My gut says Air Malta will ultimately fail | Philip Fenech

Air Malta could be saved and become successful even without a strategic partner, but will ultimately fold as governments continue to refuse to take drastic measures across the board that would turn the national airline into a leaner, but meaner machine, according to the president of the GRTU’s tourism and hospitality leisure section.

“The main issue to tackle would be the passenger vs employee ratio, as that is one of the fundamental pillars upon which all airlines base their commercial viability,” Philip Fenech insists when I ask him what it would take to save Air Malta.

That means firing employees, I interrupt him to clarify what he’s saying.

“Unfortunately, yes, people would have to be sacked, or the government could take it upon itself to find them alternative employment,” he said.

Fenech said the airline’s future was pre-determined more than a decade ago, with the onset of low-cost airlines and their increased traction in the industry.

Successive Maltese governments chose to ignore – or understate – the extent to which so-called legacy airlines like Air Malta could be affected, he said. 

Fenech was himself one of the few, back then, who recognised the true appeal of low-cost airlines to consumers and had tried to prepare others for the inevitable.

“And now, Ryanair has just celebrated its tenth year of operations in Malta and will be basing its fourth aircraft here from this year,” he said. “In the meantime, Air Malta is left registering losses year after year and seeking a partner in a final bid at staying afloat.”

Other measures would need to be introduced at the same time as the employee lay-offs, including reviewing fuel price hedging arrangements, and revising the catering contract and other agreements with outside suppliers and contractors.

“I still believe Air Malta is salvageable, if all these and other cost-cutting measures are implemented,” Fenech said. 

“But my gut feeling says that it will not happen and that the government will choose to drag out the process as much as possible before admitting defeat.”

And he points out one important thing: staff lay-offs and other cost-cutting measures would be necessary to make Air Malta commercially viable, with or without a strategic partnership with another airline.

“At the end of the day, I don’t think the deal with Alitalia will happen, for many reasons, but mainly because of the precarious situation Alitalia itself is in, particularly with Etihad CEO James Hogan’s strategy of buying smaller airlines having backfired on the group.” (Etihad acquired 49% of Alitalia in 2014.)

I turned my line of questioning to the national alcohol policy launched in October, which proposed that the alcohol limit for drivers be slashed from 0.8g of alcohol per litre of blood to 0.5g.

In comments to this newspaper earlier this week, Fenech had said that this, and other punitive measures intended to clamp down on drink-driving, could lead to a dip in the number of people dining out, since it would become more expensive for people to go out.

In the wake of the sharply negative feedback from readers that his comments generated – for the implied suggestion that profit was more important than lives – was he still of the same opinion, and was he suggesting that business and profit were more important than people’s health and saving lives?

“Absolutely not! Not now, not ever, have we felt that profit is more important than saving lives,” Fenech said. “I want to make it absolutely clear that we recognise and accept that people’s health and safety take precedence over everything else.”

He says that those who reacted badly to his previous comments had failed to comprehend that the GRTU had been consulted on the proposed changes to the national policy, and that it had immediately signed off on them, making clear its approval to lowering the alcohol level limits and increasing fines for people driving while under the influence of alcohol.

“In my remarks midweek I did not intend to lead people to think that this was the first time the GRTU had heard of these proposals or that we were opposed to them because of a possible effect on the catering industry,” Fenech said.

That is what may have happened, if the sentiments and remarks in some of the comments in reaction to Fenech’s statements are to be taken literally.

He certainly seems to think that people jumped to conclusions and that his comments were blown out of proportion.

“A substantial increase in outside catering orders was registered this holiday season, meaning that fewer people opted to dine out,” he says.

“Additionally, cash and carry businesses have indicated an increase in business over the festive season, further confirming catering outlets’ reports of a drop in business.”

He says that those outlets and areas that took it upon themselves to offer attractive entertainment to their clients, were highly sought after. Valletta, in particular, saw a general increase in patronage.

But Fenech insists that the indications still need to be verified, because although catering establishments in some areas might have registered a small decline in business, this did not necessarily reflect the entire industry.

“With restaurants, bars and other types of outlets cropping up in practically all towns and villages around Malta, people nowadays have more options and could simply have chosen outlets in their own localities, nullifying the need to use transport and to visit areas traditionally associated with catering and entertainment,” he says.

There was also an increase in demand for taxi services and other transport-on-demand, probably due to the widespread media campaign on responsible driving and against drink-driving.

So how is drink-driving to be tackled? I ask him

Fenech says that public transport and taxi services should – and are – providing enough of a viable alternative to make them attractive to people wanting to go out and consume alcohol without having to drive.

“The concept of designating a driver when going out as a couple or in a group does not seem to be practised enough to make a difference,” he says. “People need to be encouraged to adopt this practice more often.”

That is where the public transport and taxis come in.

Of course, public transport would need to be available across the island into the early hours. In the meantime, Fenech said, taxi services were becoming more affordable, as evidenced by the increase in demand.

Fenech says he is looking forward to the introduction of skill cards in the leisure industry, as was done recently in the construction industry by the Building Industry Consultative Council (BICC).

“This would raise industry standards further, as employees and operators would be encouraged to take up specialised training that would be recognised throughout the industry,” he said.

With all the reference to leisure and entertainment, I cannot but ask Fenech about the much-criticised Paceville masterplan and where he stood on the issue of high-rise development in the area.

“I am not against high-rise development per se, but I feel we should never lose Malta’s traditional charm,” Fenech said.

He says that when he attended the first briefing on the proposed masterplan, it was immediately clear to him that the plan would need to be tweaked. He could not understand, for example, how certain areas had been earmarked for so-called comprehensive development, with the only alternative for owners being expropriation.

“One major positive aspect of the plan was the importance it placed on the infrastructure,” he said. “The serious inefficiencies in the current infrastructure network ought to be tackled immediately, irrespective of the masterplan.”

Fenech says the current setup presented huge problems for the delivery of goods and services in the area and could cause equal problems for emergency services needing access in peak hours.

His vision for a future Paceville is one which could end up in four areas offering distinct services that would make each zone inherently unique.

“One such zone could end up focusing on six-star accommodation, services and entertainment, possibly featuring top-notch hotels, as well as high-end office and retail space,” he said. “These would in turn be complemented by a restricted class of catering and entertainment venues geared towards big-budget clients.”

Other areas would similarly offer a unique, and diverse, overall experience, garnering a core loyal clientele but also providing attractive alternatives to the non-discerning visitor.

“We are already seeing a change in the cross-section of the atypical tourist,” Fenech said. “There are no longer just one or two types of tourist, nor is tourism still strictly characterised by nationality or age group.”

The concept of community tourism, for example – where tourists choose to stay with a friend (or complete strangers) and participate in the mundane activities in the daily lives of their hosts – was rapidly gaining a strong following.

But whatever the future holds for Paceville, within a masterplan context or not, Fenech says the area had already secured its place in the local leisure and entertainment scene. He is quite convinced and passionate about this.

“Whatever anyone says, the past 30 years have proven Paceville is a true local success story.”