With the tourist industry bracing itself for colder times – not only on account of the “lazy” winter season – airlines, including Air Malta, may have to try and find ways to further cut costs and optimise the financial performance of the route network. At the same time, a more diverse and seasonally expanded network is what is expected.
In the following, we are going to look at whether the acquisition, in some way or another, of an efficient large regional jet aircraft could be a productive addition to the fleet of the flag carrier. Having touched on this issue somewhat briefly quite a time ago (in STOM on 11 July 2004, and again in TMIS on 27 January 2008), this piece is more detailed and includes route profiles and strategic aspects. What should be of particular interest from the tourism aspect is the routes addition aspect.
As regards route distribution, during summer we might see:
• additional source markets that cannot sustain a larger capacity aircraft profitably, thus diversifying the geographic sourcing base – particularly with regard to larger countries that, to date, do not have a high density of connected airports;
• additional frequencies on routes already served with larger aircraft on days that would not sustain the Airbus but could take an 80 or 90-seater, thus providing more flexibility to both individual customers and tour operators;
• taking over routes that currently occupy larger capacity core fleet aircraft that are under-occupied seat-wise in these sectors during summer. Capacity could then be re-allocated to markets that can take it, meaning there would be a capacity increase from these core routes and, hopefully, more arrivals. Alternatively, this extra capacity could be used to squeeze out low-cost carriers – particularly leisure airlines –to gain dominance.
During winter we could:
• keep open routes that so far have only been seasonal, thus improving connectivity and, hopefully, arrivals in the critical winter season, also at low frequency
• help maintain frequency on routes that during winter traditionally see a lower frequency than during summer.
Generally, an efficient smaller jet would:
• offer the tour operator business an even broader mix of airports;
• for Air Malta, reduce journey costs, thereby improving financial performance on marginal routes on the flight cost/revenue side and also significantly reducing airport and navigation charges;
• help Maltese tour operators, who currently have to charter 140 seats, which is a big risk.
Canadians and Brazilians
The Canadian Bombardier CRJ900 is available with either 90 or 86 seats. With Air Malta heavily tourist-oriented (which means more luggage), maybe the four seats fewer (the last row) would be better, as this means two more cubic metres of baggage hold (while there are baggage holds under the passenger cabin, the main hold is in the rear, between the engines), but generally there should be no problem anyway. For “self loading cargo”, aka passengers, the jet offers a 2+2 seating layout, meaning either window or aisle but no middle seat – so maybe not a bad option at all, even though with the 2+2 seating layout, the Brazilian Embraer 170/190 family undoubtedly leads the way in cabin standard.
Air Canada operates about 60 “E-jets”, most of them the larger E190 model. They claim a 20 per cent lower trip cost than the A319, while in practice the load, ie revenue, is the same, unless the A319s are really full. With a range of 4,200km, the E190 is also very flexible also in this respect for runs to Central America/Caribbean or transcontinental runs.
Embraer would be very interesting if it were possible to get a combination of, for example, E175s and E195s (120 seats, as used by British LCC FlyBE) with the E190/195s maybe replacing some of the A319s (see trip cost advantage), or increasing the fleet substantially if one theoretically had the chance (at present, on some winter days Air Malta could comfortably cope with a fleet half the size of its current one), as Embraer offers a family with full commonality between 70 and 120 seats, whereas with the CRJ900 there is then only the 100-seat CRJ1000 and that is really the limit of the design. If you just wanted the 90-seater, then surely the CRJ900 would be a very attractive choice.
Neither compare in any way to the (un)economics of the (at least in the Air Malta context) ill-chosen Avro RJ70s of the 1990s. The problem with the RJ70 was that it basically used the same amount of fuel as an A319 or B737-700 (deliveries of which started soon after the RJ70s were delivered to Malta) and they both had almost double the number of seats, not to mention the bigger maintenance bills for the RJ and the lower productivity.
Both the CRJ900 and the Embraers have the same speed as the A320 series, so there would be full inter-changeability as far as scheduling is concerned – at least with airport slots if not with pilots. Currently, Air Malta’s farthest scheduled destination is Moscow – 2,800kms away. Both the CRJ900 and the Embraers are proven/ordered with low-cost carriers.
For the following, we are going to assume that the CRJ900NG would be the choice, with just two additional jets, meaning that the added capacity would be equal to a single A320, but showing how many extra opportunities could be available.
The CRJ900’s range is 3,000 to 3,700kms (dependant upon fuel/load option). For dimensions, Frankfurt is 1,700kms away. In North America, the jet also runs on sectors as far as Malta-Moscow. Lufthansa claim its fuel burn per passenger is so low that it can be compared to wide-body jets. In the longer-term perspective, fuel remains a key factor, and carriers with low fuel burn aircraft – and the right balance between revenue potential and trip cost –definitely have an advantage.
Even with unit costs slightly higher, if trip costs are generally massively lower, and if revenue is the same, it remains a plus. Flying large 140 or 170-seaters with a 50 per cent or less load-factor, and this only with meagre passenger revenue on a number of routes, is debateable. There is also the surely strong argument for the financial benefits of commonality in small fleets.
The CRJ900 NextGen now being sold has a more attractive cabin interior (including larger windows) than the standard CRJ900, and still lower costs due to significantly “stretched” intervals between scheduled maintenance. While mentioning maintenance, adding an additional type of aircraft means accordingly increased maintenance costs. But maintenance could be outsourced to a service provider, eg Lufthansa Technik, for total technical support, which for a small fleet is the more cost-effective option.
One problem would be what to do with the freed capacity when capacity is adjusted more to demand on some existing routes. Leasing charges still have to be paid when the plane is parked. Up to several months ago, aircraft could be disposed of very easily by subleasing them on long-term contracts, but now more carriers will be facing over-capacity, so this will be more difficult. It would have been good if, during the period of high leasing rates for that size of jets, one could have leased them out – having acquired them at low rates – then leased smaller effective jets more in keeping with demand, cashed in the arbitrage between the two leasing rates, had equal revenue on according routes – with just the load factor significantly boosted – and cut the trip cost significantly, so making a good profit.
So we have to try to grow, and this can be done by kicking other carriers out. But adding two 90-seaters equals just one A320 and anyway, as the following will show, the greater part might not be seasonally adding routes so far not served at all or keeping seasonal routes open longer or year-round.
The routes
Britain
Instead of helping a football club to pay the wages of its player (concurrently, in Malta, one runs a retirement scheme to reduce staff and manpower costs), Air Malta could run a marketing campaign targeting present and former Royal Navy personnel, given the long joint tradition between the RN and Malta, and connect with Southampton, maybe twice or three times a week which, particularly with a 90-seater, should mean not too much pressure on Gatwick, although surely one or two A319s as well, and maybe a CRJ900 on the weaker of the two or three days, should work. Southampton is the key airport of FlyBE, Britain’s biggest domestic carrier. The Southampton/Bournemouth area has a social structure that is interesting for destination Malta, but is a “hole” on the sourcing map.
If Air Malta refuses Southampton, then Ryanair should be “encouraged” to fly from Bournemouth. Parallel flights will not work. As discussed in TMIS of 23 November (not online), while Bristol is a very interesting airport, it would have been better had Bournemouth, rather than Leeds/Bradford (in over-served Manchester’s backyard) been put into the subsidy programme. If Bristol fails – try Bournemouth.
Denmark
A CRJ900 could keep Copenhagen connected three times a week, with capacity equalling one-and-a-half A320s, thus there would be no high marketing risk, although one could also try an A319 non-stop once or twice and the third flight with an A320, triangling with Billund. A non-stop scheduled Copenhagen link could target point-to-point traffic, plus connect to Scandinavian places currently not linked via the German hubs. Norwegian will heavily increase its presence in Copenhagen in the wake of the Sterling shutdown, possibly meaning an opportunity, but from the fares aspect, Air Malta is much lower, has cooperation with SAS and balanced capacity would tolerate the JetTime flight.
Eastern EU (general)
A 90-seater could further expand operation periods and routes or alternatively cut losses on routes to the continental new EU member states. Prague should see better services, and for Warsaw plus Katowice and/or Krakow, one could also see a service, although here it would be good if we had Wizzair, but we will now have to see how the crisis will hit Poland, given its high dependence on the British Isles.
Routes like Budapest, Bucharest, Timisoara, Cluj and so forth could run with much lower trip costs, as it is clearly a waste to push an Airbus on a route that barely fills half of it, but which provably does happen there.
France
The Marseille link might be seasonally expanded and the Lyon service stabilised with the help of a 90-seater, although for Marseille we could also consider it being put on a year-round Ryanair service. In addition, the services to Toulouse and Nantes, and eventually Strasbourg, plus occasional charters across the country, eg to Clermont-Ferrand, could go on a 90-seater instead of flying with an under-loaded 140-seater or “triangling” airports very far apart with the 170-seater.
Germany
Air Berlin has been trying to offer flights from and via Nuremberg, but due to small low-fare state-carrier Air Malta from Munich and Frankfurt taking a lot of the point-to-point traffic, plus flights from across the country for the transit potential, the low-cost airline clearly has no chance. Air Malta might try to occupy Nuremberg for the summer months. With a 90-seater, it would really not mean too much capacity. For basically the same price or slightly more, people might prefer flying directly from “their” airport, instead of having to go to Munich or Frankfurt – which, of course, means that this volume would be missing there. So far, Air Berlin has never operated a summer flight. Hopefully, the plans for Munich are not too ambitious. Nuremberg in summer could perhaps run twice weekly with a 90-seater. If they could run maybe once a week in winter, the airport could be dried out for Air Berlin and so scare them away from Malta, as a result of which the routes serving the places connected by Air Berlin through Nuremberg would profit.
Memmingen could also be an option for a once weekly 90-seater summer operation in cooperation with tour operators, if not risking a 140-seater.
With Leipzig, the route could be made (seasonally) more economical by using a 90-seater instead of a 140-seater. However, during the winter an extra airport is needed to combine with not that far away Hamburg, so sharing an Airbus remains a good option.
There might also be the opportunity for a once weekly summer flight from Paderborn.
Air Malta is taking up Stuttgart next summer, since Germanwings has pulled out. In the event of a longer car industry slump, a 90-seater could help keep the route open also during winter. The flight operates non-stop on Mondays and Fridays. Although it is now bookable, and would surely be greatly welcomed by hoteliers, for some reason Air Malta apparently did not announce anything in the Maltese media. By taking Stuttgart, Air Malta can keep Germanwings out of the market – a move mentioned as a possibility by yours truly in TMIS on 31 August.
For Cologne, the other airport where – with much celebration in the Maltese media – Germanwings had replaced Air Malta, 90-seaters could be operated twice weekly as a summer supplement to the core route in Düsseldorf, which is only 35kms of autobahn away. This would enable a careful balance of revenue and capacity, while keeping Germanwings out.
The squeezing out of two big “low cost” airlines on the Germany-Malta market, helped not a little by the period of high fuel prices, has certainly set an example. Although it cost Air Malta quite a lot of money, the effect achieved was worth it – giving a message to LCCs that they cannot afford to ignore: try and fly to Malta and we will make you lose money.
Generally, Air Malta could use a 90-seater with attractive unit costs to occupy secondary airports and block them off from the attempted establishment of (subsidised) low-cost routes, retaining “air superiority” over passenger transport to Malta, drying out opportunities for other carriers or subsidy programmes, growing both in passenger figures and market share, while reducing costs with a significantly rationalised trip cost to passenger load ratio.
Greece
Athens could also be kept open regularly during the winter schedule, while Thessaloniki could be added for the summer schedule. Athens might see an additional summer frequency without pressing in too much capacity. Charter flights from Malta to Corfu could become more attractive/regular.
Israel
The re-establishment of the Tel Aviv route was discussed in STOM of 4 March 2007, in TMIS in December 2007 and in detail in TMIS of 15 July. A twice weekly run with an Air Malta A319 should definitely work and there are further opportunities with Israeli carrier Arkia – with its ultra-low-unit cost 280-seat B757-300 – or eventually also with Israir. Both Israeli carriers have a strong marketing machine behind them, while Air Malta would have to rebuild contacts, a problem given apparently heavily melted down middle and strategic management. The Maltese outgoing market potential is not insignificant, and a 90-seater would make the commercial risk lower, if this is the problem. Arkia has now received its first 120-seat Embraer 195 and this should be taken by MIA, MTA, MHRA, the Tourism Ministry, and Foreign Affairs Ministry (given the establishment of the two embassies in Israel/Palestine), as an indication to meet with their Israeli counterparts regarding re-starting the route.
Italy
A service to/from Milan-Bergamo could supplement the Malpensa service. As discussed in TMIS of 17 August, MyAir could come with three times weekly A320s during the summer and three times weekly CRJ900s during the winter – or six times weekly CRJ900s in the summer and three during the winter. This should be preferred over other low-cost airlines. If Air Malta would run the route itself, the area could be kept clear.
A 90-seat jet could also prolong the Bologna operation, and additional flights could be added, or capacity adjusted, during the summer.
More might be made out of Naples, and maybe Palermo could be kept afloat.
Libya
Tripoli could be served with a 90-seater morning and evening flight. This would provide the same capacity as the single A320 flight but would be a huge improvement for bilateral business and businessmen from both countries, who would be able to return the same day and thus reduce costs enormously by not having to stay overnight.
The Benghazi route has stopped. While the 140-seat A319 might be too big, a 90-seater could do the job. Libyan Airlines has already put the CRJ900 on the Tripoli-Malta hop. Maybe the possibility of a Tripoli-Malta-Benghazi-Malta-Tripoli routing on some days could be explored. The problem with the Libyan market, surely, is the elaborate travel bureaucracy.
It might also be possible to optimise the performance of the Tunis route.
Luxembourg
This could be a fine addition, eg twice-weekly, and if there is currently a reluctance to risk a 140-seater, maybe it could be served with an efficient 90-seater; however, would Luxair’s seasonal run survive?
Russia
Eventually, St Petersburg might become Air Malta’s longest route. Currently Air Malta sends A320s only during the peak weeks. Generally, destination, airport and carrier should try and get cooperation with Rossiya, a large state-backed Russian carrier with strong bases in both Moscow and St Petersburg (after merging with St Petersburgian Pulkovo). It would, of course, be nice to get Rossiya straightaway with a Boeing B737-500 or the higher capacity Tupolev 154M from St Petersburg, instead of a 90-seater, or Rossiya could help Air Malta fill the A320. A CRJ900 could help the Moscow service go daily by running on the few weaker days.
Serbia
Surely, Air Malta would be able to compete with JAT?
Spain
A CRJ900 could be an ideal plane for a regular Madrid link, eg with Iberia/Air Nostrum, but I suppose one could evaluate putting Ryanair on a year-round service (see TMIS of 9 November). For Zaragoza and Bilbao charters it could be an option for a not too much (risk) capacity. Maltese tourist groups/operators would then not have to directly hire (and sell) the seats of a whole Airbus for charters.
Summing up, I think there is some basis to the argument that adding a smaller jet with competitive unit-costs – which is certainly a must and should clearly be very carefully calculated, particularly in the case of a small fleet – can, along with simple and efficient structures, provide a good basis for improving the financial performance of routes, block off other carriers and provide growth to the carrier by (seasonally) adding/improving routes. And Malta can only benefit from this.