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In a little over nine months’ time, the European Union will mark the half-century since the signing of its founding treaty in Rome. A lot of progress has been made since then to extend the spread of influence by enlargement and the operation of the internal market. Some are countenancing the argument against more enlargement saying that a period of consolidation is badly needed to heal the fresh wounds inflicted by the rejection of the Constitution.
Others are avoiding the prejudices of many exclusionists and would welcome Turkey, Ukraine, Romania, Bulgaria and the western Balkan countries. They say it would be wrong to assume that significant instability could be imported into the Union if the enlargement happens too soon. Such contenders include Macedonia, Bosnia-Herzegovina, Kosovo and Serbia itself. The planned enlargement will ensure better social integration and improved job opportunities particularly in the leisure and hospitality industry where holiday resorts in new accession countries will benefit from the arrival of more EU member states.
Just consider the much discussed “Open Skies” arrangement between Europe and the US, which presented great economic opportunities for air travel, according to an economic impact study drawn up by the European Commission. Open Skies will supersede existing bilateral agreements between the US and individual European countries that favour national carriers. Indirectly the liberalisation of air traffic on transatlantic flights has benefited low cost airlines operating in mainland Europe. Such airlines openly boast that their average fare is over 50 per cent less than the next scheduled flight ticket. In Germany alone there are more than 10 commercial airlines that offer flights at ridiculously low prices between the country's major cities and to tourist destinations like the French Riviera or Spain's Majorca and Costa del Sol. European airlines, like Easyjet, Ryanair and Germanwings, can afford the low airfares because of discounts on landing rights using secondary airfields. Recently Michael Crawley CEO of Rynair was plaintive at the resistance to entry in destinations dominated by national carriers. Equally ,he reiterated that Rynair were merely trying to drag the dwindling local tourism industry into the 21 Century of air travel and they do not intend to draw blood from anybody, least of which the partially privatised ‘monopoly’ investor which is running the international airport.
Voicing dissent, MIA reiterated that higher traffic would unduly strain the resources at the airport. This additional traffic means an extra 44 landings and take off per day.It may be an additional strain but can the island afford the maintenance of the status quo and end up demolishing hotels into holiday flats for locals. What is stopping Government from attracting more investment from low-cost operators to develop the old cargo section at Luqa as a secondary airport in return for a rebated landing charge.
On the positive side surely this means more effective use of our air traffic controllers but of course our ground handling staff have to treble their output. Doomsayers and other agencies with a vested interest may well sow doubts if the existing infrastructure can ever service this expansion in the tourist arrivals.
Certainly MHRA is continuously begging for more arrivals to fill its members’ low occupancy levels especially when the magical 50k additional arrivals promised by MTA did not materialise. On the other hand, one may well question about the optimum capacity utilisation of the Airport. Can banks invest their surplus liquidity in building a larger ramp and additional parking bays to accommodate the expansion of tourist arrivals which is so crucial for the revival of the economy at a macro level. The answer is crucially awaited by hoteliers and restaurateurs suffering prolonged losses. It has taken more than a year for the hunger pangs of a dwindling hospitality industry to start airing its protests. One suggestion was that we convert the national airline into a viable low cost airline which will then benefit from the volume landing charge discount. The bureaucrats resist this idea lamenting that layoffs will then ensue and refusing the counter argument that any redundancies can easily be re-trained and absorbed by the arrival of other low –cost airlines. So in the context of the perceived undue competition on the national carrier are we tempted to retard the ingress of low-cost airlines?
It is a fact that Air Malta has had bad years in the past and at one time registered annual losses in the region of Lm24 million and yet no layoffs ensued.
But the taxpayer’s pockets are finitely deep and a restructuring exercise was introduced two years ago. As if by magic we are slowly witnessing better results and more customer service on offer. Of course, a national airline is an important link to guarantee us a safe passage and reduce our geographical insularity. It is a vital connection to other European countries. On the social aspect one cannot ignore that so many families depend for a living on the economic survival of Air Malta. Politically it needs nerves of steel to wield the right solution.
As EU citizens there is so much fuss about the inalienable right as members of the EU to have freedom of movement and ease of travel to other European countries .The possibility of participating in the EU dream of exploiting the internal market is seriously hampered by air travel costs now exacerbated by government surcharges.
It is taxing air travel until the pips squeeze. Why do citizens have to fly in cramped budget airlines mostly during ungodly hours to afford taking a decent break out of the confines of our tiny enclave? What about burgeoning travel costs suffered by myriads of businessmen who have to keep in touch with latest developments in overseas markets? Certainly they have to dig deep into their pockets to pay exorbitant travel itineraries in their quest for export opportunities now made available by enlargement. How can we successfully win the battle of globalisation not to mention the stiff competition from an emerging Eastern block with lower labour costs and flat taxes?
The answer is simple - the early bird catches the worm and likewise our erstwhile entrepreneurs have to travel most of the time to source business niches. Yes, the horrendous cost of travel hinders such initiatives. Paradoxically, the European boom in low-cost airlines, fuelled by tax incentives, is increasing the level of market share that are driven by low-cost, no-frills carriers capitalizing on structural cost efficiencies and leveraging other advantages in the marketplace.
For example, Rynair and Easyjet enjoy higher labour efficiency coupled by the use of cheaper landing rights at secondary airports on routes, as well as high seat density and fast at-gate aircraft turnaround time.
With hindsight we note that the introduction of low-cost carriers in Malta did contrast with the vision of Air Malta during the 1990’s to invest in the creation of a hub concept. This was followed by the purchase and operation of eight low capacity Avro liner jets. The project was a pet idea of the directors at the time and was politically trumpeted that it will jettison the island as the premier regional hub in the Mediterranean. It was a tragedy of political interference in a pipe dream project that did not bear fruit. Back to reality, this year airlines are faced with higher insurance costs and rocketing oil prices.
All this instability has contributed to a decline in revenue per seat mile. To partially buttress such problems Government had invested Lm30 million in return for the acquisition of certain non-core assets owned by Air Malta. Paradoxically the company registered good profits in the years leading to EU accession even though it did not enjoy the participation rights under the open skies policy. Prior to the introduction of the hub concept it reported rich cash pickings by which directors could afford to swell its employment registers and award generous salary increments.
Hopefully, sanity prevails and within a short period we can meet the aspirations of Air Malta while giving a leg-up for the admission of low-cost airlines. Both can co-exist in an enlarged EU market and only thus can we safeguard the employment of thousands that depend on the long term sustainability of the tourism industry. On the other hand there is no prize for guessing why citizens are pressing politicians to endow them with the same privileges enjoyed by other Europeans by way of low- fare travel.
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