Air Malta chairman calls for privatisation

The only way to expand the national airline's operations is from private investment, Air Malta chairman Louis Farrugia said today on the airline's restructuring process.

"Some players believe that Air Malta must continue to lose money on some of its routes. Let me make it clear. We have no option but to become profitable. It is only once we achieve this that we will be able to attract new capital and funding," Farrugia said.

Explaining that under state aid rules Air Malta can no longer receive state funding for the next ten years, Farrugia said: "The only way to expand is through private capital injection which will only be forthcoming if profits are made."

Addressing the Malta Hotels and Restaurants Association annual general meeting, he added that it would make perfect sense for private capital to be represented on the Board of Directors and ensure that in the future "good commercial thinking" prevails. In July, Air Malta announced a €30 million operating loss at the end of its financial year in March 2012, registering an improvement of €4.3 million over 2011.

The airline had said that the target for the current year was to reduce the loss by half, to €15 million and break even by 2015. It also outlined its intention to return to profitable by 2016 and in September, Air Malta's chief executive Peter Davies had claimed that the airline is planning to register a profit of €8 million in 2016.

Farrugia explained that the current record numbers of tourist arrivals is down to the success of the airline's restructuring and the arrival of low-cost operators.

"I wish to conclude with a word of caution. Our tourism success is clearly due to the competitive efforts of Air Malta and others. Air Malta must continue to survive for this winning formula to succeed. It is therefore in our interest that Air Malta succeeds. I do detect that not all stakeholders understand this.

"Some players believe that Air Malta must continue to lose money on some of its routes. Let me make it clear. We have no option but to become profitable. It is only once we achieve this that we will be able to attract new capital and funding. As you know under state aid rules, Air Malta is not able to ask for further state aid within the next ten years and so the only way to expand is through private capital injection which will only be forthcoming if profits are being made. Besides it would make perfect sense for private capital to be represented on the Board of Directors and ensure that in the future good commercial thinking prevails."

The Air Malta chairman warned that the successful tourism model could collapse if "too many more airlines are encouraged to serve Malta."

"We all know that if, God forbid Air Malta stopped trading, other airlines would move in and increase fares as they attempt to take our space... By encouraging too many more airlines to serve our island we could be tipping the balance against Air Malta's sustainability. Let's ensure that we succeed through sensible management in allowing competition to set the market prices at sustainable levels which will allow our current success to continue."