Air Malta, ‘we’ve stopped the rot but still losing €30 million’

Air Malta’s new management has informed staff that the national airline is forecasting to lose some €30 million from operations, despite improving on its performance.

The management has told staff this was “clearly not acceptable or sustainable.”

However, notwithstanding a €16 million increase in the airline’s fuel bill this year, the new management says it reviewed its budget and improved upon it by €6.4 million – assuming it performs better than last year.

“What does this mean – we have stopped losses from growing and now we plan to focus our attention on reducing them,” the circular reads.

Air Malta has to reduce costs by €30 million and at the same time increase revenue by €30 million, a tall order acknowledged by management which is planning to reach breakeven by 2014.

While in July 2011 Air Malta registered a higher load factor of 74%, its profit per flight are still low. “We aren’t making profits even though we are flying relatively full planes. This can be improved with better revenue and pricing management…”

Air Malta fares averaged out at €101.50 per passenger during July.

The airline said it was also reviewing its supplier contracts on which it spends millions every year, such as its contract with Sky Gourmet for in-flight catering. “They have clearly indicated they are willing to be flexible and support us in the development of new products and offerings,” the airline said.

Also, Air Malta hopes to save €2 million a year on fuel savings, according to an IATA estimate. It will save €1 million on its fuel hedging even tough costs go up by €16 million in 2012 to €68 million.

A new cargo commercial centre opens in September for customers to arrange cargo delivery directly. This will be one of the airline’s new profit ventures.

Restructuring

Air Malta received a €52 million cash injection from the state but this is only admissible if certain conditions are met. The national airline is expected to scale back operations, such as reduced flying; it will not be able to apply for state aid for another 10 years; and it can only receive as much state aid as it can raise of its own accord – no mean feat.

In late July, the European Commission raised numerous questions on the initial restructuring plan it received from the finance ministry in May. A formal decision is expected by early 2012.

“Clearly this is a detailed and time-consuming process. However, this should not prevent us from proceeding with our restructuring plan – we can’t afford to wait. So we are proceeding as fast as we can, taking steps to secure funding whilst the EU process continues,” the staff circular reads.

Voluntary redundancy and early retirement schemes are expected to be announced in the coming weeks.