08 March 2006

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Business Today

Air Malta’s profit warning

By a special correspondent

The fourth quarter results announced recently by Air Malta could have easily qualified as a ‘profit warning’ had the company been a quoted company on an overseas stock exchange.
The company gave an outline of its operating performance on traffic handling for Q4 2005, as well as a review of the first 9 months of its financial year. Air Malta’s financial year extends from April to March.
The results registered by Air Malta are not something which other airlines have not experienced.
In the first nine months of its financial year, Air Malta registered operating revenues of Lm81.5 million, being Lm2.7 million less than that registered for the same period in the previous year. Overall the operating loss for the first nine months of the financial year, was Lm2.3 million against a profit of Lm291,000 for the period April – December 2004.
Air Malta’s CEO commented that the shortfall in revenue was registered on the Malta operations and on handling operations at MIA where Air Malta is now competing with a second ground handling operator. The company also experienced reduced unit revenues even though it experienced improved results on its intra-European operations.
Here is one company that is exploiting the opportunity created by the single European market.
The company has succeeded in improving its operating cost base by Lm600,000 despite the fact that its fuel bill alone rose by Lm4.6 million even taking into account the hedging income.
The company reduced its labour costs and carried out a number of business process reviews over the year but the results were still conditioned by low traffic.
The worst months for Air Malta’s financial year are January to March when tourist traffic is low. Moreover, it is seeking to maximise revenue generation activities whilst not allowing costs to get out of hand.
Air Malta shows that it is able to compete in a tough environment. Indeed this company has been competing against other operators since its inception but there is the need for further measures to get the airline back to profitability levels.
It is evident that had there not been any increase in fuel costs, the company would have registered better financial results following a series of cost curtailment measures it undertook.
The statement published by Air Malta only related to the company with no indication as to the results of the Group.
A past slogan of Air Malta was ‘We are going your way’; what is certain is that management needs to remain focused to take the company where it wants to go.

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