Air Malta posts €13 million loss, will hive off Heathrow, Gatwick slots in new state company

Hiving-off of precious UK airport slots will allow Air Malta to raise funds through shares now that it can no longer receive any state aid

From left to right: George Abela, tourism minister Konrad Mizzi, Air Malta chairman Charles Mangion, and CEO Joe Galea
From left to right: George Abela, tourism minister Konrad Mizzi, Air Malta chairman Charles Mangion, and CEO Joe Galea

Air Malta will be divesting itself of its last remaining assets - its flight slots at Heathrow and Gatwick airports - to place them in a government-controlled company, airline chairman Charles Mangion said this morning. 

"This will allow us to raise funds through our own assets as we can no longer receive any state aid," he said. "It will also ensure that these invaluable assets always remain part of Malta's national assets."

Mangion, who was addressing a press conference at the end of the company's annual general meeting, said that the new company would be a fully-independent government company and not a subsidiary of Air Malta. 

He said the success the airline was forecasting for the next financial year would only come about if the negotiations on the three collective agreements with the General Workers Union and the pilots' Union were concluded in the near future. 

Tourism minister Konrad Mizzi said he was proud that two agreements had already been finalised and said the government and airline remained committed to ensuring that the company become successful and would work to conclude the negotiations on the agreements, which needed to be agreed upon by the end of the year. 

President emeritus George Abela told MaltaToday he was "cautiously optimistic" that all negotiations, including those with ALPA, the airline pilots' association. 

Air Malta CFO Klaus Gossler said the airline had recorded a loss of €13.1 million in the fiscal year 2016-2017 but expects to break even this year after breaking free of fuel hedging contracts that had forced the airline to continue buying way above market price for the past three years.

The airline bought fuel at €72 per barrel last year - while the market average stood at €55 - because of the long-term hedging agreements it had bound itself to in the past, he said. 

Gossler said that the airline was forecasting a profit as of FY2018, once it got back to buying fuel at competitive prices and as it started implementing a new business model. 

Air Malta experienced a decrease of €28.3 million in revenue when total revenue amounted to €192.2 million compared to €220.5 million a year before, mainly driven by a capacity reduction of 20%.

The airline’s operational costs decreased by €20.6 million. The decrease in operating costs was driven by lower aircraft leases, fuel costs and related maintenance expenses, efficiency gains and savings on a number of contracts and administration expenses. However, the former fuel hedging contracts were in place for much longer than those of competitors.

The company decided at the end of the year to transition the national airline from a traditional one to a hybrid business model, which will see Air Malta adapt to compete and survive in the European low-cost airline market. 

The company will expand its Go Light system, charging separately for any luggage and additional services. 

Gossler said that since inception, 148,000 Go Light tickets had been booked online, with 70% being booked from abroad. 
Compared to last year, there were currently 141,000 additional guests who had already booked tickets this year, he explained.

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