31st May 2009
The Malta Independent on Sunday
The Malta Independent on Sunday
One should not
underestimate the seriousness of this report that was featured in the media this
week:
“Ryanair accused Malta International Airport of holding the country’s tourism industry to ransom, being only interested in lining the pockets of its shareholders by imposing high charges.
“The low-cost airline said the airport was misleading the public by claiming its airport charges were within the EU’s average. It said MIA’s cost per passenger was more than three times its average.
“An airline spokesman said that if MIA, which he called a private monopolist company, was genuinely interested in the economy it would cut airport charges by offering a discount scheme to all airlines. This would stimulate passenger traffic, which would directly impact the tourism and leisure industries while also improving the business prospects for the country.
“The comments come as Malta, like other tourist destinations, is struggling with the effects the global financial crisis is having on tourism. Tourism spending has declined by 10.7 per cent compared to 2008.”
Let’s establish some facts. Firstly, MIA is a private monopoly de facto and there is no need for Ryanair or anyone else to claim it. It is an undisputed, evident fact.
Secondly, I have no brief from Ryanair or any other airline. All things being equal I prefer travelling Air Malta as a matter of national pride and have great admiration for the organisation, its management and staff.
Recently, I travelled by Ryanair to a destination not serviced by Air Malta. I was impressed. It is a no frills airline but utterly efficient. What you see is what you get. We left on time and arrived at destination ahead of time. We got off the plane very expeditiously and the baggage was delivered in record time. What else do you want when the trip is just around two hours?
In this case I certainly agree with Ryanair that MIA should not compare their charges with the European average, which takes into account business airport hubs in the main European business centres. We are no Heathrow, Frankfurt or CDG! We should compare ourselves with airports that primarily service tourist traffic, with airports in tourist resorts. If our airport charges are not competitive with such airports then we are putting ourselves at a disadvantage.
This brings into serious question the wisdom of privatising monopolies like MIA or strategic assets like Air Malta. From a macro-economic point of view, it is unquestionably dangerous to privatise monopolies. Monopolies have power that could be translated into economic fortunes, and whoever has power uses it for his own benefit with little or no regard for the interest of others.
It is hardly surprising therefore that MIA uses its monopoly power to keep airport charges higher than the macro-economic interests of the country demand. MIA is not tasked to look after the country’s economic interest. As a commercial company that paid a price upon privatisation reflecting its monopoly status, it is hardly surprising that it seeks to cash in on its monopoly power.
The problem is the way the privatisation of MIA was structured. Where is the economic sense in leaving such a strategic monopoly in private sector hands and create a situation where the narrow interest of the private monopolist could be in conflict with the wider interest of the country?
When, in 1998, the then Labour government was planning to conduct part-privatisation of MIA, which until then was 100 per cent government owned, the intention was for the government to keep a 60 per cent majority stake and to engage a technical partner at minority level in the equity, even if the technical partner could be given a greater say at operational level to drive though efficiencies and guard the company against undue political interference. But the government was then not prepared to lose boardroom control of the company, which could be forced at times to sacrifice its short-term narrow interest for the wider national good.
The PN government somehow thought it fit to privatise this monopoly in toto. Now we have a crisis in tourism and the government does not have the proper tools to respond to it.
Our airport is predominantly a resort airport. In these competitive days, the tourist’s choice of destination is highly influenced by the availability of cheap direct flights operating from an airport closer to home rather than from a business hub mega airport. Cheaper flights mean that tourists will have more spending power during their stay. With a tendency to take more frequent but shorter vacations, flight frequency is also an important factor. Two or three flights a week mean that a tourist can structure two, four or seven day holidays with flexibility. This fits in perfectly with our strength as a destination, whose message should be that what you can see in Malta in a few days would take several weeks in many other destinations.
MIA privatisation was badly structured. What has been done cannot be undone and we have to keep to the commitments given in the privatisation process. But this does not mean the government should not use whatever influence it has to nudge MIA to sacrifice its margins in order to build volume, which is so important for other operators in the crucially important tourism sector.
Such flexibility on the part of MIA could make a difference between a disastrous season and a downturn, which is painful but not fatal. In the longer term, MIA cannot thrive if Malta’s economy stalls. Outward travel, from which MIA derives much commercial benefit, is a discretionary type of expenditure that is totally aligned to the strength or otherwise of the country’s economy.
Private monopolies should not exist; if unfortunately they do as a result of past policy error, they should be pressed to look beyond this year’s profit and loss account.
“Ryanair accused Malta International Airport of holding the country’s tourism industry to ransom, being only interested in lining the pockets of its shareholders by imposing high charges.
“The low-cost airline said the airport was misleading the public by claiming its airport charges were within the EU’s average. It said MIA’s cost per passenger was more than three times its average.
“An airline spokesman said that if MIA, which he called a private monopolist company, was genuinely interested in the economy it would cut airport charges by offering a discount scheme to all airlines. This would stimulate passenger traffic, which would directly impact the tourism and leisure industries while also improving the business prospects for the country.
“The comments come as Malta, like other tourist destinations, is struggling with the effects the global financial crisis is having on tourism. Tourism spending has declined by 10.7 per cent compared to 2008.”
Let’s establish some facts. Firstly, MIA is a private monopoly de facto and there is no need for Ryanair or anyone else to claim it. It is an undisputed, evident fact.
Secondly, I have no brief from Ryanair or any other airline. All things being equal I prefer travelling Air Malta as a matter of national pride and have great admiration for the organisation, its management and staff.
Recently, I travelled by Ryanair to a destination not serviced by Air Malta. I was impressed. It is a no frills airline but utterly efficient. What you see is what you get. We left on time and arrived at destination ahead of time. We got off the plane very expeditiously and the baggage was delivered in record time. What else do you want when the trip is just around two hours?
In this case I certainly agree with Ryanair that MIA should not compare their charges with the European average, which takes into account business airport hubs in the main European business centres. We are no Heathrow, Frankfurt or CDG! We should compare ourselves with airports that primarily service tourist traffic, with airports in tourist resorts. If our airport charges are not competitive with such airports then we are putting ourselves at a disadvantage.
This brings into serious question the wisdom of privatising monopolies like MIA or strategic assets like Air Malta. From a macro-economic point of view, it is unquestionably dangerous to privatise monopolies. Monopolies have power that could be translated into economic fortunes, and whoever has power uses it for his own benefit with little or no regard for the interest of others.
It is hardly surprising therefore that MIA uses its monopoly power to keep airport charges higher than the macro-economic interests of the country demand. MIA is not tasked to look after the country’s economic interest. As a commercial company that paid a price upon privatisation reflecting its monopoly status, it is hardly surprising that it seeks to cash in on its monopoly power.
The problem is the way the privatisation of MIA was structured. Where is the economic sense in leaving such a strategic monopoly in private sector hands and create a situation where the narrow interest of the private monopolist could be in conflict with the wider interest of the country?
When, in 1998, the then Labour government was planning to conduct part-privatisation of MIA, which until then was 100 per cent government owned, the intention was for the government to keep a 60 per cent majority stake and to engage a technical partner at minority level in the equity, even if the technical partner could be given a greater say at operational level to drive though efficiencies and guard the company against undue political interference. But the government was then not prepared to lose boardroom control of the company, which could be forced at times to sacrifice its short-term narrow interest for the wider national good.
The PN government somehow thought it fit to privatise this monopoly in toto. Now we have a crisis in tourism and the government does not have the proper tools to respond to it.
Our airport is predominantly a resort airport. In these competitive days, the tourist’s choice of destination is highly influenced by the availability of cheap direct flights operating from an airport closer to home rather than from a business hub mega airport. Cheaper flights mean that tourists will have more spending power during their stay. With a tendency to take more frequent but shorter vacations, flight frequency is also an important factor. Two or three flights a week mean that a tourist can structure two, four or seven day holidays with flexibility. This fits in perfectly with our strength as a destination, whose message should be that what you can see in Malta in a few days would take several weeks in many other destinations.
MIA privatisation was badly structured. What has been done cannot be undone and we have to keep to the commitments given in the privatisation process. But this does not mean the government should not use whatever influence it has to nudge MIA to sacrifice its margins in order to build volume, which is so important for other operators in the crucially important tourism sector.
Such flexibility on the part of MIA could make a difference between a disastrous season and a downturn, which is painful but not fatal. In the longer term, MIA cannot thrive if Malta’s economy stalls. Outward travel, from which MIA derives much commercial benefit, is a discretionary type of expenditure that is totally aligned to the strength or otherwise of the country’s economy.
Private monopolies should not exist; if unfortunately they do as a result of past policy error, they should be pressed to look beyond this year’s profit and loss account.
No comments:
Post a Comment