Air Malta planning €8 million profit for 2016 – Peter Davies

After years of loss-making and a difficult restructuring process, Air Malta is planning to register a profit of €8 million in 2016.

Air Malta's chief executive Peter Davies mentioned the figure for the first time in an interview published on Airlines International, the International Air Transport Association's magazine.

In the interview Davies said the airline's five-year business plan was "probed extensively" by the European Commission and will take Air Malta from a €35 million loss in 2011 to a profit of €8 million in 2016.

In July, Air Malta announced a €30 million operating loss at the end of its financial year in March 2012, registering an improvement of €4.3 million over 2011.

The airline's chairman Louis Farrugia had said that the target for the current year was to reduce the loss by half to €15 million and break even by 2015. Although the airline outlined its intention to return to profitable by 2016, no figure was ever mentioned.

In the interview Davies spoke extensively about the Air Malta's restructuring process and the airline's importance to the islands' economy.

In his interview with IATA, Davies stressed: "We have made big decisions and we now have the funding to match our ambition."

Davies expressed a degree of optimism in the airline's return to profitability. He mentions ancillary revenues and retail opportunities online and on-board as areas where the airline can generate more revenue. In a snide remark about political interference ate Air Malta, Davies said:

"We're a heavily regulated industry. Some rules-such as those involving safety-are understandable, even necessary, while others-such as bilateral agreements between governments-can make life much more difficult than necessary."

He also hit out at service providers in Malta. "In most industries, there is a good choice when it comes to sourcing raw materials. But in Malta I have no choice of airport and, at the moment, just one fuel supplier."

The CEO said dealing with monopolies once and for all is not just about benefiting the airlines. "It's a competitive industry so any savings that we make will be passed on in part to the consumer. So consumers are missing out because of the industry structure imposed by the authorities."

In a clear message to the government, Peter Davies noted: "Governments urgently need to start taking better long-term decisions in favour of a healthy aviation sector. Commercial aviation shouldn't be about satisfying the rule-makers. Commercial aviation should be about satisfying customers time after time."

As part of its five-year restructuring programme, which this year was green-lit by the European Commission, Air Malta has had to reduce its flight capacity and route network by 10% in 2011 and another 10% this year.

On the restructuring process, Davies said: "On an annual basis and by the end of the plan, we will have reduced costs by more than €30 million and increased revenue by the same amount."

He also explained that Air Malta reduced its fleet from 12 to 10 aircraft and staff numbers by more than 450.

The CEO pointed out that, "about 30% of what we're trying to achieve depends on what I refer to as a 'rewiring and re-plumbing job'. The other 70% is all about delivering a cultural revolution at every level of the organisation."

He added this is going to be a radical overhaul and "following the recent approval from Brussels, I am encouraged by the EC's confidence in our capability to deliver."

Outlining the details of the restructuring programme, Davies explained that the European Commission approved aid of about €130 million to increase the airline's share capital.

Davies added that the company contributed a matching sum and said that Air Malta is selling off a number of non-core subsidiaries to "concentrate on running the airline."

In recent weeks the airline announced that it will soon launch an invitation for offers for the acquisition of its package holiday division, Flyaway Tours.