Is it time for a regional revolution in Malta?

8 May, 2017

Can smaller capacity regional airliners be the solution to Malta's connectivity challenges, and to balance out schedules due to seasonal peaks and troughs? 'Regional Connectivity and Second Tier Operators' was the main theme of the sixth edition of the BOV Aviation Outlook held at Bank of Valletta's head office in Santa Venera and featuring the most influential players in the Maltese aviation industry. The conference was hosted by Bank of Valletta CEO Mario Mallia. Hon Joe Mizzi, Minister for Transport and Infrastructure was also present.

"Located in the centre of the Mediterranean, the Maltese islands have traditionally been known for their thriving tourism industry and have historically been a hub for maritime activity," said BOV CEO Mario Mallia in his opening address. "The Transport market is a key sector with high growth potential in the Maltese Economy."

Malta is now seeking to take its strengths as a hub for maritime activity into the sky through growing its aviation sector, attracting internationally renowned entities to set up operations in Malta. As part of its economic development strategy, Malta is supporting diverse sectors in the aviation industry, including, but not limited to, maintenance, repair and overhaul (MRO) operations, back-office setups, R&D and the production of aircraft components. The recently announced six-bay hangar for SR Technics endorses Malta, a premium location for the MRO industry.

The Malta flag's attractiveness has already proven itself in the maritime industry, where the Maltese Shipping Register is the second largest in Europe and the eighth largest in the world. Recent initiatives to boost aircraft registration are indicative of the country's enthusiasm for the aircraft register to follow in the footsteps of the shipping register.

"A modern legislative framework and straightforward registration process mean that Malta is now a recognised address for the registration of both corporate and private jets, with over 250 aircraft on its register and 32 operators being holders of a Maltese AOC," said Hon Mizzi. "I am informed that as we speak another five new applications are being processed which could see the number of AOCs approach the 40 mark by the end of the year."

After four successive years of passenger growth, traffic demand in and out of Malta is now clearly on the rise as the nation continues to reinvent itself as a leisure market. The arrival and growth of low-cost air travel means that 100 destinations are now served directly from the island and Ryanair is now officially the largest airline.

National carrier Air Malta has been restructured, albeit is still in need of a major investor to safeguard its future, but is celebrating the recent launch of flights to Tel Aviv, Israel and its return to North Africa with Tunis, Tunisia from the end June 2017 with a schedule designed to offer transfer connections through Malta International Airport. Its unit costs are efficient compared to other European legacy airlines, but remain higher than the level of the LCCs with which it competes with its short-haul, non-premium, point-to-point offering.

The conference's international guest speaker, CAPA's recently appointed european content editor, Richard Maslen, highlighted how Malta is witnessing a renaissance and raised the question: "does the maturity of Malta's aviation market make room for a second-tier operator in the country flying regional equipment?"

Setting the scene, he said: "Last winter's flight schedule was over a fifth larger than the previous year and this year's summer schedule in Malta will be around 15 per cent larger than summer 2016, based on current published schedules.

This growth has been largely facilitated by the arrival and growth LCCs with a share of capacity rising from just ten per cent in 2007 to almost half in 2017. "Ryanair is a great example of an airline that sees the potential of the market growing, starting with one aircraft based in Malta in May 2010, increasing to two crafts in May 2012, three from March 2016 and four from March this year," said Mr Maslen.

Air passenger demand is currently heavily dominated by flows from Italy and the UK where LCCs have already entered the market and those two countries account for over two million annual two-way O&D passengers per year and are home to the six largest markets connected to the island - the Malta - London Gatwick route alone accounted for almost seven per cent of passengers in and out of Malta in 2016.

"It is clear that Malta has never been better connected, but it continues to suffer from significant seasonality in demand and has led to frequency reductions in low and shoulder periods and notable fare reductions as airlines seek to fill aircraft," Mr Maslen explained. "The use of smaller capacity regional airliners is one solution that could allow operators to modify schedules to better meet demand and balance out the operational peaks and troughs."

After six years working closely with the air service development community, Mr Maslen looked at some of the markets that could perhaps support new direct connectivity in and out of Malta based on current passenger travel itineraries. "Interestingly, the largest unserved point-to-point markets in 2016 were Tokyo, Manila, Toronto and Melbourne. However, the likes of Gothenburg, Lisbon, Tallinn, Aberdeen and Venice are much more realistic targets, as are Nice, Cairo and Kiev," he said.

"In order to deliver sustainable growth it is essential that stakeholders all work to deliver what is best for Malta's future air connectivity. Malta International Airport, the tourism industry, major local business should collaborate with similar organisations in target markets and work hand-in-hand to deliver enhanced aviation connectivity," he added.

Hon Mizzi said the BOV Aviation Outlook discussions "continue to accentuate the fact that Malta, albeit a small country, has a lot to offer even in the aviation sector". He added: "I am proud to say that aviation is fast becoming a major contributor to the country's continued growing economy. The Aviation sector is a fundamental industry for economic growth, job creation and mobility within regions and between regions."

The Minister noted that operators themselves say that Malta is "an ideal jurisdiction" and Malta's growth in the aviation sector will create further jobs, thereby strengthening its connectivity with the EU, both with respect to tourism but also in relation to goods and services.

Connectivity is a crucial element for the growth of any economy and any society. A well-developed transportation system allows for linkages between different regions creating bridges for the flow of goods and services and also helps to nurture culture, information and social interactions, and cohesion."

"Direct links help to reduce travel time, enhance comfort and if the right aircraft type is deployed could be very much more cost effective, "said Hon Mizzi. "Route analysis needs to be conducted to determine the potential of every route. Smaller operators with more suitable aircraft could revitalise routes abandoned by bigger carriers who can only deploy large assets which are not viable financially and sometimes even technically viable. Having said that, airport operators must look positively at smaller second tier operators and provide them with adequate levels of service."

Other speakers at the annual event included well-known entrepreneur Martin Degiorgio, who has pioneered operations to a number of destinations from the Maltese islands as well as university lecturer Dr Alfred Quintano who in the past was a senior executive at the national carrier.