Pilots’ union boss’s views of Air Malta restructuring ‘shallow’ – airline

The national airline has put paid to claims by pilots' union boss Dominic Azzopardi, that Air Malta would not be achieving its much-needed breakeven by 2014, saying it had achieved substantial savings on fuel hedging and third-party contracts contrary to Azzopardi's claims.

Azzopardi's comments were made on Favourite Channel's Reporter in an extensive interview in which he reiterated his criticism of much of the restructuring programme for the airline, which has received €130 million in state aid.

"Azzopardi's comments reflect a shallow view and understanding of the airline's restructuring and what it really takes to manage an organisation such as Air Malta operating in the complex global airline business and regulatory landscape whilst facing fierce competition," the airline said.

Air Malta has already reduced losses in 2011, driven mainly by the airline's commercial initiatives that delivered a €22 million increase in revenue, a €4 million decrease in cost of wages, and a €3 million reduction in operations and administration costs.

The restructuring plan sees the airline halve its losses at the end of this financial year and achieve breakeven in 2014.

In its statement, the airline took time to answer to all issues raised by Azzopardi, who is insisting that the airline must raise cargo prices, fly larger aircraft and increase routes to the African continent if it wants to turn a profit.

Air Malta said it had saved €3.5 million in 2011, and a further €10 million in 2012 after changing its fuel hedging policy.

"Air Malta hedged 79% of its fuel requirements for this financial year whilst Easyjet has 63% and Ryanair has 90% of its fuel hedged. More importantly Air Malta has secured its hedges at better rates - about 3% better. This is due purely to robust and clearly understood policies."

Due to previous hedges at the start of the last financial year, Air Malta had a 26% fuel penalty in comparison with its direct low cost competition (LCC). The airline has now managed to decrease this penalty such that it enjoys a price advantage of 4.2% in the fourth quarter of 2012 and 2.8% in financial year 2013.

Air Malta denied claims by Azzopardi that the airline had hedged at higher fuel prices, saying it had hedged fuel at favourable rates in the low $90s. "Air Malta hedged at US$108.75 and, furthermore, is taking full advantage whenever fuel prices fall."

Referring to Azzopardi's gripes about a €1.9 million rebranding which he said was "untimely", Air Malta defended its comprehensive review of the airline.

It said a recent €3.5 million investment in new ground handling equipment and the rebranding, which also includes aircraft repainting, were fundamental restructuring elements.

"Some of the airport equipment that was replaced was over 30 year old. It is not a case that 'we were managing with the old equipment' as Mr Azzopardi said, but a case where Air Malta should provide its employees with good equipment so that they can service passengers and other airline clients to the best of their abilities," the airline said.

Air Malta is also investing in a new chiller facility to offer a better product to the pharmaceutical industry, and that it would aim for a more competitive cargo product once new ground handling equipment and chiller facilities are in place.

Air Malta also said it had achieved €8 million in savings during 2012 in renegotiated contracts with key suppliers such as Lufthansa Technik, Malta International Airport and SITA. Similar discussions are underway with the World Aviation Group, SkyGourmet and Sabre. Other cost related initiatives are being tackled including Global Distribution Systems fees, aircraft cleaning and reserves funding.

The airline said it was not on the lookout for new opportunities in the training of cockpit and cabin crews, new routes opportunities to Russia and North Africa, and new ground handling contracts.

The airline is also designing a new in-flight product and services to generate more ancillary revenue, and is in discussions with catering provider SkyGourmet and the Union of Cabin Crew. "Air Malta is adamant that all initiatives and new opportunities should be driven by commercial sound logic and research not a gut feeling," the airline said.