Air Malta back in Palermo

Air Malta’s return to Palermo after an absence caused by parallel traffic from Trapani saves Palermitans the trouble of driving to Trapani and gives them the opportunity to fly with a legacy carrier with no luggage or extra charges, as well Maltese wanting to take the opportunity to discover Palermo and the western central part of Sicily. Air Malta announced that the route will continue during the winter.

Air Malta’s code-share partner Meridiana links New York from Palermo. It could be interesting as a further transit alternative via a compact airport alternative provided coordinated schedules.

Clarification and background on another report

Another newspaper recently carried an item regarding the Air Malta – Alitalia MoU. In fact, one of the persons consulted, allegedly a regular contributor with a neutral standpoint, has possibly a not-so-neutral one, as long-time observers of the airline scene in Malta might remember. 

Indubitably, as also pointed out in my article on a possible Etihad partnership in The Malta Independent on Sunday at the beginning of the year, having a strong strategic partner behind Air Malta is necessary as regards procurement power. But some issues require some clarification. 

Regional operations vehicles

Clearly one cannot compare the “regional divisions” of Lufthansa (or other network carriers in Europe or the US) and their manpower strength per aircraft to Air Malta in an undifferentiated way as unfortunately happened there. These set-ups, like dissolved Augsburg Airways or Contact Air, or currently Cityline, are legal-commercial frameworks to operate certain regional aircraft cheaper by avoiding scopes of pilots’ pay. These set-ups consist of just the planes, the crews flying on them, and a very bare management structure required for the operation. 

These firms provide bare plane flying for reasons of lower pilot wages, nothing else, therefore requiring minimal services, administration and management. 

All the network planning, general commercial side, schedules, airport contacts, ground handling, maintenance from line to heavy, and whatever else is provided either by the parent company or its subsidiaries, or external providers. Air Malta provides a good lot of these in its own case, and in part to others too. Then economies of scale come in. 

Yet one also has to see not just manpower but rather manpower cost – because Malta boasts about low costs compared to elsewhere. If one wants an Air Malta providing all kind of services and infrastructure for the economy, including but not only meaning tourism, then obviously these services require staff, meaning cost and according headcount.

One can also mention examples like Ryanair where a good share of the pilots are self-employed service-providers who are not paid when sick – so of course they have less own manpower per plane. 

Cyprus

It was far from relevant to mention Cyprus flourishing once/despite Cyprus Airways was gone.

Cyprus Airways in the end held about 10 per cent of the market share – Air Malta today is in the 40s despite contrary efforts. A market exit impact would obviously be stronger than the Cyprus case. Air Malta needs to maintain a market share making it “too big to let fail”. To achieve / continue this, Air Malta must gain both the financial ability and permission to expand freely – many good route opportunities for Air Malta have been slept over – or lost to subsidized low-cost airlines due to the limits of the restructuring programme.

Cyprus Airways failed primarily because of:

• over dimensioned wide-body aircraft joining the small fleet for the sake of providing ‘cargo capacity’ and ‘peak capacity’ without considering the impact on the carrier for most of the year and the enormous cost of running long-haul jets on European routes in a high fuel price period

• highly subsidized low-cost flights thrown at them in parallel not making things easier on the commercial side in an (understandable) bid to boost tourism when Cyprus was feeling the effects of the financial crisis in the Hellenic states and source markets

• dropping the multi-channel distribution base

• Turkish air space blockade causing them a lot of extra cost

Also bear in mind the issues of a number of sea/sun destinations such as Egypt, Turkey and Tunisia where tourists from the EU, but also Russia, have been seeking alternatives leading to growth in ‘safe’ countries hence including Cyprus, marketing initiatives of local tourist authority, government and tour operators, and of course no doubt also route developments to so far not directly connected places, and definitely also some carriers putting the destination on the radar for more tourists.  But one should not imply a connection between the ceasing of Cyprus Airways and a therefore resulting improvement of tourism. 

Air Malta not superfluous

Contrary to the suggestions in that item, Malta’s global connectivity, which needs to be secured, requires reliable network links not only to Heathrow and Frankfurt, but from as many hubs as possible. Low-cost flights with no connections are no help on this.

Every additional hub connection spreads Malta’s connectivity well beyond the certainly important point-to-point traffic provides passengers with more choice, lowers fares, and can help optimize flows. 

Air Malta partners numerous network carriers might themselves not want to risk operating at that frequency or at all – particularly off peak (making the difference between Malta and most other Med islands), at the frequency, or during periods of lesser business. 

Malta is a peripheral island economy requiring reliable links that are not beyond one’s control. 

Air Malta employees also contribute directly to the local economy, not least through their taxes, social security etc paid in Malta rather than elsewhere (see cabin crew contract of a certain low-cost airline). 

Only strong airline networks can provide a global infrastructure for Malta as a nation and an economy with a wide range of choices. And Air Malta is the one-stop shop for Malta for these different airline networks. 

Transparent reporting

Of course anybody, including Ryanair, or anybody commercially associated with them as representative, or intermediate with a government, past or present, surely with the according financial reward, can be asked for their opinion / comment on the Air Malta / Etihad Group case.  Yet one would at least have expected that in today’s circumstances an investigative newspaper would provide the actual background to the statements given. The comments made on Air Malta are in view of these interests. 

Connectivity in case of an Alitalia-Air Malta-Etihad deal

In conjunction with the MoU, it has been mentioned that Air Malta passengers and destination Malta in general will profit from better connectivity (so better compared to now). 

While not going into network analysis details here, interested readers are invited to compare the network of Alitalia (and, if one wants, add also Air Berlin as another Etihad equity partner) to that of Air Malta’s current code share partners Lufthansa Group (Lufthansa, Swiss, Austrian, Brussels Airlines) and Air France/KLM combined, not mentioning others, for those markets actually relevant to Malta as realistic current and potential source markets on the one hand in western, central and eastern Europe, on the other hand for North America and to some extent also Asia. Air Malta also profits from the network of low-cost airline Eurowings, as Eurowings flights under the Swiss code feed into Air Malta’s Zurich flight, vv..

Alitalia’s current agreements with Air France/KLM will end in January 2017. In a mid-to-long term perspective, the cooperation with US network giant Delta have a big question mark behind them.  

If a similar policy is adopted, one will have to see if this would really be an improvement. Today Air Malta acts as gateway carrier for two big alliances and can profit both from short-haul feeders linking to (longer) Air Malta flights inside Europe, plus taking a part of the long-haul cake when networkers put their passengers on an Air Malta flight for the Malta segment.  It like this opens Malta to networks which might not serve the destination at all otherwise.

Air Malta serves Malta well because it consolidates all kinds of traffic onto their flights, and maintains year-round frequent hub connections for both airline groups with Frankfurt, Munich, Zurich, Vienna, Brussels, Paris and Amsterdam.  The revitalization of code-shares with CSA and Aeroflot means further potential for central and eastern European as well as Far East Asia markets via Prague and Moscow. Air Malta as a highly specialized very small airline with one product to sell (flying to/from Malta) needs the marketing power/visibility of these systems.

Currently, Air Malta passengers (particularly flying on Air Malta planes under respective code) from/to the Americas can profit not only from the above networks of European carriers, but also through the onwards agreements from the United and Air Canada (Lufthansa Group code-share partners) and Delta (Air France / KLM code-share partners) networks. One can compare this potential vis-à-vis the network of Alitalia for connections – particularly without Delta.

If, in the worst case Air Malta ends partnerships, one needs to attract more network carrier capacity. Hence one should not make these hubs commercially unattractive by installing low-cost at any cost parallel flights. The same applies to the Alitalia/Air Berlin hubs. 

The deal could clearly improve the Australia-Malta connectivity. 

A partial ownership of Air Malta by Etihad, via Alitalia, might hopefully allow Air Malta to continue cooperating with at least some European network carriers that are not direct competitors of Etihad equity partners. Clearly it does not depend entirely on that side. But if it helps Air Malta maintain market share and profit, Etihad might hopefully consider this