‘Unprofitable’ and ‘disadvantageous’ contracts untouched in Air Malta restructuring

Dominic Azzopardi’s claims follow in the wake of earlier statements issued by the Airline Pilots’ Association (ALPA) which called attention to the “extravagant” tariffs that Malta International Airport charges Air Malta for each passenger it brings to the island.

Earlier this month, ALPA also blew the whistle on how “major issues” in the draft restructuring plan proposed by Ernst & Young “still need to be addressed” and pointed to MIA’s ‘excessive charges’ and current contracts as areas that require renegotiation and redress.

These included “carriage of cargo, in flight catering, in flight entertainment, aircraft cleaning, IT services, call centre and other services which have been outsourced in recent years need to be renegotiated,” the association had said.

Speaking to MaltaToday, Azzopardi maintained that through these “unprofitable” and “often loss-making” contracts, Air Malta is pandering to the interests of a handful of private interest companies that are milking the carrier into bankruptcy.

Azzopardi referred to two particular profitability ‘drains’ – Air Malta’s cargo prices, and ticket prices.

“A kilo’s worth of cargo (such as a parcel) that is transported by Malta to, for example, the UK, costs €1.30, despite how even sending the same parcel locally costs at least €6 – not counting Courier service, which can run to around €80.”

€1.30 is merely a starting price, he adds, saying that “Air Malta could break even through well-adjusted cargo prices alone,” with a minimum cargo charge of at least €3 per kilo.

Referring to seat ticket pricing, Azzopardi said tickets are “often sold at cost-price, or loss-making prices” to certain preferred buyers. Asked about who might get this ‘preferential treatment’, Azzopardi pointed to well-connected tour operators as one example.

“We need to establish a minimum price to ensure a safety ‘profitability’ net,” he said, “and irrespective of how well a buyer might be connected, ticket prices do not fall below a certain minimum.” He places this minimum price at €80.

He defended Air Malta’s oft-criticised expensive ticket prices as the by-product of such “abuse”, as tickets that are sold to the public have to “make do” for their un-profitability. “Everyone is having to make good for the abuse.”

He says that through low cargo pricing and ticket pricing, Air Malta is “effectively subsidising” Malta’s manufacture industry through low and unsustainable cargo prices. Azzopardi attributed this to “the policy of a clique of private interests that look to each other’s interests for mutual profitability.”

Azzopardi also referred to the tariffs that the Malta International Airport charges Air Malta on each passenger and kilo of cargo brought to Malta, IT hardware contracts awarded to SITA, and software contracts awarded to SABRE as further examples of disadvantageous contracts that represent a burden that Air Malta is ill equipped to endure.

MaltaToday also reported how another beneficiary of Air Malta’s business outsourcing is the Bianchi Group – Malta’s consultants to Airbus Industrie – who successfully concluded the sale of aircraft and complete fleet renewal to Air Malta, which has a fleet of 11 Airbus planes. The Bianchi Group’s director, Michael J. Bianchi, is one of the owners of Malta International Airport.

“All of Air Malta’s contracts need to be revised,” Azzopardi said. “In almost every contract Air Malta has entered into, it is at a disadvantage. We are talking about million upon millions, not one or two.”

He also revealed that despite how Ernst & Young were meant to examine Air Malta’s accounts and contracts first-hand, “the independent investigators merely relied on the company’s official audit records and spoke only with company managers.”

Azzopardi insisted that there is a “network of a dozen private business individuals who are controlling the company.” There are rates that can afford to double, if not triple, and the company would still remain competitive and affordable, he says.

He said despite how the restructuring approached the downsizing of Air Malta’s workforce in an almost-surgical manner, “when it came to corrections that might affect those businesses and entrepreneurs who work with Air Malta, nothing was heard. This is why I think it was a cover-up,” Azzopardi said, dismissing any notion of a ‘genuine’ restructuring.