David Darmanin
The national carrier’s CEO has once more expressed displeasure on government aid granted to low cost carriers to operate to Malta.
Reacting to Ryanair’s recent announcement of its plan to open a base in Malta, Air Malta CEO Joe Cappello hotly contested the increase in government subsidies to the LCC for increasing its current 13 routes to 19.
Quoting a recent Air Malta report, Cappello argues that the €1.2 million subsidy given to LCCs in 2009 “should rather have been spent in promotional advertising of tourism to Malta.”
The grant, allowed by EU law under the route support scheme, subsidises landing fees for airlines flying from underserved airports.
“Subsidies are making it cheaper for Maltese to holiday at LCCs destinations than in Gozo,” Capello said. “Air Malta cannot say that it has not suffered passenger displacement, however it has been able to compensate with other traffic from other markets. Nonetheless the subsidies given to LCCs at this end – combined with similar subsidies given by the origin airport – have put significant pressure on Air Malta’s revenues.”
From 2005 to 2009, total passengers at the Malta International Airport increased by 165,092, while Air Malta’s passengers increased by 82,073. The two major LCCs (Ryanair and Easy Jet) increased by 627,348. Other airlines dropped by 544,329.
“Air Malta’s stand on the LCC issue has remained unchanged,” he said. “We have always advocated a level market and believe that through subsidies one risks skewing the market which could be detrimental in the medium and long term for the island’s tourism industry.”
Cappello stressed that Air Malta’s route network has been built by sustained investment over many years, and without any subsidies from public funds.
“We have always harped on the need to preserve a level playing field where all airlines including LCCs compete with similar opportunities without having preferential access to market support schemes or incentives targeted to particular airlines,” he said.
Reacting to a study in the Journal of Aviation Transport that argued that LCCs attract “younger and more affluent tourists to Malta”, Cappello dismissed the results as “skewed”. He adds that the findings do not necessarily denote that the national airline’s core market is made up of older and less affluent tourists.
“Since LCCs use the internet as their only source of distribution network, then it is normal that these airlines transport younger generations,” he said. “LCC sales are limited to one single sales channel – the internet. Air Malta sells through all available sales channels, including an increasingly high internet sales element… one cannot infer that Air Malta attracts older and less affluent passengers,” Cappello said.
However, studies prepared by Air Malta show that the national airline’s core market is made up of the middle-aged and senior citizens. 29% of the airline’s customer base are aged anywhere between 35 and 49, while another 29% of its market is made up of travellers aged 50 to 64. 13% of Air Malta passengers are 65 years and over while only 8% are aged between 18 and 24 years. 3% of the passengers are under 18 years.
On the claim that LCC passengers tend to be more affluent, the Air Malta CEO said that there is a fundamental difference between a passengers’ average income (which was the basis used for the study) and tourist’s expenditure while on holiday.
“We believe that average income is not a good indicator of how much tourists are spending whilst on holiday in Malta,” he said.
The national carrier claims to have a visitor profile that is more diverse as it attracts tourists coming to Malta for purposes of leisure, conferences, or for visits to friends and family.
“Air Malta supports Malta’s tourism diversification needs better – a good strategy in times of recession,” he explained.
The same UK report claims that LCC passengers coming from the UK are less likely to choose Malta for history or culture when compared to UK tourists travelling with other airlines.
“The report highlights LCCs’ failure to deliver on this count, which is a tourism policy goal,” he charged. “This statement is very worrying.”
Cappello argues that the Maltese tourism industry suffers from huge seasonality dispersion.
“Our islands are practically full in July and August with excess hotel capacity in other months especially in winter,” he said. “The LCC lobby in Malta has strongly advocated that Malta’s tourism problems are largely tied to route accessibility and airline seat availability. Air Malta on the other hand, has successfully worked upon trying to lengthen Malta’s summer season to the shoulder months (May to November). We concentrated our marketing efforts abroad on the short break holiday market segment and the island’s potential in the lean months.”
Back to the study, where it is revealed that there seems to be a greater proportion of LCC passengers staying in self-catering accommodation, or staying with friends or relatives.
“If this is correct this is also a worrying statement for the local hotel business,” Air Malta said. “We have been in this business for over 35 years and know how complex and complicated it can get. Thus we have always advocated (and will continue insisting to maintain) a level playing field and not to make the mistake of seeing short term gains whilst alienating partners that have contributed to the establishment of the Malta tourism industry we know today.”
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