Editorial | Air Malta: A fresh start

The decision to fold Air Malta and set up a new national airline was necessary, even though bold restructuring was undertaken over the past two years.

Air Malta was too broken to be fixed, especially after the two restructuring exercises carried out in 2004 and 2010 failed to bring the airline on its feet.

The figures presented by Finance Minister Clyde Caruana when unveiling the future plans agreed with the European Commission show the extent of Air Malta’s current malaise.

In 2010, the airline employed nearly 1,400 people. In the 2019/2020 period, before the pandemic struck, on average, every flight lost €4,075 the moment the aircraft took off the ground. With a seat load factor of 74%, passenger revenue per flight stood at an average of €24,534. Employee costs per flight stood at a staggering €5,786.

The business plan for the new airline is premised on a seat load factor of 87.8% thus ensuring passenger revenue per flight will reach an average of €27,844. With wage costs cut to €3,186 per flight, the new airline will be expected to make a profit of €2,866 every time an aircraft takes off.

Today, following two years of cost-cutting and restructuring, the airline employs just under 400 people and the new airline is expected to stick to a headcount of 375.

It is these numbers that forced the change that many a minister in the past postponed. Caruana must be commended for the bold stand he has taken. Air Malta has been a drag on public coffers for years and although the change to a new airline will come with its own cost – €90 million to buy out lucrative early retirement clauses for pilots and cabin crew; €350 million as capital investment in the new airline – the promise of a fresh start will hopefully see a national carrier that makes a profit.

It was important for Malta that government convinced Brussels that an island country on the periphery of the EU needs to have a national airline. This is not just a question of nostalgia but important for the island’s economy.

But also, having a national airline, is a question of preserving the Maltese people’s right to enjoy freedom of movement enshrined in EU treaties. Given there are no road or train links with the mainland, air and sea travel remain the only two modes of transport in and out of the island.

Leaving air travel completely in the hands of private companies could result in disruption to tourism and the economy if they decide the Malta route has to be sacrificed.

It was also important to convince Brussels that the new airline should operate with eight aircraft. Fewer aircraft would have created bottlenecks and forced the airline to cut down on more routes that would in turn shackle growth potential.

It is also crucial that the new airline operates on routes that are profitable. The 17 routes being proposed link Malta to major airports across Europe, including the UK, France, Italy, Spain and Germany, ensuring access to key cities. More important, the new airline will once again acquire as part of its assets the lucrative airport slots at London Heathrow and London Gatwick.

The financials presented by Caruana for the new airline look promising and the minister has also made it clear that work contracts offered to employees will be in line with market levels for comparable airlines. The excesses of the past will be ditched.

What is important now is that the promises being made on keeping political interference at bay are kept.

Air Malta has suffered for too long at the hands of politicians who considered it their employment agency. All administrations since the airline’s inception in 1973 used the airline as a glorified jobs agency to placate constituents by providing them a job. This burdened the airline with unnecessary costs, which came biting back when market conditions changed and the airline started losing money.

It is important that Caruana keeps his word and shields the new airline from political pressure. Malta cannot afford a second airline going down Air Malta’s way.