11 - 17 January 2001

Air Malta still considering increasing fares by 5%

by Franco Aloisio

As a result of the considerable increase in its fuel bill, Air Malta is still planning to increase its air fares by five per cent as from next April, sources close to the national airline said this week.
Although oil prices have stabilised to US$25 a barrel, last year’s escalation in prices has left its mark on Air Malta’s profitability, with a barrel reaching US$35. The sources told The Malta Business Weekly that Air Malta would be increasing the fares in line with what other airlines in the world did over the past months.
When presenting the company’s annual financial results last year, Air Malta chairman Louis Grech had announced that the airline’s fares were expected to increase in 2001 as a result of several induced costs such as the escalation of the price of oil over the past year.
Mr Grech said this year Air Malta’s fuel bill went up from Lm7.5m to Lm15m, an increase which wiped out Lm3m off the airline’s profits. Despite the surge in the cost of oil, Air Malta still recorded a pre-tax profit of Lm6.3m for the year ending in March 2000. The company’s turnover totalled Lm124m, against the Lm108m of the previous year.
Mr Grech had said Air Malta was not planning to increase its air fares until March 2001. However, if the international situation with regards to the price of oil persisted, the company had said it would have to revise upwards the fares.
There were other factors which have reduced the profit margins of the company, such as the increase in Air Malta’s payroll. The company paid over Lm21m in wages in 2000, an increase of Lm4m.
Other factors which reduced the company’s profitability included the cost of leasing an aeroplane to cater for inbound tourists from the German market, and the devaluation of the Libyan Dinar together with the appreciation of the US dollar.
Despite these factors, Air Malta still managed to increase its turnover and profits, mainly as a result of rationalisation plans adopted by the company. One such plan was the agreement signed with Lufthansa Technik and FLS Aerospace covering the management and overhaul of Air Malta’s engines and aircraft components.
Over the next years, Air Malta will have to change its fleet, an investment spread over a period between five to seven years that would amount to US$400m.