Peter Davies | Aircrafts have no rear-view mirrors

Air Malta has just announced an operating profit of €0.4 million in the first half year ending 30^th September 2012. What does this mean for the airline?

It's very good news for the airline and its stakeholders, including employees and the general public. It means that we have reversed the trend of losing money during our peak season. This gives us confidence and courage that we have started reaping the results of the efforts we have put in restructuring the airline. This result, which is in line with the Restructuring Plan and our Budget for this financial year, is a major step to returning the airline to profitability. There is still a lot of hard work left to complete the turnaround.

To what do you attribute this result?

The Restructuring Plan is based on a number of projects that collectively will return the airline to profitability. We are now starting to see the results of the work done so far. However, revenue in particular has significantly improved during this summer and this notwithstanding a decrease in the schedule of flights by 20% as a 'compensatory measure' to satisfy the European Commission guidelines on state aid.

Does this mean that Air Malta is on solid ground and that it will not look back?

Absolutely not. This is only just the beginning. We are still not of the woods and several hurdles remain. It is imperative that we continue re-assessing the terms of some of the airline's major suppliers, so that we reduce costs and offer customers a better product in-line with today's expectations and customer trends.

In the announcement, you remarked that the second half of the year will be tougher due to the seasonality effects. What will Air Malta do to maximize its performance and offset this?

Our destination is largely affected by seasonality effects. This has a major effect on all tourism operators on the islands.

It does not make financial sense to have employees who are very busy during summer but have long idle hours during winter. The Unions were very understanding in this regard and we have designed an organisation in our Restructuring Plan whereby permanent staffing levels are those required for running the airline in winter. We now recruit temporary positions during the months that we require. This helps us to manage personnel cost much more effectively.

This winter we are also working to lease out, through a wet lease, one of our aircraft for a couple of months. Through such agreements the airline generates additional revenue and leases out its excess capacity during winter.

Air Malta was up till very recently in the limelight regarding negotiations with ALPA, the pilots' association over a pay increase. There was much speculation that the investigation into alleged flight delays by ALPA President Dominic Fenech was a form of pressure against the Union. How do you react to this?

In terms of timing the incident happened at the worst possible moment and we did consider that some might perceive our action as pressure against the union. We have made it very clear that this is not the case. As a company we have a responsibility towards our other employees and our customers and it would have been irresponsible for us not to investigate such an incident especially when we started receiving complaints from passengers on board that flight.

At what stage is the investigation into the alleged flight delay involving Dominic Fenech? When will it be finalized? How do you justify the delay?

We wanted to carry out the investigation and work closely with ALPA to ensure due and fair process. Unfortunately the Union has limited its collaboration with the company and this has delayed matters. The Company is now proceeding with the case.

The trickle of information regarding the case, strong and steady while the ALPA deal was still being negotiated, dried up abruptly following the contract settlement. Why do you think this is?

Air Malta never disclosed any information about the case to start with and it only reacted to what was reported in the media. Furthermore the company investigates every employee issue brought to its attention. It does not disclose any details of these investigations.

A contractual agreement has since been signed, but official information or details regarding the actual contents of the agreement are scant. Why is this the case?

Air Malta believes that industrial relations discussions, especially those involving collective agreements, should be held privately. This is the manner the Company treats any commercially sensitive discussion. Such discussions are the result of a give-and-take approach where every party needs to have the time to appreciate the other's party point of view and calculate impacts of proposals.

Air Malta issued a statement in which is described this agreement as a win-win deal. This agreement was negotiated within the same parameters of the discussion undertaken with other unions and meets the requirements of the restructuring plan approved by the European Commission.

The deal was criticised by many as a pre-electoral move on Government's part to secure good-will among dissatisfied pilots. Is this the case?

Absolutely not. Government was not involved in these discussion. Government is represented by the airline's Board of Directors. Following the successful conclusion of negotiations between the airline's management and ALPA's executive, the agreement was reviewed and approved by the airline's Board and the ALPA members. 

To this day, there is also much speculation regarding a considerable number of supposedly disadvantageous contracts and agreements that Air Malta allegedly entered into over the years and are now being renegotiated? Can you confirm this?

Yes, Air Malta had to re-negotiate a number of contracts and agreement that were not necessarily in-line with current market pricing or service levels. These were putting the airline at a disadvantage against competition. This is an ongoing process and although a number of contracts have already been re-negotiated; including with Malta International Airport, Lufthansa Technik and SITA, Air Malta is currently re-assessing the terms of some of the airline's other major suppliers. In addition, Air Malta is currently reviewing its supply chain and procurement processes in order to be in a position to negotiate better deals in the futures with its suppliers, and more importantly create supplier relationships that give the company winning solutions.

Can you provide examples of such instances of re-negotiation of unfavourable contracts or agreements? If not, why?

Our international experience helped us to really understand what we should pay for and the levels of service we should expect. Some of the contracts reflected an airline that operated in the 1980s. The aviation industry has changed dramatically, especially in the last decade.

Our discussion have and will continue to revolve around getting a better service for our money, reaping benefits from technology improvements, offering passengers a better quality product in-line with today's expectations whilst reducing our costs. We will continue to create relationships with our suppliers that give the airline the most commercially advantageous terms.

Is it not in Air Malta's interest to be more transparent regarding the ALPA agreement, and also regarding the disadvantageous contracts or agreement that are now being reportedly renegotiated?

It is not in Air Malta's interest to look back and publicly discuss the disadvantageous terms of contracts or agreements it had.

I always say that an aircraft has no rear-view mirrors. We must look forward and do our utmost to return this airline to profitability. In this regard it is imperative that we continuously re-assess the terms of our major suppliers which continue to be pivotal to the underlying performance of the airline.

Air Malta was once popular for the comfortable service it offered when compared to other low cost carriers. Is the fact that the airline is considering dropping the complementary in-flight meal a sign that it is moving away from this approach?

Air Malta is still very popular and every year 1.7 million customers choose to travel on our services. We need to start offering our passengers a good value for money on-board product that is in line with current market expectations. At the moment we are having conversations with our suppliers to assess the opportunities we have as a company in terms of changing the way in which we have our products on board the aircraft. There are ongoing discussions as we speak.

The recent Air Malta rebranding was very focused on promoting Malta as a destination. Why did Air Malta opt for such a destination-focused marketing approach when there are other carriers which can bring passengers to Malta at cheaper rates?

Air Malta represents the values of Malta. The new airline new brand is based on the history, heritage and colours of the Maltese Islands. With our new brand and identity, Air Malta is now ideally positioned to become the ambassador and guide of choice to the very best Malta can offer.

The design chosen reflects the uniqueness of the Maltese islands with their proud heritage, colours, culture, symbols, hospitality and language.

This new brand identity is another key step in the airline's development as it represents the building block on which Air Malta's customer experience will be built. It also marks another milestone in airline's cultural revolution, both internally and externally, and supports the airline's new vision of 'Flying The Pride of Malta'.

We are the airline of the Maltese Islands and our whole customer experience will be based on that.

Air Malta lost a number of popularity points when the company shed a relatively large number of employees. Can we expect to see more downsizing in future?

Air Malta needs to become a commercial organisation which until recently was not the case. Losing employees is a very painful process for all those involved in the matter and this includes the unions, the management and the people losing their job.

We have managed to negotiate good schemes which ensured that those leaving the organisation would not find themselves out in the dark with no means of support. It is within this context that the shedding of employees should be seen. Going forward our Restructuring Plan does not envisage any more downsizing and we have to ensure that the Company avoids such painful interventions in the future.