we had a low-ranking third quarter with all the construction work going on up stairs in the shop area, I am confident we could have done better. It is the attitude of the people at MIA that makes the difference.

What level of investment is dedicated to MIA’s employees?
We invest a lot of money in training. The Customer Enthusiasm Programme emphasises that all employees at the airport from the CEO down have their salaries paid by our customers.
The next step is to embark on an internal programme to understand ourselves better. Even in a small company like ours there are sections that do not communicate adequately with each other. Everybody in the company is someone else’s customer within the company itself, so we need to better understand the needs and requirements of internal customers.
Recently we have also embarked on a joint venture with Air Malta to provide language courses for our respective employees to enhance mutual customer relations.
I wish to have a learning organisation where the minds of 400 employees are brought together to generate ideas thus making us more competitive.

How important is it to be competitive in the airport business?
It’s very important because we are living in a world where there are a lot of alliances between airlines. Airlines are the basis of our business and whether we are willing or not, these alliances also concern us as airports. I believe very much that the competitiveness of Malta and Air Malta are important to MIA itself.

Who are MIA’s main competitors and what challenges does the market place pose?
We are active in different fields so competition is varied. Resort tourism, a key factor for the economy, sees Cyprus as Malta’s main competitor and not Tunisia. Cyprus are after our market, which is a combination of culture, high end hotels and the sea. If it comes to cruise liner business Barcelona is our biggest competitor. Many ships utilise Barcelona as a home port but we have a unique position in the Mediterranean and Malta can be an ideal home port between the East and West regions of the Mediterranean. Barcelona, Genoa and Venice can only cater for a part of the Mediterranean.
With the completion of the Valletta Waterfront we will have an important marketing tool to allure people over here. Our shareholders from Canada have proven it by making Vancouver as the fly and cruise hub in the North American sphere.
As far as cargo is concerned we have embarked on a cooperation agreement with the Freeport so that Malta could become a multi-functional hub for the transhipment of cargo from sea to air and vice versa. After many years of static growth we have increased the cargo throughput at MIA.
The most difficult but challenging aspect is to develop Malta into a passenger transfer hub as far as aviation is concerned for travellers on the East-West Mediterranean route. Without disclosing anything from ongoing discussions, we have identified partners to study the issue and see whether Malta could take up the position between the Eastern and Western Mediterranean, a position similar to that of Vienna airport which acts as a hub between Eastern and Western Europe.

Are you still in the study phase of this hubbing concept?
No, we are much further. According to the study phase we already have non-binding expressions of interest from organisations in the world-wide aviation business willing to share our interest.

Is MIA looking at the possibility of further growth through the operation of low-cost airlines to Malta?
The public perception might be that a more private airport may have a higher degree of freedom. This is not true because we have a dominant position and this status does not allow me to discriminate on price.
If a low-cost carrier came here and offered me a number of passengers as long as we offered them a 100 per cent discount on landing charges, I would feel obliged to reject their kind offer because this is not within my legal obligation. I am obliged by law to apply fair, transparent and non-discriminatory charges. Any change in charges has to be evaluated by a board of stakeholders and users at MIA, who are represented at the same level as we are.
We have a very established system of passengers coming to Malta. Let’s take for example Alitalia, Lufthansa and Air Malta. They all operate to Milan and Frankfurt, major connection points to the rest of the world. How could a Japanese and Canadian come to Malta if these routes didn’t exist?
But if a low-cost carrier came and started an operation between Milan and Malta, other established airlines may be tempted to leave this route. We may get an increased volume of customers from the Milan catchment area but we will lose all connections to the rest of the world because low-cost carriers only offer point to point flights.
I believe, what Malta’s tourist product needs is wide access to all of the world and not only be dependent on tourism that originates from just two countries, Britain and Germany.
I’m not here to speak on behalf of the Minister for Tourism or MTA but in my responsibility as the CEO of an airport I would not support jeopardising the access of Malta to the rest of the world just for the sake of an airline that promises one million passengers. What if they don’t deliver? I don’t know from where this exorbitant figure came from because when we had discussions with Ryan Air they were ‘assuming’ that they would ‘probably’ operate four routes and each would bring around 100,000 passengers. The one million passenger mark was never communicated to us by Ryan Air

Within this context would you say Malta will not see low-cost airlines operating here?
We may not have low-cost carriers but we do have low-fare airlines and Air Berlin is a classical example.

What about the more popular ones, Ryan Air and EasyJet?
I don’t know if it will happen but everybody has to be aware of the fact that if Malta ever decides to say OK to these carriers it means a complete change in aviation policy and I don’t think it would be in the best interest of the country.
Every low-cost carrier is welcome here but MIA will treat them according to the criteria used for other airlines. We will help them to establish themselves because they will add value but we are not here to breach the rules.

The Libyan market is gradually opening up to the outside world. What impact does this have on MIA given the hub concept you are trying to develop?
Our concept is twofold. We want to be an East-West hub in the Mediterranean but we also want to have catchment markets. In this respect Malta could be an ideal transfer point for the Sicilians to the rest of the world and this could also apply to Libya. The opening of Libya fits into our strategy.

What has become of the proposal to develop a business park on the airport grounds?
At the moment we are telling the rest of the world about the proposal. We want to match our belief in Malta as a stepping stone in the Mediterranean region with the aspirations of prospective investors. It is a philosophical approach. We want to attract businessmen here to set up their regional offices instead of Larnaka or Tunis because of certain advantages including a skilled workforce, the English language factor, good infrastructure and an advanced IT framework. Having a regional or head office close to an airport will be an added incentive.
We are in big competition with other places but this is our unique chance in history to participate in the general effort of Maltese society to establish Malta as a Mediterranean hub. We alone as MIA are too weak. I wouldn’t put the onus on Government either. It has to be a clear vision for all stakeholders to offer prospective investors the chance to establish themselves here and it can work.
I was born in an Austrian region that lived in the shadow of Communist Eastern Europe. It was the poorest region in Austria and with help from the EU it transformed into a regional hub for wellness and golf tourism, research and development in renewable energy sources and other value added industries. The success of the region can be measured by the fact that it now does not qualify for Objective One funding anymore.

Malta is at the cross roads of deciding on whether to adopt the Euro at the earliest possible stage or wait for a longer period. How would the introduction of the Euro impact MIA?
More than anything it has a psychological impact. Prior to joining the EU Malta had already adjusted its laws and regulations to European standard but nobody in Europe knew or took notice. Today, after accession everybody knows that Maltese rules and regulations are similar to those in other European states.
The same applies to the Euro. The exchange rate risk has always been minimal since the Maltese Lira has always been tied to a great extent to the Euro. In real terms adopting the Euro may not be such a critical issue but a possible investor in Finland, Estonia or Scotland will have the certainty that there is no exchange rate risk.

In August the passenger tax imposed by Government on Maltese travelling abroad will go up in line with the decision announced in the budget. What impact will this have on MIA?
It doesn’t help. If a family of four all of a sudden has to pay an amount of money equivalent to a vacation in Tunisia it will have an impact. But I am not here to comment on Government policy.
As far as MIA is concerned the percentage of Maltese passengers has been hovering around 10 per cent of all passengers going in and out of Malta. The increase which we have to aim for must come from foreign passengers.

If you were Vienna airport would you seek to increase your shareholding in MIA?
I am not Vienna airport and I am not an employee of Vienna airport. I was asked to come here to administer the Malta airport. I resigned fromVIE and am a full time employee of MIA. I have no connection to the shareholders be it the Austrians or the Canadians. It is difficult for me to judge what they would do but they are happy with our performance.
We have managed to combine quantity with quality and over recent months we have been used by our shareholders as a model for prospective privatisations they may be involved in. Having said this I would be surprised if any of our current shareholders would be reluctant to buy more shares when these are made available by Government when it decides to dispose of its remaining shareholding.

Peter Bolech was interviewed
by Kurt Sansone

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