Ever since the aviation market was liberalised at the turn of the century, legacy airlines urgently needed to redefine their strategy and reorganise their operations.
After promoting globalisation, the aviation industry seems to be stuck in a mercantilist past dominated by national pride and special interests.
The Open Skies agreements are the bedrock of the European Union’s external aviation policy and its commitment to fair competition within the Union. Air Malta has found its transition to a liberalised market in the last two decades exceedingly difficult. The national airline is still struggling to take off after various attempts to define a viable strategy and reorganise its operations.
Air Malta now faces its last chance to convince the EU competition regulators that it has a viable future if only it is granted yet another big injection of taxpayers’ money.
Malta has asked Brussels for permission to pump €290 million into Air Malta in the last-ditch attempt to save the ailing airline.
Inevitably, like all European airlines, Air Malta will argue that it has been adversely affected by the pandemic.
The EU acknowledges this sobering reality. In fact, it has already made significant concessions for state aid to ailing aviation giants like Lufthansa and Air France-KLM.
However, the acid test that the EU negotiators will apply will be whether an airline was profitable and solvent just before the pandemic.
The agreements of different airlines struck so far with the Brussels competition authorities could indicate what Air Malta can expect in return for approval of more state aid.
Air France-KLM and Lufthansa have been told to give up a few airport slots. Alitalia, which was struggling before the pandemic, is expected to give up many more lucrative slots that competitors will take up.
Air Malta has already sold its valuable London slots to a government-owned entity. It has even sold its intellectual rights and its brand to its shareholder. This asset stripping may make it difficult for striking a quid pro quo with Brussels.
The delays in publishing accounts will not positively reflect Air Malta’s commitment to taxpayers who are keeping the airline flying.
The most challenging task for the Air Malta negotiators will be to convince the competition authorities that the airline has a robust future strategy.
Air Malta has dished out various strategies in the past few years. None of them have proven to be viable.
The establishment of Malta as an aviation hub for other major airlines, the merger with troubled Alitalia and the ambition to become the favourite airline of the Mediterranean have all proven to be no more than wishful thinking.
The sobering reality is that, in Europe’s overcrowded skies, small airlines often lack the economies of scale to survive.
Focus on cost control matters. But it has its limits. The bigger airlines have the financial clout to modernise their fleets to make them more fuel-efficient and capable of meeting strict environmental criteria.
Further headcount reduction is unlikely to make much difference for Air Malta’s long-term viability.
The determining factor that will decide Air Malta’s future will not so much be convincing the EU that the national airline is of strategic importance to the country.
It will be about how credible the new restructuring plan will be to stem financial losses, improve efficiency, engage in fair competition and enhance consumer benefits.