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Air Malta reports a loss for the year ended 31-Mar-09

  • A small loss, but a conservative approach is sensible in the current environment

Malta’s Finance Minister, Tonio Fenech, has said that Air Malta is expected to post a loss for the financial year to 31-Mar-09, having been negatively affected by fluctuating fuel prices and the decline of the Sterling.

The airline reportedly made a profit of EUR3.7m (USD5.2m million) last year, but lost EUR8 million (11.3 million) and EUR16 million (USD22.6 million) respectively in the preceding years. No further details have been made available.

Earlier cost cutting will reduce Air Malta’s suffering

Air Malta’s 2008 accounts have not been released, although it expects the fall of the British pound to cost it more than EUR10 million (USD14.1 million), and last year’s EUR30 million (USD42.4 million) increase in fuel costs was generally absorbed, rather than being passed on through fare increases. This will have an effect on profits, the extent of which remains to be seen.

Several years ago, Air Malta began a restructuring process that that included investing in revenue management projects and negotiating new deals with its powerful unions, that has allowed it to shed more than EUR30 million in costs, with a 21% reduction in staff numbers over the past five years, despite an increase in flights over this period.

The airline does, however, concede there are still pockets of overstaffing to be addressed.

This has allowed Air Malta to move through the current economic with less difficulty than many other carriers are facing. It has an all Airbus fleet, leased from ILFC, that is well suited to cover regional destinations, and has thus avoided being weighed down with debt from expensive new aircraft purchases.

The airline has long been content to make codesharing arrangements with other airlines to permit its code to appear in more distant markets, rather than attempting to commit its own metal to long-haul routes. Some 60% of Air Malta’s flights are conducted under codeshares.

But fuel surcharge retention may be a bit rich

Air Malta plans to eliminate the fuel surcharge currently added to passengers' fares but not until Nov-2009 – despite the large fuel price drop over past months.

Passengers are now paying a whopping EUR50 (USD70.60) fuel surcharge on most return flights between Malta and points in Europe, while passengers flying to Moscow, Sofia, Istanbul, Manchester and Birmingham must pay an additional EUR2, because of the longer distance.

While confirming the company had decided to do away with the fuel surcharge from November, Air Malta has admitted it will be adding back some of the foregone fuel surcharge to base ticket prices,

The airline first introduced the surcharge in April 2004 and increased it in tandem with subsequent fuel price increases. In Jul-08, the price of jet fuel peaked at USD147 a barrel, but it has since dropped considerably. Most airlines have already reduced or eliminated their fuel surcharge, but Air Malta has held out and will be retaining the full amount throughout its peak season.

The airline claims the surcharge does not cover the full added fuel burden the company is incurring, which may have been true in the past, but seems to be drawing a long bow at present.

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