Bracing for change
Major restructuring programme at Air Malta after summer losses
Air Malta is bracing itself for a major restructuring programme which will be brought forward after the airline registered its first-ever summer losses.
International experts have been engaged to draw up a comprehensive plan to restructure the airline, which is expected to start being implemented by the end of the year.
The focus will be on Air Malta’s strategic and commercial operations. Air Malta’s losses this year are expected to be “much worse” than the €31 million deficit announced for the year ending March 2009, aviation sources told The Sunday Times.
The airline is believed to be losing money even on its Germany routes, where there is no significant competition from low-cost carriers.
Discussions between the European Commission and the government over the airline started earlier this year, but the process is being speeded up amid worrying figures.
“In today’s realities where all national carriers are facing huge pressures on their margins, Air Malta’s cost structures are way too high, profit margins are too low and decisions have to be taken very soon,” the sources said, adding that the summer losses came about to a large extent because of “developments” taking place in the airline industry.
EU rules permit the granting of state aid to Air Malta as long as this is just a one-time opportunity and is tied to a restructuring programme aimed at putting the national airline on a sound financial footing.
The government has engaged international experts Ernst and Young (also responsible for the restructuring of British Midlands Airways – BMI) to carry out a full review of Air Malta.
Airline ‘overstaffed’
One of the main problems revolves around the airline’s overstaffing and the restructuring programme is analysing the possibility of farming out certain services to the private sector.
Ironically, Air Malta’s predicament contrasts sharply with this year’s tourism figures, whereby Malta could be heading for a record year if current trends continue. This is largely due to increased seat capacity through low-cost airlines.
In an attempt to minimise the impact on Air Malta, the government is trying to establish how best to introduce the so-called bed tax on tourism, promised two budgets ago to finance the increased marketing efforts of the Malta Tourism Authority, and the introduction of new routes.
The Malta Hotels and Restaurants Association proposed to change the nature of the bed tax to one which would be paid by departing tourists at the airport.
However, since EU rules preclude discrimination between Maltese and European citizens, such tax would have to apply to Maltese tourists too – though the government believes this measure could dent Air Malta’s competitiveness even further.
Before tomorrow’s Budget, the government also has the option of increasing the five per cent VAT rate which is currently levied on accommodation, or sourcing the tax collection, at hotels.
http://www.timesofmalta.com/articles/view/20101024/local/bracing-for-change
Major restructuring programme at Air Malta after summer losses
Air Malta is bracing itself for a major restructuring programme which will be brought forward after the airline registered its first-ever summer losses.
International experts have been engaged to draw up a comprehensive plan to restructure the airline, which is expected to start being implemented by the end of the year.
The focus will be on Air Malta’s strategic and commercial operations. Air Malta’s losses this year are expected to be “much worse” than the €31 million deficit announced for the year ending March 2009, aviation sources told The Sunday Times.
The airline is believed to be losing money even on its Germany routes, where there is no significant competition from low-cost carriers.
Discussions between the European Commission and the government over the airline started earlier this year, but the process is being speeded up amid worrying figures.
“In today’s realities where all national carriers are facing huge pressures on their margins, Air Malta’s cost structures are way too high, profit margins are too low and decisions have to be taken very soon,” the sources said, adding that the summer losses came about to a large extent because of “developments” taking place in the airline industry.
EU rules permit the granting of state aid to Air Malta as long as this is just a one-time opportunity and is tied to a restructuring programme aimed at putting the national airline on a sound financial footing.
The government has engaged international experts Ernst and Young (also responsible for the restructuring of British Midlands Airways – BMI) to carry out a full review of Air Malta.
Airline ‘overstaffed’
One of the main problems revolves around the airline’s overstaffing and the restructuring programme is analysing the possibility of farming out certain services to the private sector.
Ironically, Air Malta’s predicament contrasts sharply with this year’s tourism figures, whereby Malta could be heading for a record year if current trends continue. This is largely due to increased seat capacity through low-cost airlines.
In an attempt to minimise the impact on Air Malta, the government is trying to establish how best to introduce the so-called bed tax on tourism, promised two budgets ago to finance the increased marketing efforts of the Malta Tourism Authority, and the introduction of new routes.
The Malta Hotels and Restaurants Association proposed to change the nature of the bed tax to one which would be paid by departing tourists at the airport.
However, since EU rules preclude discrimination between Maltese and European citizens, such tax would have to apply to Maltese tourists too – though the government believes this measure could dent Air Malta’s competitiveness even further.
Before tomorrow’s Budget, the government also has the option of increasing the five per cent VAT rate which is currently levied on accommodation, or sourcing the tax collection, at hotels.
http://www.timesofmalta.com/articles/view/20101024/local/bracing-for-change
