Ryanair’s Malta subsidiary could price out Air Malta, report warns

European Parliament report requested by Labour MEP Alfred Sant predicts market growth of Malta Air over national airline

The launch of the Ryanair subsidiary Malta Air, a part government-owned company, could price out Air Malta because of Ryanair’s high market share and bigger flexibility on salaries and lower costs.

The warning comes from a European Parliament report on unfair market practices requested by Labour MEP Alfred Sant, which suggests the low-cost could giant become the dominant airline in Malta and drive Air Malta out of the market.

The report, initiated by Sant through one of the EP committees, says that despite the mutual cooperation marking the relationship between the two airlines, it cannot be excluded the Ryanair subsidiary Malta Air, which includes one government share, could supplant Air Malta.

“It notes that Ryanair and Air Malta have been alternating in vying for the top spot in terms of seat share, but from now on, Ryanair will certainly grow its already sizeable presence in Malta, including gaining access to non-EU markets in North Africa and, as a consequence, potentially becoming the dominant airline in Malta,” Sant said.

The report says that higher market share could put Ryanair at a competitive advantage. “There is no guarantee that the airlines’ two routes will not eventually overlap. Moreover, considering that intra-EU transport is critically dominant – accounting for around 92% in the case of Malta – it is possible that the enhancement of the island’s tourist traffic and connectivity will be achieved to possible detriment of the flag carrier.”

Malta’s European traffic declined in 2006, driving the government to provide price incentives in the form of reduced landing charges for low cost airlines.  In the last ten years, LCCs’share of seats in Malta has doubled (from 24.7 % in 2009). However, despite the increase in traffic and the fact that LCCs are today highly significant in Malta, the situation in Maltese skies is characterised by the presence of two main carriers: Ryanair, by far the biggest LCC on routes to the island, and the state-owned flag carrier Air Malta.

The two airlines have a very similar share of seats to and from Malta. For several years, they have swapped the lead back and forth in terms of seat share. While Ryanair has more routes and annual passengers, and it has been the leading airline by summer seats to the island, there difference is only a few decimal points.

Air Malta has however struggled with profitability. In 2018, the two companies announced their decision to cooperate in a form of codesharing agreement, where the two airlines share the same flight, providing for the possibility of purchasing a seat from the first airline on a flight that is operated by the second. In this case, the airlines agreed to liaise on sales and marketing initiatives, like the sale of Air Malta flights from the Ryanair website, providing the flag carrier with an important new distribution channel.

For Ryanair, the partnership is meant to offer the possibility of enjoying new routes from Malta on top of those already existing, while Air Malta can draw on new revenues and increase its weight in overseas markets.

Ryanair however also concluded an agreement to buy a Malta-based start-up airline named Malta Air, launching it as a new subsidiary airline to operate low-cost operations on the island with competitive fares. The new carrier is expected to take over 61 routes that Ryanair already operates to and from Malta. It will fly to over 60 destinations across Europe and North Africa. For this purpose, a fleet of six Ryanair aircrafts was been transferred to the island

The acquisition had the support of the Maltese government, with the aim of boosting tourism to the island. The new airline will operate alongside the state-owned Air Malta, which is thought to run parallel with the development of Malta Air. To protect the country’s interests, the Maltese government maintains a golden share in the new airline, meaning that it is able to outvote all other shares in certain circumstances.