Former CEO: Government involvement is Air Malta's major 'cancer'

Former CEO of Air Malta (IATA: KF), Philip Micallef, who served the airline between October 2014 and September 2016, says that Air Malta's major 'cancer' is the government's strong involvement. Micallef, who spoke to AeroNewsX on 17 April called on the government to limit its involvement in the management of the airline.

Air Malta Airbus A320neo reg. 9H-NEB. Photo by Max Sutter │ AeroNewsX

Air Malta has a fleet of 10 aircraft, comprising 1 Airbus A319, 6 Airbus A320-200s and 3 Airbus A320neos. The carrier has reported consistent losses for the last two decades, with the exception of the financial year ending March 2018. The announcement of the carrier's first profit in two decades was a massive achievement for Air Malta as it was also awarded the 'Turnaround Airline of the Year' award by CAPA.

"This was great news but one still needs to see whether this profit can be sustained in subsequent years as the April 2018 to March 2019 results as well as the April 2019 to March 2020 results have not been published yet. It is extremely important to continue this positive trend and that the April 2017 to March 2018 results were not just a one-off. This profit in financial year April 2017 to March 2018 can be attributed to the fact that Air Malta was no longer under the European Restructuring regime constraints, [and] reaped some of the benefits carried out during that period and could now implement a new sales strategy and increase routes and passenger numbers and revenue. This was coupled with better aircraft utilization, the much needed investments in IT technology, decrease in fuel costs and aircraft leases and new collective agreements which aimed at giving a strong base for improved productivity," explained Micallef.

Air Malta has, in the past, been known to consistently lose money. Its losses have been put down to heavy competition, high fuel prices and expensive salaries. The former CEO added that some of the airline's losses in past years can also be attributed to the political tensions in North Africa, notably in Libya - 'by far the most profitable' market. Air Malta has served Tripoli (Libya) since its inception in 1974.

Indeed, there are a number of other factors that led to the carrier's losses over the last two decades.

"The major 'cancer' with Air Malta over the years has been the strong involvement of [the] Government in running the business and interfering in the management of the company. It is useless to employ professional people to manage the airline and then not allow them to run the airline."

To maintain profits, Micallef called on the government to reduce its involvement in the airline and allow the management to 'unleash their full potential'.

"Many expatriate Chief Officers have been employed in the past yet were not allowed to unleash their full potential as airline managers due to unnecessary interference. The major change I would like to see is for Government patronage to stop completely and [the] appointment of an independent board of directors. A successful company is led by an effective and entrepreneurial board whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to the wealth of Malta. Board members should not be political appointees. This is purely my personal opinion," the former CEO explained.

Micallef then explained his position in regards to the newly formed Malta Air. When asked, the CEO mentioned the demand for Maltese services and described a synchronised operation in which Malta Air and Air Malta cooperated in order to further improve connectivity. Malta Air was formed as a joint venture between the Maltese government and Ryanair in June 2019. The airline would assume all the Ryanair routes to Malta with plans to grow beyond that. The carrier's livery includes the classic Ryanair paint scheme in addition to an 'Operated by Malta Air' sticker.

Philip Micallef explained: "I had already left Air Malta when Malta Air was set up and no discussions or decisions took place during my term. I am thus not privy to the rationale behind the decision of setting up Malta Air. What is certain is that Malta has a catchment area of 500,000 residents and at best 2 million visitors every year. It [Air Malta] needs to carry more passengers if it wants to grow and Malta Air could guarantee this expansion if the two airlines complement each other and not compete. Malta Air is a good initiative but if the strategy of Air Malta is to expand beyond Europe a joint venture with non-European airline could have been studied but as I said I was not around when the decision to set up Malta Air was taken."

Air Malta Airbus A320neo reg. 9H-NEB. Photo by Max Sutter │ AeroNewsX

Concluding the interview, AeroNewsX asked the former CEO whether Air Malta was strong enough financially or valuable enough for the government to survive the coronavirus pandemic.

"Air Malta is extremely valuable for the government and I am convinced that Government will take all the necessary measures to salvage the airline. Successive Maltese Governments have declared Air Malta to be a strategic asset for the island as a pillar of tourism which accounts for 13 per cent of Malta's GDP and guarantee transport of medical passengers and essential supplies. Air Malta, although carrying 80 per cent foreign passengers, is too politically sensitive for any Government to ignore. On its financial strength one can only judge after the April 2018 to March 2019 and April 2019 to March 2020 accounts are made public."

AeroNewsX would like to thank former CEO of Air Malta, Philip Micallef, for having agreed to this interview.

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