The signals being transmitted by Air Malta during the past few days indicate that severe turbulence has hit the balance sheet of the national airline while various other issues point towards an urgent need to restructure the company.

During the 2009 financial year Air Malta made a loss of €31m with fuel costs accounting for €18m of the loss and a weak sterling accounted for a further €12.8m.

The media revealed last week that Air Malta incurred a loss during the supposedly ‘peak’ summer months for the first time in recent history. With this summer loss, and fuel costs remaining a major burden on expenses once again, the operating loss for this year is expected to be more than €31m.

One of the mitigating measures proposed during the budget for next year was a one-time €100m capital injection through which the company would strengthen its share capital, restructure and become viable once again. The significant term used was ‘restructure’ meaning that the past six years of restructuring have not sufficed in turning around the company’s balance sheet to black ink. This was confirmed by the Prime Minister himself a few days ago when he expressed his dissatisfaction at the pace of the restructuring process and admitted that restructuring should have been more ‘aggressive’ during the past three years.

These are once again very significant statements when considering that this government has been spearheading Air Malta’s restructuring for the past six years. The restructuring process which started six years ago was at the time preceded by intense negotiations between the management and the unions representing the different groups of workers employed both on the airlines and the ground support staff. The measures which had been introduced, and which created much anxiety among the employees, were deemed necessary to eventually return to profitability and save the airline from crashing out of the scene. In today’s scenario, these measures seem to have had little or no effect on returning the airline into profitability.

In reality, the writing was on the wall for long enough to spur the authorities concerned into action to turn around the national flag carrier.

With hindsight it is easy, now, to criticise the work done when it was the same government which set the policy, and pace, of restructuring. Thus any statements made on the ‘aggressiveness’ of the restructuring process are superfluous at this stage. What matters most now is the level of commitment which government intends to commit to turn around the company. The airline industry has been characterised by heavy turmoil throughout the last few years as a consequence of the global financial crisis. Mergers and acquisitions abounded in a bid to save airlines from going bust and disappearing into the sunset forever with the recent being the tie-up between British Airways and Iberia. However, certain airlines also underwent a complete restructuring process, such as Alitalia, and the results are somewhat encouraging.

The legacy of a national carrier remains very important for the islands which have tourism as one of the main pillars of the economy and air travel is the most convenient means of arrival. Any measures which impact Air Malta require much thought and analysis on their impact on the multi-million euro tourism industry before being implemented. On the other hand, government has sent a clear signal that the national airline cannot remain a loss-making venture and a solution has to be found before the airline disappears into a black hole.