Malta’s tourism markets – mainland European countries gaining at the expense of the UK

According to Malta International Airport, its top five markets – the UK, Italy, Germany, France and Spain – were responsible for more than 460,000 passenger movements of the airport’s total traffic of 693,537 passengers for Aug-2017.

While all of these markets experienced varying levels of growth ranging from +8.9% to +31.5%, the number of passengers from France (+31.5%) and Germany (+22.6%) registered the most significant upturn. The French market’s growth can be partly attributed to the launch of Bordeaux and Toulouse routes and increased capacity on the Lyon route. The increase in activity from Germany mainly stemmed from added flight frequency on the Frankfurt and Munich routes. Meanwhile, traffic from the UK and Germany in summer 2017 was impacted by Air Malta’s withdrawal from some routes where competition (usually from Ryanair) was too strong.

Slowly, Malta’s tourism profile is switching away from the UK (which was the colonial power until 1974) towards mainland Europe, particularly nearby Italy, and France. Even so, well over a quarter of the visitors are still from the UK.

CHART – Despite growing connectivity with the likes of France and Italy, the UK remained the largest market for Malta visitor arrivals in 2016Source: CAPA – Centre for Aviation and National Statistics Office of Malta

Delving back into the archives, in 2008, just as the global recession set in, that rate of British tourist visitors was 35.2%, so there has been a fall of 6.7 percentage points. Italy’s share was 11.2% so there has been almost a five percentage point gain by that country while France’s share is up from 6.3% to 7.4%. Germany’s share though also fell, from 11.7% to 8%.

Growth has also been recorded from a host of ‘other’ countries as connectivity at Malta International (Luqa) Airport improved. Passenger traffic there grew by 10% in 2016, on top of 7.7% the previous year. Indeed, the last year in which there was a decline was 2008, with constant gains year on year ever since. And it has been notably strong in the period Jan to Aug-2017 with 18.8% growth recorded.

CHART – Annual passenger traffic at Malta is showing healthy gains and in 2017 it is set to record its largest year on year riseSource; CAPA – Centre for Aviation and Malta International Airport reports

Some of those ‘other’ countries tourists are coming from are evident in the chart below, which is for the distribution by country of international departing seats (there are no domestic services in Malta). Spain and Belgium figure at 4.2% and 3.7% respectively while Cyprus, Switzerland, Poland and Turkey are also included. Brussels is currently the route with the sixth highest amount of weekly seats, more than London Heathrow. Larnaca in Cyprus is connected by one of the first Emirates fifth freedom operations.

CHART – The largest international markets by capacity from Malta for the week commencing 18-Sep-2017 highlights the key inbound markets for the Mediterranean destinationSource: CAPA – Centre for Aviation and OAG

On the other hand it must be borne in mind that there is a considerable amount of outbound travel now from Malta, a small island state but one that is very heavily populated, with 450,000 inhabitants. Apart from the external business travel that is generated by islands generally the degree of tourism infrastructure has been a factor behind more Maltese people now seeking to take their vacations abroad.

National carrier Air Malta is now not the largest carrier by seats and LCC Ryanair has overtaken it, though the difference is minimal.  Other airlines play a comparatively small role though the growing presence of Ryanair has prompted another reappraisal of Air Malta’s role. The airline continues to seek private investors and there have reportedly been talks with Air China and Turkish Airlines as well as with Alitalia, which were abandoned before that carrier’s own predicament became evident. The government prefers to retain a majority stake, which may prove to be an impediment.

CHART – Air Malta and Ryanair together account for almost two thirds of the capacity from Malta for the week commencing 18-Sep-2017 with Lufthansa the third largest operator with just a 5.6% shareSource: CAPA – Centre for Aviation and OAG

Air Malta can no longer receive state subsidies since its last cash injection of EUR130 million in 2012, owing to EU state-aid rules. Its employee unions have a propensity to call for strike action and were identified in a management report earlier in 2017 as “the single biggest risk” to its future. In 2014/15 it made an operating loss of EUR24.1 million on revenues of EUR218.2 million.

In Sep-2017 it introduced a new fare structure in order to boost revenues. It plans to target markets in Germany, Portugal, Spain, France, Israel and Russia. The UK is notable for its absence but it remains in second place in the allocation of Air Malta seats presently, albeit some way behind Italy and Malta – London Heathrow is marginally the route with the greatest level of seat allocation by the carrier.

Meanwhile some of the routes that were cancelled earlier this year are being revived, such as the loss making Malta-Manchester, though with reduced frequencies. One thing Air Malta has in its favour is public support. In a recent poll 86.7% of Maltese nationals voted that “it should be saved at all costs”.

The airport is in a much safer place financially. Partially owned – directly and indirectly – by Flughafen Wien (which shows no sign of disposing of it), in 1H2017 (the period ending 30-Jun-2017) the airport recorded EBITDA of EUR20.9 million (+26.7%) on a turnover  of EUR36.7 million (+16.7%), thus achieving an EBITDA margin of 57%, which is high.