Malta braced for tourism blow as Arab competitors open up to low cost

Tunisia is set to open its skies to low cost airlines as of 1 May 2011. Meanwhile, British Airways has priced return flights from Gatwick to Morocco at £80.

Aside from the increased competition, British tour operators have also predicted a decline in tourist arrivals from the UK as a result of the loss of 11 flights to UK airports this summer, as well as cheaper options available to the British tourist.

Michael Zammit Tabona is among the local hoteliers who foresee a blow to the tourist industry in the coming year.  

“Air Malta claim that they are losing money on flights to UK airports – at prices significantly higher than £80 – yet British Airways are operating flights to Morocco, which is approximately the same flying time as UK to Malta, for only £80.”

Not everyone in the industry shares this opinion, however. Malta Tourism Authority CEO Josef Formosa Gauci acknowledges the increase in competition the low cost carriers flying to Tunisia will bring. But he is not overly concerned.

“Different destinations are opening up all the time and though this increases competition I do not envisage a huge effect. It is important for us to ensure that access to Malta is increased as much as possible at the right price,” he told MaltaToday.

“Tunisia is already a direct competitor in the charter industry, opening up to low cost carriers will simply extend competition to the budget tourist market. It only makes it more important to ensure connections to Malta remain competitive.”

Many attribute the €50 million in losses made by Air Malta this year to the introduction of low cost airlines in Malta. Zammit Tabona, however is insistent that this is not the case.

“Low cost airlines are not to blame for the demise of Air Malta. Air Malta has had problems way beyond the birth of the low cost industry and it is of vital importance that we accept this fact in order to kill the virus plaguing our national carrier.”

Competitivity of the airline is vital to ensure the future of the national carrier. Zammit Tabona believes that better pricing policies need to be put in place to and flights from the UK reinstated not only to ensure future viability of the airline, but of the entire tourist industry.

Over the years Air Malta has changed its policies for new pricing policies to bring it in line with the line with low cost carrier models. A percentage of seats are floated at a cheap price, once sold the next batch becomes more expensive and so on. The last 15 –20% of seats left on the plane are so expensive that they are rarely sold. So much so that Air Malta closed the season at 80% occupancy.

Zammit Tabona claims that these seats could easily be sold to tour operators for a good price. “As a tour operator myself I am sure that these seats could easily be sold seats to ensure Air Malta flies at 90 – 95% capacity, generating enough revenue to counterbalance the losses made.

“Tour operators are being pushed out of the market in peak seasons as prices are arranged up to 12 months in advance. When flight prices are increased above a certain level then the tour operator starts losing margins. So much so, that a number of operators in the UK refuse to sell Malta over the busy seasons because flight prices are just too high and it is not profitable.

“Last summer seats were priced at between £300 and £400 in peak season. These prices are not competitive and it just makes more sense for tour operators to sell other, more profitable destinations.”

Air Malta’s policy to reduce the 20% vacant seats has been to scrap flights altogether – 11 flights a week have been reduced resulting in approximately 40,000 arrivals and 320,000 bed nights.

“Instead of reducing flights and becoming more competitive they are simply reducing flights and taking the easy way out,” Zammit Tabona reasons.

The direct effect on tourism, as a result of these cuts in flights, is yet to be determined. However Zammit Tabona is not hopeful.

“I believe that flight prices will go up as a result of lack of capacity, and unless the MTA manages to replace these cancelled flights then hotel prices will plummet as beds cannot be filled and each and every hotel will have to provide fantastic prices to attract tourists.

“British tourists spend more bed nights in Malta in any one trip than any other nationality, thus one new Russian tourist does not make up for one lost British tourist as bed nights still fall.”

Zammit Tabona believes that new flights to the UK need to be replaced and that it is not enough to redirect efforts to other countries.

“It is important to invest in new routes but not at the expense of UK tourists, as these are the result of a 250-year friendship with the UK. Rumour has it that these flights are to be redirected to Russia. There isn’t one year of friendship between our two countries.

“It is imperative that these flights are reinstated, if not by Air Malta then the MTA should be given necessary funding to seek out other carriers to fill the capacity.

“Air Malta needs to be supported with marketing strategies s long as they give an undertaking and not come out with these silly prices.”

Currently, prices displayed on the Air Malta website for dates over the Christmas period are already higher than transatlantic flights leaving the UK.

Zammit Tabona says it is pointless to appoint experts to prepare reports and studies, and wait until final decisions are made. A decision needs to be taken now, otherwise an inevitable sharp decline in tourism is sure to be the result.

“The MTA have been working hard, pulling the right strings to develop an upward trend in tourism figures. All we needed was continuity to ensure figures keep rising, continuing to develop more routes and increasing marketing and advertising spend.

“Parliamentary secretary Mario de Marco is in a Catch-22 situation, after performing so well in 2010 he is facing a decline in 2011, unless he manages to persuade his government to fund necessary routes without delay. It is a pity as we were on the right track.”

In an interview last week, de Marco said that he was not concerned with reduced routes from the UK as these were to be redirected elsewhere. This is the only part of the interview with which Zammit Tabona disagrees.

“I am worried and sincerely doubt that the capacity we will potentially lose from the UK, as well as bed nights, can be replaced by other countries. A lot of other countries are already at saturation point. If it were just one or two planes then it might be possible, however 11 flights a week is just too big a capacity to expect to replace.”

When talking about the future of Air Malta, Zammit Tabona is reluctant to go into the finer details of the management or mismanagement of the company, but has a number of recommendations to make.

“Aside from dropping the prices for tour operators to fill the extra capacity arising from overpriced seats close to the date of travel Air Malta can change policies to tighten their belts and ensure a profitable national carrier.

“Meals should be removed and hot and cold snacks sold in-flight. This will not make a difference to the market as we are already used to the situation aboard other carriers. Shopping trolleys should be going up and down the aisles throughout the entire flight.

“Seats should be upgraded to club class for a minimal amount at the airport. If club class tickets were reasonably priced I believe that there is a market. As a tour operator I used to sell a lot of club class tickets until the prices were increased two years ago.

“Timing of the flights needs to be revised. Birmingham has already been lost as a result of travel times that were simply inconvenient for travellers.”