Air Malta: After a hard landing, prepare for take-off

Air Malta’s maiden flight happened on 1 April 1973, two weeks after parliament approved a resolution to set up a national airline.

The company started operations with two Boeing 720B aircraft leased from Pakistan International Airlines. The first scheduled services saw Air Malta fly to the UK, Germany, France, Italy and Libya.

Air Malta was Dom Mintoff’s brainchild in a Malta that was industrialising and finding its feet economically ahead of the withdrawal of British forces in 1979. A critical Opposition gave the fledgling airline short shrift, branding its aircraft ‘birds of lead’ in the belief that it will not survive for long.

The airline defied the Opposition’s bleak prognosis and just 10 years after its first flight went on to purchase three aircraft of its own from Boeing. It became an important cog in the tourism industry and a contributor to Malta’s economy.

Over the years, Air Malta employed hundreds of people and carried millions of passengers to and from the island, becoming a symbol of pride for a small island nation.

But nostalgia only tells one side of this airline’s 50-year-old story that will end on 30 March 2024 when the last flights will be operated.

The once successful airline whose name has been etched in the national psyche experienced a slow and painful decline over the past three decades.

After two unsuccessful attempts to rescue the airline in 2004 and 2010, Air Malta plc will be wound down to make way for KM Malta Airline plc. The new State-owned company will inherit the Air Malta brand name but only if it successfully wins a bidding process.

The bidding process for the name is symbolic of Air Malta’s demise. The airline was gradually stripped of all its assets over the years as successive governments sought to inject more funds and keep it afloat. Even its name, ostensibly one of its biggest non-tangible assets, was taken away and bought by a government company.

It turned out to be a providential move because it allows the new airline to bid for the brand, but it also shows how Air Malta was flown into the ground.

In a parliamentary debate after the government announced its plans for the airline, politicians on either side tried to scapegoat each other for Air Malta’s collapse. From the ill-fated decision taken in the mid-1990s under a Nationalist administration to create a regional offshoot of Air Malta with its own aircraft to the Labour government’s decision to expand the network with unprofitable routes after 2017, every administration has driven a nail in the coffin.

Finance Minister Clyde Caruana gave what was possibly the most sobering assessment, blaming all politicians and all governments for interfering with the airline’s running.

Caruana was reflecting a similar assessment given by the airline’s first chairman Albert Mizzi, a renowned businessperson, in a 2012 interview with The Sunday Times of Malta.

“When I was at Air Malta, at budget time the minister used to go around to see what employment he could factor in. Ministers are the worst because they employ their own people... I have worked with both parties, they’re all the same. For me politicians, at least many of them, are the most dishonest people in this world,” Mizzi had said.

The bloated airline heaved under the weight of an exorbitant wage bill, unrealistic collective agreements and routes that lost money. Nonetheless, it was a cow that politicians continued to milk relentlessly.

Figures distributed to the media show that in 2010 the airline employed nearly 1,400 people. Today, following two years of cost-cutting and restructuring, the airline employs just under 400 people.

The new airline will eventually employ 375 people, the minister said, giving all employees currently on Air Malta’s books the chance to apply for a job.

And in a bid to avoid the excesses of the past, Caruana said the work contracts offered by the new national airline will reflect the market conditions for comparable airlines.

The numbers depicting the airline’s losses are staggering. In the 2019/2020 period, before the pandemic struck, on average, every flight lost €4,075 the moment the aircraft took off the ground. With a seat load factor of 74%, passenger revenue per flight stood at an average of €24,534.

The business plan for the new airline is premised on a seat load factor of 87.8% thus ensuring passenger revenue per flight will reach an average of €27,844. With wage costs cut to €3,186 per flight from €5,786, the new airline will be expected to make a profit of €2,866 every time an aircraft takes off.

The turnaround will see the new Air Malta operating on 17 routes, which are deemed to be profitable, with one new route to be added three years down the line.

The first flights of the new airline will commence on 31 March 2024 in a fresh start that comes with the minister’s commitment that politicians will not be allowed to interfere in its workings. And it has to be that way because after three years the government is committed with the European Commission to seek a strategic partner or private investor for the new airline.

Only time will tell whether Air Malta version two will survive the tough market place and resist the indecent proposals that may come its way from politicians and their cronies.