€4.5 million increase for MTA to go for route development

Airline pricing can be complex as it is unpredictable, driven by competition and demand. Only the first few seats on a flight will be sold at cheap prices (which is why early booking counts) but as the flight fills up, prices start going up accordingly.

Depending on who you speak to, proponents of this so called ‘flexi-system’ will argue that more travellers are directly booking their flights on the internet.

Critics – like tour operators – will complain that Air Malta no longer allocates enough reduced-price seats for package tourists.

No surprise then, that the Maltese tour operators based in the UK whom MaltaToday spoke to, are fearing the worst, given Air Malta’s reduced UK schedule for summer 2011, and the 2% VAT increase on tourist accommodation.

“It’s a disaster for Air Malta and for Malta as a tourist destination. If things continue the way they are going, Air Malta will end up operating out of Heathrow and Gatwick and with one or two flights out of Manchester a week – leaving Malta at the mercy of low cost airlines like Ryanair for the survival of one of Malta’s major industries.”

Low-cost airlines manage to achieve cut-price seats thanks to the so called ‘route development support scheme’ – funds from governments that pay the airlines’ landing fees at airports, in return to open underserved routes.

This year’s budget has allocated a record €35 million to the Malta Tourism Authority – the singular increase of €4.5 million will be allocated for route development.

That leaves other legacy airlines like Air Malta fuming over the competitive pricing of LCCs.

Air Malta says it is looking at how to deploy aircraft in the most cost-effective way. “The global aviation industry – in these turbulent times – is always looking at optimising its fleet. It is normal business to have route-by-route strategy… Air Malta is looking at existing routes and at possible new routes to ensure maximum return for Air Malta at these difficult times,” a spokesperson for the airline said when asked about the reduced UK flights.

But another UK-based tour operator says leaving room for Ryanair to capitalise on reduced capacity, encourages them to demand more subsidies.

“The subsidies to LCCs are enough to operate a flight at a profit even if seats aren’t charged at all. What I don’t understand is how an organisation like Air Malta, so profitable just five years ago, fails to turn a profit over the summer?”

The available data shows Air Malta operated at 78% of capacity on average flights while other airlines reached well over 80%. Would reserving the additional 20% of seats to tour operators change things?

“As things stand today, as tour operators we pay the same price for a seat as anyone else trying to book one. The airline is trying to be too many things – British Airways, a low cost airline, a national airline and a tour operator all at once,” the tour operator says.

“Before, Air Malta was our partner. Now they compete against us. At the end of the day they earn the same revenue whether we sell a seat or they do… Some seats were sold at even £600 a seat. Air Malta would rather sell a few seats at high prices than more seats at a cheaper price. We need to see more bums in seats.”

On his part, parliamentary secretary for tourism Mario De Marco says that before commenting on the reduced flights, questions must be asked as to whether there was already excess capacity anyway from the UK.

“What is important in this scenario is that Air Malta overcomes its present difficulties and ensures its long term viability,” a spokesperson for De Marco said.

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