Updated | Hoteliers unaware of Air Malta decision to cut unprofitable Manchester route
MHRA demands clarity after Air Malta cuts Manchester route and questions ‘stealthy’ dismantling of routes
28 December 2016, 11:43am
Last updated on 28 December 2016, 2:03pm
“MHRA is voicing its serious concerns on the future of the National Airline since this comes quickly on the heels of the Air Malta pulling out from Frankfurt Airport,” the association said.
The Malta Hotels and Restaurants Association said it was concerned by the latest twist in the Air Malta saga, saying the national airline was relegating itself to just another airline that services Malta.
“MHRA is concerned that the latest move indicates that Air Malta might be shutting shop by stealth. It certainly does not inspire confidence to have a MCESD meeting discussing Air Malta without a director of Air Malta present, neither to have a strategic destination such as Manchester dropped from the schedule 48 hours after the MCESD meeting without a hint of such action being taken.
“Clearly all the stakeholders now are in need of clarity as to the direction that the shareholder is taking in so far as Air Malta is concerned. Stakeholders who are investors in Malta need clarity,” MHRA president Tony Zahra said.
Zahra said the dismantling of key routes could not be justified by arguing that such routes were now being serviced by other airlines. “Over the past years MHRA has consistently argued that Air Malta must keep flying because beyond the commercial interest, it has to cater for the national interest,” Zahra said.
Zahra said that as long as the international economic and political environment keeps favouring the growth of Malta’s tourism sector, the critical importance of Air Malta servicing key routes would be less felt if at all. “It is when the market turns unfavourable that our tourism and commercial sector will reach out for an Air Malta as the national airline to take up the slack. The fact that the tourism sector today is not only doing well but also marking an encouraging immediate prospect doesn’t mean that we should take this as a perpetual guarantee for the future. It is here that we expect a clear vision and strategic thinking by the relevant Authorities taking decisions in relation to our national Airline.”
Expensive €2 million route
Air Malta said it was projected to lose up to €2 million in variable costs by operating its Manchester route with four flights per week in summer 2017. “By simply leaving the aircraft parked, the airline would have saved these costs. However, Air Malta has decided to operate additional routes that will give a positive contribution,” the airline said.
The airline said in a statement that the decision was taken after a thorough analysis of supply and demand. “As a price-sensitive leisure route without a big business travel component, Manchester is well served by various low-cost airlines and charter airlines who are able to cross-subsidize certain routes. Due to journey distance, Manchester is also an expensive route to operate for Air Malta and should have therefore been axed many years ago.”
Air Malta said it will strengthen its profitable routes and if necessary expand its offering. “As an airline, operating in this cutthroat environment, Air Malta must continually strive to achieve operational efficiency and maximise opportunities by operating the best conveniently timed flight schedule and network.”
Next summer Air Malta will be operating 150 weekly flights to 29 destinations and planning to carry 1.2 million passengers while continue operating with a fleet of eight aircraft similar to this year.
The Gulf airline Etihad, to which Air Malta’s fortunes have been tagged in the hope of a strategic acquisition, could be planning to remove James Hogan as its CEO over his failed spree of acquisitions in Europe, Handelsblatt reported.
Air Malta was hoping that Alitalia, a subsidiary of Etihad, would acquire 49% of the ailing airline in a bid to remain afloat after a massive €260 million restructuring package negotiated under strict EU state aid rules.
Air Malta must reduce staff and gain new efficiencies to compete against low-fares giants like Ryanair, without taking any form of state aid, under EU rules. But hopes that it could achieve this through a strategic acquisition by Alitalia or Etihad, appear to have faded in recent weeks.
James Hogan sought to expand Etihad’s presence in Europe, buying a 29% stake in Air Berlin in 2011, and then Air Serbia in 2013 and finally the stake in Alitalia three months later. This European expansion proved to be a misadventure when Etihad lost €2.5 billion on these investments, €477 million alone with Air Berlin as of 2015.
Eithad is now performing a volte-face on its European expansion, with supervisory board chairman Ahmed Ali Al Sayegh leading the roll-back, with plans to sell European holdings
Earlier this year, Alitalia signed a Memorandum of Understanding with the Maltese government over the possible acquisition of 49% of Air Malta by the Italian airline. However, Prime Minister Joseph Muscat was already reported to be very close to terminating the agreement signed with Alitalia in April as there are serious doubts on whether it will benefit the country and Air Malta’s employees.
If Etihad pull out of Alitalia, it would definitely spell the end of Alitalia’s interest in Air Malta because the Italian airline’s future will be on the line.
Ministry for Tourism’s reaction
In a statement, the Ministry for Tourism said Air Malta’s decision to cut the unprofitable Manchester route was part of a strategy the government was committed to see through in order tackle the economic difficulties that previous administrations had burdened the national airline with.
The ministry said the Manchester route would have cost Air Malta up to €2 million.
“The fact is that air connectivity for this winter and the 2017 summer will increase, further strengthening the success in tourism sector, from which the whole country – including MHRA members – are benefiting,” the statement read.
Air Malta was not “shutting shop by stealth”, as alleged by the MHRA, but was simply taking decisions that made commercial sense and that ensured the airline’s future commercial viability, the ministry said.
Matthew Vella is executive editor at MaltaToday.
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