Air Malta ended its financial year on 31 March with a much reduced loss of Lm4.8 million, down from Lm7.7 million in the comparable period a year before, and a full Lm3 million of this is due to the recent increase in oil prices world-wide.

Speaking at a press conference yesterday, Air Malta chairman Lawrence Zammit gave details about the results and said they showed the airline’s turnaround has begun, although a long way still lies ahead and the airline “is not out of the wood so far”.

The results are for eight months ,due to a change in the airline’s reporting period, but are comparable to a similar eight-month period in the previous year.

They come in the wake of a rescue pact which was signed in May last year and which was effected through the contribution of all employees who accepted the suspension of increments, a 40 hour week for the shift staff, the removal of half days, changes to the loading teams’ composition and reduced cabin staff complement.

Management restructuring began last August and is now almost complete, said Mr Zammit. The number of senior executives has been cut from 65 to 32, and part of the income of the senior staff is now performance-based – not just on the individual’s performance but also on the airline’s. Allowances and benefits have been rationalised and executive allowances have been reduced by Lm58,000.

As for the whole structure of the airline, an ongoing exercise was begun, zero based, that is as if the particular section still has to be set up, and every operation closely scrutinised.

The airline is divesting itself of its non-core activities and returning to its core business activity.

There are still a number of work practices which need to be changed, said Mr Zammit. The airline must be in a position to use its resources as and when they are needed and to cut down as much as possible on idle time.

The airline has committed itself to making no forced redundancies.

The overseas out-stations have been rationalised, saving some Lm0.5 million. It did not make sense, said Mr Zammit, to keep an out-station open when only one flight a week went to that place.

The airline has also introduced a number of incentives and cheap flights, notably the Flexifly and Fare4U options, which have seen more people using them.

It is also upgrading its websites and hopes that by the end of this year e-ticketing will be generally available. This is already available in the UK and the airline has a commitment with IATA to phase out paper tickets by 2008.

Changes have also been made with regard to corporate governance. The board of directors is now more involved in policy, strategy and overseeing management’s performance and the Corporate Management Board runs the business actively and hands-on. Internal audit functions have been strengthened, even in the subsidiary companies, and new purchasing rules have been introduced.

The airline is proud to be able to say it is now involving its workforce more than ever in the running of the company. The Works Council, set up earlier this year, meets management every two months while the four unions meet management jointly every month. Both sets of meetings get to see management accounts. An internal website has been set up with chat clipboards, news items and social matters for employees, while all employees get weekly information about weekly traffic and operational indicators, even though this is company-sensitive material.

The figures

Substantial progress on the road to break-even has been achieved, said Mr Zammit.

The August to March figures show a 16 per cent increase in revenue and a nine per cent increase in costs. Turnover is up from Lm54 million in the comparable period last year to Lm63 million this year and the operating loss is Lm4.819 million compared to Lm7.7 million in the comparable period last year.

The number of passengers carried has risen from 1.069 million in the comparable period last year to 1.273 million this year, also fuelled by the newly-introduced UK-based operations and the Catania – Gatwick service made possible by EU membership.

The 203,000 increase is made up of 32,000 more on scheduled services, 37,000 more on charter operations and 133,000 more through the UK-based operation.

The Available Seat per Passenger ratio increased by 20 per cent to 3.2 million.

As for the results of the rescue plan in figures, the airline today has 115 fewer staff than it had a year ago, 147,000 fewer hours have been worked as overtime and the airline has cut its gross salary bill by Lm1.650 million, of which Lm650,000 represents less overtime, Lm59,000 represents fewer management allowances and Lm168,000 represents what are called weighted units. Today the airline employs 1,633 people, 10 per cent less than a year ago.

Revenue per employee stands at Lm34.89 this year compared to Lm29.08 last year and plane utilisation is up, due to more aircraft leases in the winter.

The oil factor

Among the factors adversely impacting on the airline, Mr Zammit identified the price of oil as the most worrying.

The airline has spent 55 per cent more on fuel in the financial year to March than it spent in the previous year. The surcharges on air fares were in no way sufficient to stem the losses made, Mr Zammit said: they only recouped some Lm1.3 million of the Lm4 million increase.

And extrapolating the trend of oil prices over the next two years will see the price of fuel doubling in just three years.

The airline has also faced a 22 per cent increase in enroute charges, for traffic control.

Another worrying factor for the airline is the Lm835,000 fall in revenue it has experienced due to the liberalisation of ground handling and the entry of a second ground handling company.

As a result, excluding the oil price increase and its consequences, the airline’s operating result is better than the previous year’s by Lm859,000 but it still lost almost Lm1.5 million.

Another risk is that of currency exchange, due to the strengthening of the dollar, in which oil prices are quoted, and the exchange rates of the Maltese lira and the euro.

Commenting on the results, Investments Minister Austin Gatt said these are positive results and the unofficial results for the first three months of the year see the airline doing Lm900,000 better still.

The agreement is working, Dr Gatt said, and it shows that if all parties stay away from fighting out an issue in the media, and stick together for the good of the company, they can face up to difficult times. All parties must understand, he said – obviously referring to other issues – that those who use rhetoric head for the wall. It is far more better to cut down on waste and unsustainable working practices and to get an agreement which, while it may hurt those affected by it, at least saves their jobs.

Air Malta works in a competitive sector and it must not try and stand market rules on their heads. The company will survive only if it is commercially viable, otherwise it faces difficult decisions. It must face up to the challenge and it must not fear the future.

Replying to questions, the minister denied that Air Malta will be privatised next year. But the government’s long-term plan for the airline is to float it on the Stock Exchange, once its turnaround has taken place and it is profit-able.

The term “privatisation” implies a whole range of options, the minister added. Mainly, government does not believe it is there to manage business and so should not be trying to do so.

It was also revealed that Air Malta is considering setting up its call centre, like most other airlines. Given that the airline has a policy of no forced redundancies, it is also considering a range of affordable retirement schemes.

As regards the sale of non-core subsidiary companies, Mr Zammit said that the sale of Sterling is being finalised, while a call for offers for the sale of 100 per cent of Air Supplies has just been issued.

As for the hotels owned by the airline, it is negotiating with the government for the return to the government of the land on which the hotels are situated. Holiday Malta, the airline’s tour operator, however, will not be sold as it is considered part of the airline’s core business.

And lastly, an international call is soon to be made for the engagement of a chief executive officer.