There’s something suspiciously odd about Air Malta’s accounts. Its losses are supposed to have shot more than threefold from 4 million euro in March 2016 to 13 million euro in March 2017. The huge losses are being leaked when negotiations with some of the employee unions are nearing their crux point. Management want the airline’s prospects to look bleak to ensure unions are modest in their demands.
Speaking to The Times, Konrad Mizzi acknowledged the situation was “bleak” and “said the airline should manage to break even by next March if the unions accepted the new packages on offer, the sources added”.
Now that does not make sense and that’s not just because Konrad Mizzi is saying it. If Air Malta’s finances are so volotile that losses could veer downwards by 9 million euro in a 12 month period, how can Konrad Mizzi even have an inkling that finances could be veered by 13 million in the opposite direction in a 3 month period?
Probably because he’s lying.
The great slip into the dark seven figure losses is being attributed to fuel hedging gone wrong.
Another The Times report says “Air Malta management has blamed its massive losses on a fuel hedging agreement, but believes the airline will break even in just four months’ time.”
‘Hedging’ is one of those words designed to make the eyes of trade union negotiators go all wide and glossy in awe and acceptance. But let’s look at the facts, shall we?
The ongoing fuel hedging agreement at Air Malta was introduced before 2013 when Peter Davies was running the company. At the time oil was at a 140 euro. The commitment entered into was for 1st January 2014 to March 2017.
In March 2016, the airline ended a financial year with 4 millions in losses. During the high season for that year (Summer 2015), 70% of Air Malta’s fuel needs were procured at hedged rates. The rest was bought at market prices. Later in the low season of the same financial year, 60% of the fuel bought was hedged. The rest was bought on spot prices. OK so that year ended with 4 million losses.
Let’s move on to the following year when losses went up to 13 milion ostensibly because of hedging. But actually during the summer of that year only 40% of the fuel Air Malta bought was on hedged rates. And 20% during the low season.
So during the year when losses were at 13 million most fuel was not hedged but during the year when losses were at 4 million most fuel was. So how can anyone blame increased losses on hedging?
Now we are looking at reaching break even by this March. Even if operating costs will at least increase by a further 6 million because Air Malta is leasing a new plane and wet-leasing a smaller one. Air Malta is also gowing for 6 new routes with all the start-up costs that brings with it: at least half a million for each new route.
There’s one other reason this ‘blame it on hedging’ thing looks like a load of bull. Joe Gasan was the Air Malta board member with the task to oversee and managing hedging for Air Malta. If hedging is to blame for such a disastrous financial result the last thing you’d expect would be for him to be the only director to be retained by Konrad Mizzi when he replaced all appointees of Karmenu Vella and Edward Zammit Lewis.
Apart from crippling the unions’ negotiating position, Konrad Mizzi looks like he has a more transparent plan for exaggerating Air Malta’s financial situation. Reporting a reversal of such a spectacular loss will make him look like a miracle worker. Because nothing short of being that can justify his continued political existence.