Air Malta cuts 11 UK flights for summer, as Budget inflicts 2% VAT rise on tourist beds

Air Malta cuts down Heathrow, Gatwick, Birmingham, and Manchester flights for summer 2011, reducing capacity by some 38,000.

Corrected at 1:15pm with clarification on departure tax.

The national airline will be discontinuing eleven flights from the UK, as the first signs of reduced activity from Air Malta – which announced its first-ever summer losses this year – start to worry tour operators.

Air Malta’s flight schedule for summer 2011 shows it will be halving its activity from London Gatwick from 14 flights, cutting two flights from its previous 7 to Manchester, one flight from London Heathrow, and practically pulling out of Birmingham by operating only until 30 April 2011.

UK-based tour operators and hoteliers who spoke to MaltaToday said the reduced capacity could see Malta lose over 300,000 bed nights after its record summer.

“At 80% capacity over a six-month season, Air Malta would be bringing in 38,000 tourists less,” the same sources said.

The other carrier flying to Malta from Gatwick is EasyJet.

Hotelier Michael Zammit Tabona, for whom the UK core market is a mainstay, said the lack of capacity would push up airline prices.

“At an average length of stay of some 8.1 nights, the loss in UK business will translate into over 300,000 bed nights lost – enough to keep four hotels booked up for the summer season,” Zammit Tabona said.

“With airlines committed to the 2011 schedule, less flights operating to Malta from the UK will only push up airline prices, a clear case of demand outstripping supply… unless a new route is created or a new carrier starts operating, this void will not be filled up immediately by the low-cost carriers.”

In the meantime, Finance Minister Tonio Fenech is insisting the government cannot postpone the raising of VAT from 5% to 7% on hotel and other tourist accommodation, to be introduced on 1 January.

While the Malta Hotels and Restaurants Association complained it was not consulted on the VAT rise, hotels have already committed to prices in agreements it signs nine months ahead with tour operators.

“As things stand, with our hotel prices already set for the May-October 2011 season, hotels will have to absorb the cost of this VAT increase,” Zammit Tabona said.

“But if Air Malta cuts down on these UK flights we will have less VAT to pay the government because we will lose thousands of bed nights.”

Finance Minister Tonio Fenech said the VAT increase would not be postponed, “unless the MHRA wants to postpone additional funding for marketing and new routes.”

The VAT increase should be funding an additional €4 million in marketing funds for the Malta Tourism Authority.

Prime Minister Lawrence Gonzi also said on Monday that the government had turned down the MHRA’s proposal for a departure tax, claiming the measure would have been “populist”.

Commenting on the proposal, Michael Zammit Tabona said a departure tax of between €4 and €5 would have generated revenue from everybody, Maltese travellers included. “The Maltese are still enjoying weekend breaks in Maltese hotels - so they will be paying the increased VAT anyway. But everyone benefits from tourism. With a VAT increase and less airline capacity, fewer tourists will make it difficult for everyone to reap the benefits from tourism.”

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@ bolar500, 98% Government owned and it`s not subsidised` come on pull the other one. If Ryanair are screwing the Government who`s fault is that, in my experience the worst businessmen in the world are politicians. If the 100,000,000 euros ain`t a subsidy what is it, a tip for services rendered. I`d love to know who owns the other 2%.
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Jeffrey Grech
@ FREDDY AIR MALTA IS NOT SUBSIDISED BY THE GOVERNMENT - RYANAIR IS. AIRMALTA HAS TO FIGHT FOR SURVIVAL - RYANAIR MOANS AND THREATENS AND GOVERNMENTS JUST POURS IN MORE MONEY. SIMPLE AS THAT. GOVERNMENT HAS TO FIND EXCUSES AND SEEK PERMISSIONS TO ASSIST IT'S OWN OFFSPRING. YET RYANAIR GETS EASY MONEY AT WILL AND WITHOUT OBJECTIONS FROM BIG BROTHER. Is this the level playing field you had in mind?
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Alfred Galea
[Budget 2011: €100m for Air Malta to become viable again by Annaliza Borg The €100 million mentioned for Air Malta is intended to strengthen the company’s share capital for it to restructure itself and become viable once again, said Finance Minister Tonio Fenech, at a press conference following the budget speech. “It is not a subsidy but a one-time injection,” he replied to The Malta Independent´s questions. Whenever state aid or financial assistance is on the agenda, the government must discuss the matter with the European Commission and approval is necessary in the case of state aid.] A ROSE by any other name is still a ROSE. Why do you think Tony Gunner is talking to the EU about AirMalta?? Are you guys that D-U-M-B??
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Last thought on Air Malta, sell it off to the highest bidder and use the proceeds to repair the roads and install some drains.
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@Carmel if Air Malta wants to raise,borrow money to keep afloat it can do this by either going to the Banks or raise money on the Stock Exchange or private equity. Government money how ever dressed up should never be allowed. Airlines are commercial businesses not social services or national prestige symbols. Frankfurt airport raises taxes and Ryan cuts its flights its a commercial decision,their planes can make more money based elsewhere. Air Malta should follow suit.
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Brandon Johnson
Freddy just in case you missed this part AIR MALTA IS NOT SUBSIDIZED BUT LOW COST CARRIERS ARE from your taxes. And just to make it clear here it is again AIR MALTA IS NOT SUBSIDIZED BUT LOW COST CARRIERS ARE from your taxes.
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@Salgister,there is at least 6 different airlines from the UK flying to Malta,this ensures competition between the airlines to ensure the cheapest prices, provided they have a level playing.If you want a national airline fine,but you end up subsidising them and giving people a job for life that in the real world would go bust.I don`t mind what logo the plane has on its fusilage as long as it is regulated and safe.The UK hasn`t had a national carrier since the eighties thank god,they`ve always had the begging bowl out.
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With this move The Gonzi administration is giveing another punch below the belt to Air Malta, another move to shut it down like Sea malta.
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Jeffrey Grech
The MHRA makes my stomach churn. So now Mr Zammit Tabona is concerned that if KM reduces capacity the fares will rise. But, Mr Zammit Tabona, now you have your low cost airlines. Have you forgotten how ferociously the MHRA lobbied for these five years ago? Have you forgotten how the MHRA hailed these as the saviours of tourism in Malta five years ago? Now you got what you asked for. Air Malta is not the MHRA's concubine.
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Pigs dont fly? http://www.fpqrp.com/
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Micheal Bonanno
@Freddy. And what happens if the enterpreneur who buys AirMalta suddenly leaves it on the lurch and closes it? What will happen to our country? We'll be at the mercy (literally)of the airline mercenaries! No thank you. Prefer paying through my taxes and know that we're safe if something comes up!
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P.S.don`t forget the two golden rules of business 1. Never lose money 2. Never forget rule No 1
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Air Malta,MIA,the Maltese government and people should get the message that they are operating in a free enterprise zone,don`t fear Ryanair,Easyjet or any other low cost operators, they`ve been an absolute blessing.They have taken on vested interests all over Europe trying to protect their patch.The result has been increasing passenger numbers to all parts of the continent at affordable fares.These are commercial entitys if they don`t make money they go bust.Privatise Air Malta to the highest bidder if you want it off the taxpayers back,same goes for any other company suffering the dead hand of the State,you`ll be amazed at the results.
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Ale02 wrote "If AirMalta want the support of the Maltese taxpayer it must ensure that it does not take unilateral decisions which affect other major sectors of the economy" So far Air Malta has always done what the Maltese Government of the day wanted it to do. Until some years ago Brussels flight were not a daily flight as it is today but since joining the EU (or some time before), flights wre increased to daily. Which other airline carries Maltese sick people to the UK practicalley every day at a reduced price not to mentioned stretchers and incubators ? Which airline carries Maltese voters to Malt and back for a few Euros so that they vote ? Air Malta is in its present situation because it has always served the government & the Maltese taxpayers at its best without taking care of it's own needs !! Air Malta has NEVER received any subsidies from the government but when there is trouble those who enjoy criticising Air Malta get a field-day !!! Politics should be kept away from the national airline because otherwise one day soon we'll go and look for it and find it now belongs to foreigners like Mid-Med Bank, Public Lotto and the like !!
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HAHA did you forget your interviews on the local media insisting on low cost airlines coming to Malta Mr Zammit Tabona? They won't remain low cost for so long?? Air Malta has to do like you try do - the best for itself. Now you will see how passengers travelling on LCC are prepared to pay the prices you ask for. What goes around..... comes around!! For everyone's information, Air Malta was NEVER given any subsidies from the government unlike LCCs.
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Micheal Bonanno
@Joe South. FYI AirMalta doesn't receive subsidies from the Government, ergo the Maltese taxpayer. But the LCA's do. How's that for irony? We don't help our airline, but we subsidize RyanAir and its ilk!
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Brandon Johnson
Joe South, so i guess you have no problem with the government subsidizing Low Cost carriers like rYAn with your tax euros. Air Malta is where it is due to unfair competition created by the government and by mis-management( once again by those chosen by the government). For the record up till now it has been selling all assets acquired in the bad old days to pay for its losses.
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duncan abela
Most unfortunate that AirMalta is cutting down flights on the London route. London is not only a major departure point for British tourists but is also a major hub for Maltese to travel over Europe. If AirMalta want the support of the Maltese taxpayer it must ensure that it does not take unilateral decisions which affect other major sectors of the economy
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Alfred Galea
Hello boys, if AirMalta is LOSING (attn. kardijn) money it has got to do something about it. The govt. can't keep on subsidising it like various govts. did with the dockyard. Number one, the masters at EU won't allow it and number two why should the taxpayers keep paying for management's incompetence?
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@truth. Don't try to argue cause the gatekeepers ( who are not stupid) will call you off, knowing the amount of goodies they will loose if their chummy chummy friends at Castille loose power.!
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Paul Sammut
'Whatsoever a man soweth, that he shall also reap'. No creative economics will ever change that. Well, now if the harvest ain't good we have only ourselves to blame for believing in empty promises and fairy tales. We all know that pigs don't fly and the cow never jumped over the moon and hot air is just that, hot air and that promises aren't buttering our daily bread.
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Correction. It is not a 2% increase but a 40% increase. A 2 in 5 increase is a 40% increase. 2/5 x 100 = 40
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John Mifsud
Incredible. Just as Ryanair is cutting flights to Malta and hiking prices, the national airline does the same.