Air Malta to leave SkyParks in cost-cutting plan

Air Malta intends to relocate its headquarters to its engineering department in Luqa, so as to save the money it is paying in rent for the SkyParks offices it moved into just three years ago to use as its head offices.

The national airline rents its headquarters at the SkyParks Business Centre in Luqa as part of a “holistic agreement” with the Malta International Airport. An Air Malta spokesperson refused to disclose how much rent it pays MIA for the offices, because such information is “commercially sensitive”, the spokesperson said.

He said that Air Malta has not yet adopted a specific timeline for the relocation, it intends to make the move once its finances improve.

The airline only relocated its headquarters to SkyParks at the end of 2012 under then chief executive Peter Davies. Back then, the airline had described the move as part of a “much wider cultural revolution process aimed at creating a new environment and company culture in which employees can work collaboratively and more efficiently to the best of their abilities”.

Davies had praised the layout of the SkyParks offices as one that would “offer Air Malta employees an open plan environment where they can work in a brand new corporate setting that enhances productivity, teamwork and improve organisational communication”.

This will be the third time that Air Malta will be moving its headquarters. It first started operating from the Europa Centre in Floriana, before moving to the Luqa offices in the late 1970s. It had sold these offices to the government in a €66.2 million deal in 2012 as part of an extensive restructuring plan. The Air Malta spokesperson confirmed that the deal also included the sale of Malta’s old airport terminal, now serving as a cargo terminal.

Air Malta also sold a piece of land in Pembroke to Transport Malta for €3 million in 2013 and the government has announced intentions to buy the airline’s shuttered Selmun Palace Hotel. Air Malta’s spokesperson confirmed that the engineering department, in Luqa, is the airline’s last remaining property.

Air Malta is in the final year of a five-year restructuring plan that the previous government had agreed with the European Commission in 2012 in return for its approval of around €130 million in state aid. The carrier was forced to trim its staff, reduce its number of operating planes, and cut capacity. Yet it has fallen way short of its restructuring targets, registering a €16 million loss for the year ending March 2014 when it was supposed to have reached profitability.

Air Malta’s chairperson, Maria Micallef, and Tourism Minister Edward Zammit Lewis just days ago travelled to Beijing to discuss “issues of collaboration” concerning the national airline. Zammit Lewis has said that talks to bring in a “strategic partner” for Air Malta have reached a “critical” stage, but both he and the airline have declined to give any further details about the China visit.     

Upon being appointed chairperson last year, Micallef declared that the airline was trying to cut costs across the board in a bid to bring a forecast €25 million in losses for March 2015, down to €16 million.

Micallef had said that unless the airline rethinks its business model it will not achieve sustainability.

“We need to get out of restructuring mode and start thinking of long-term sustainability beyond 2016. We will need the economies of scale that we can never achieve with our size,” she said.

In March, Zammit Lewis confirmed that the airline was on course to make a €15 million loss for this year, adding, “that would mean that the target agreed with the EU Commission to make the company viable would have to be met in the following 12-month period, by March of next year.”

He went on to warn that “failure to meet this deadline would mean that the government would no longer be allowed to give the airline state aid to cover for its losses.”

Audited figures announced during Air Malta AGM in October showed that the airline posted a loss of €16 million for the year ending March 2014, compared to €31 million registered during the financial year ending March 2013.

In 2012 the airline halved its losses to €40 million but then in the year ending March 2013, its losses were €30 million rather than the €15 million it targeted; and this year when Air Malta was expected to breakeven it registered losses of €16.2 million.

In its fourth year, the European Commission’s €230 million restructuring plan for Air Malta was meant to bring Air Malta’s deficit under control.
Under the restructuring plan mandated by the European Commission, Air Malta managed to stabilise and reduce its operating losses for two consecutive years after it had halved its workforce.

But amidst increasing competition and the suspension of the Libya route – one of Air Malta’s most profitable routes – the airline’s revenues are under pressure.

Last year, Air Malta had been directly hit by the closure of the Libyan routes (losing the airline around €1 million per month, including incremental revenue from transit business) and a 20% increase in seat capacity of other airlines in the peak months.