INTERVIEW | Malta Air confident it can restore local tourism volumes post-COVID
BusinessToday met with Malta Air CEO Diarmuid O’Conghaile to discuss the airline’s expectations in a post-coronavirus world, and its plans to bring tourists back to the island
Malta Air launched in June 2019, as a Ryanair subsidiary based in Malta. At the time, Malta Air’s plan was to incorporate within it all Ryanair routes to and from Malta, to add new routes and to increase its fleet. Earlier this year, the world was hit by the COVID-19 pandemic, which has had a major impact on aviation. What are the prospects for the industry post-coronavirus?
COVID-19 has been catastrophic for the aviation industry. In the case of the Ryanair group, during the pandemic we went from 100% capacity to 1% capacity within a period of two to three weeks.
Ryanair is now back to around 40-50% of capacity, and we expect this to rise to 60-70% in August. So, we’re gradually ramping back up.
In terms of the industry in general, we think it will take a few years for it to return to where it was before the coronavirus. We believe that passenger volumes, however, can recover quicker than this. And the way Ryanair will achieve such a recovery in passenger volumes is by pricing fares very cheaply. Our goal is always to fill our aircraft.
Right now, because of the very unusual circumstances, we’re not doing this. Normally, we’d have load factors of 95-100%. We’re not seeing that yet, at the moment, but, from when we started reopening flights from 1 July to now, load factors are increasing, and we expect them to continue to grow.
In August, in fact, we expect the load factors to reach 70%. This indicates that demand is returning, and we’re in fact seeing strong bookings into Malta, from a range of different areas, including the UK. We aim to sell cheap seats to fill our planes.
Through Malta Air and the Ryanair group, next month we will be bringing in around 17,000 passengers to Malta every week. That’s over half the number we were bringing in August 2019.
Our target for summer 2021 – which lasts from April to October – is to carry around one million arriving passengers into Malta. This is roughly the number we brought to the island in 2019 – our target is to equal this. And doing this will take cheaper fare – this is what we intend to do.
Because fares are cheaper, we’ve had to cut costs. Throughout the network, pilots have taken a salary cut of 20%. These pay cuts have allowed us to avoid redundancies.
In May, it was reported that Malta Air would be making around 60 cabin crew and pilots redundant due to the COVID-19 outbreak. Was this ultimately avoided?
We did have a redundancy process in place, but we were able to cut costs without having to let go of employees. They were ultimately retained. I should highlight, however, that there is no guarantee about jobs, because we do not know what could happen in the winter when it comes to the virus. Throughout the network, we’ve decided to make pay cuts and hold on to staff. This isn’t an absolute guarantee, but for the time being we will keep staff.
We haven’t made anyone redundant to date, despite the fact that around 300,000 redundancies have been announced in the aviation sector. However, unfortunately there is currently a difficult situation in our German bases, which are run by Malta Air. We’re in negotiations with pilots in Germany, but we might have to make some redundancies in the next days if an agreement isn’t found. I’m hopeful that we won’t have to make that step.
Have Malta Air’s plans for Malta been impacted by the virus?
The plans which we announced in June 2019 have been delivered. We said at the time we’d put 50 or 60 aircraft onto Malta’s aviation register, but we’ve actually ended up putting 120 planes, having probably been cautious in our initial estimation.
Malta Air basically replaced Ryanair as the operation in Germany, Italy and France, so we’ve had to move aircraft from one register onto another, and transfer staff.
We weren’t sure how long this would take. Therefore, we didn’t want to overpromise last year, but we’ve fully delivered.
In 2019, we were carrying over three million passengers to and from Malta, and this is what we are looking to increase. We currently have six aircraft based on the island, and our target is to retain these and to increase them over time.
At this stage, we are confident that Malta Air is the airline which can restore passenger traffic volumes to Malta. All other airlines are cutting their capacity, including Air Malta, EasyJet, Lufthansa, Air France and KLM. On the other hand, we’re committed to retaining capacity, and we’re the ones who can deliver the growth for Malta.
At this stage, we are confident that Malta Air is the airline which can restore passenger traffic volumes to Malta. All other airlines are cutting their capacity, including Air Malta, EasyJet, Lufthansa, Air France and KLM. On the other hand, we’re committed to retaining capacity, and we’re the ones who can deliver the growth for Malta
Has there been any change to Malta Air’s route network? And are there any new routes planned for Malta?
As we discussed, we’re back to 40% capacity in July, with 70% expected in August – but we’re still serving 90% of all routes. Our coverage of routes is very close to what it was, but the frequencies are a bit less. We’re currently serving 44 routes arriving into Malta, and this will increase to 50 next month.
The Ryanair network serves over 200 airports, and we have 86 bases. This means the number of potential route combinations is huge. We try different routes all the time, so we can potentially increase significantly the number of destinations in to Malta. Not all of them might perform well, so we could try them out for a few months, and then renew them for the following season, or pull them depending on their success. I can’t name exact new destinations now, but I can say that we’ve expanded our coverage recently into places like Israel, Jordan, Serbia, Ukraine and Cyprus. A lot of new routes typically come from countries which we already serve, but we add different airports.
Things do not seem as dire as some might have feared in the middle of the pandemic. Would I be correct in saying you sound cautiously optimistic?
I think cautiously optimistic would describe it well. Demand has taken a hit, and it will take some time to correct itself. But we are being positive in two ways. Firstly, we’re maintaining our capacity and our employment. Secondly, we’re pricing cheaply in order to boost traffic. There is still some way for the aviation to go in order to recover previous profitability, but we’re focused on that path and we have the strength to withstand the crisis.
Of course, nobody knows how the coronavirus will continue to affect us. Hopefully, future measures won’t be as drastic as they were in the past months, and lockdowns can be more specific to certain areas rather than entire countries. We’d like to see it managed in that way.
We also prioritise safe flying on the airlines through the wearing of masks, and so on.
I think the Maltese government reacted fairly quickly when the pandemic came. It then reopened its airport on 1 July and removed all flight restrictions on the 15 July – I feel this could have been done a bit sooner. But the island is open for business, and we’re glad to be back.
Do you think low-cost airlines are better-placed than legacy airlines to bounce back from the pandemic’s effects?
There are two aspects to this. In general, low-cost airlines are better positioned to respond because they have stronger balance sheets and have a better business model. Also, legacy carriers tend to be reliant on inter-continental traffic. They normally feed their hubs with short haul aircraft, and the hubs then fly inter-continental. Inter-continental traffic has been devastated, and it will be the last to recuperate.
Nobody knows how the coronavirus will continue to affect us. Hopefully, future measures won’t be as drastic as they were in the past months, and lockdowns can be more specific to certain areas rather than entire countries. We’d like to see it managed in that way
Legacy carriers are worst affected from a long-haul perspective, and the economics of their short-haul routes is also based on their long-haul operation. In that sense, they’re worse positioned than low-cost carriers.
On the other hand, legacy airlines are the recipients of vast amounts of state aid. Lufthansa, Air France, KLM and Alitalia are receiving billions in state aid. State aid is unfair and contrary to EU rules, but it goes ahead anyway. That keeps legacy carriers afloat and enables them to compete with airlines like Ryanair and Malta Air, which have to rely on their own resources.