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Kurt Sansone
Next Wednesday is the unlikely deadline for the implementation of wide ranging reforms at Air Malta, but with unions showing little willingness to take on board government’s proposals for change, industrial action may be starring us in the face.
As the Air Malta saga slowly unfolds, a story of business decisions gone wrong, poor management and political intrigue emerges. Air Malta’s woes are not simply restricted to the last three years and, as this newspaper reveals today, the airline had a forewarning of inefficient work practices in at least one area of operation way back in 1995.
The 1995 report, known as the Saunders Report, was eventually shelved by the 1996 Labour administration and was not re-activated by the 1998 Nationalist administration.
But Air Malta is not just about extravagant work practices and conditions, which sometimes border on the ridiculous. It is also a case of political intrigue.
Unions keep referring to the purchase of the Avro RJ aircrafts in the early nineties as a case of mismanagement and money going down the drain. The business decision taken under PN-appointed chairman Joseph N. Tabone to purchase the RJs was conditioned by the thinking that Air Malta could benefit from the airline hub concept being born at the time.
However, the purchase in 1993-94 was flawed as the final contract did not make provisions for the performance guarantees that evaluated trip costs for 10 years. The result was a business decision gone awfully wrong that still hounds Air Malta.
Today, government wants to close the door on that episode but questions still linger. In 1997 under Labour-appointed chairman Louis Grech, Air Malta board directors had asked for an inquiry into how the Avro’s were purchased.
The directors at the time were still those who had been appointed by the Nationalist administration prior to the 1996 election. The inquiry eventually started and Godwin Muscat Azzopardi was entrusted with the investigation.
However, Muscat Azzopardi was asked to stop the inquiry a couple of weeks later by someone in the chairman’s office. What led to the cancellation of that investigation remains a mystery till today and Investments Minister Austin Gatt has no intention of re-opening that investigation.
Another dubious decision was the one taken during the 22-month Labour administration when Air Malta Chairman Louis Grech led subsidiary Azzurra Air, ‘the unwanted child’ into an agreement with Alitalia that stripped it of all its identity. The repercussions were deep and the already failing venture never took off the ground after that.
Government insists that the door on that episode be closed as well.
Come 1998, the PN is returned to power and Louis Grech is kept as chairman by then economic services minister Josef Bonnici.
The airline’s accounts indicated a profitable bottom line but little care was given to the fact that the core business, passenger transport, was loss making. A look at the annual accounts for the year 2002 shows Air Malta making an operating profit of Lm109,000. But that is inclusive of the money made from the leasing of the RJs to Azzurra Air, an arrangement that was hardly expected to continue. In reality, Air Malta’s core business was already making a loss.
The year 2001 dawned and with it came the dreadful September 11 terrorist attacks and their aftermath. The red lights started to flash as one foreign airline after another downsized, cut costs, re-evaluated routes and embarked on reforms to withstand the negative impact of reduced passenger travel. Surprisingly an Air Malta internal report that recommended certain changes was once again shelved. It was too risky for the PN administration on the eve of an important electoral appointment to stir the waters.
Everything continued as usual and as a result Air Malta accumulated losses to the tune of Lm17 million over a three-year period.
Low-end employees, managers and directors alike continued to enjoy the benefits despite the losses with government not batting an eyelid at the deteriorating situation. To add insult to injury, the Nationalist administration pushed for the employment of around 120 people as part-time loaders on the eve of the 2003 election, who were eventually engaged as full time workers. The burden was further increased.
Now, things have come to a head. The cost cutting has become an inevitable solution in the face of a reality, which risks sweeping Air Malta off its feet.
Past mistakes, political interference, government inaction, mismanagement and union arm-twisting have brought Air Malta to the state it is in. The average wage has been calculated at around Lm12,500 yearly but not everybody at the airline earns that astronomical sum. Managers, group heads and top-end employees have luxurious fringe benefits as much as the lower-end employees enjoy banal allowances. The strain on Air Malta’s coffers is multi-fold and runs from top to bottom. A greater effort has to be made to curb excesses at all grades. The first signal sent was the reduction of the chairman’s remuneration and the capping of the daily allowance when doing airline business abroad at Lm30.
Starting a new page will not be easy unless responsibilities are shouldered. And with Austin Gatt insisting that this was not a time for finger pointing, government will find it increasingly difficult to introduce the reforms. Pandora’s box may yet be opened.
kurt@newsworksltd.com
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