Interview | Wednesday, 02 March 2008

The Austrian boss’s first impressions

Austrian Julian Jaeger, who was appointed as Malta International Airport (MIA) Chief Executive Officer (CEO) last January, spoke to Charlot Zahra about the rising passenger figures, the company’s expansion plans, airport charges and the ‘Cruise and Fly’ project, among other things

You have been in the post as Malta Intenational Airport (MIA) Chief Executive Officer (CEO) since the beginning of the year. What are your first impressions of the company’s performance and its workforce?
What I would like to add is that I joined MIA over a year before, in January 2007, and therefore when I took over as Chief Executive Officer, I had already one year of experience working with MIA.
The performance of the conpany is, I think, very good and the staff is very well-trained and motivated. I really enjoyed working here from Day One and I am looking forward for the next three years so that we can improve on the one hand the financial results, and on the other hand the services that we are offering.
We want to improve on the ‘passenger experience’, as well as that of the general public and of our customers who come here on a Sunday for lunch or dinner or to just buy the newspapers. MIA was always a very well-run company, but there is always room for improvement.

In the last financial year ending December 31 2007, MIA posted a pre-tax profit of €14.09 million (Lm6.05 million) on ordinary activities when compared to €11.41 million (Lm4.9 million) in the previous nine months (after which the company changed its accounting reference date to December 31). Were the results up to the company’s expectations or not? Why?
It is very diffcult to compare with the Financial Year 2006, when we only had nine months, to that of 2007. So what I would rather like to compare the financial year 2005-2006 with 2007.
We are very happy with the results and these definitely met our expectations. Actually, it was even better, since we did not forecast a 10% increase in passenger movements in 2007. We had an 11% increase in aviation turnover and a 21% increase in the non-aviaton business.
Strategically, it’s very important for us that we increased the non-aviation turnover. The spend per passenger increased in 2007, but still the passenger growth is the main driver of our business and besides that, we try to improve on the non-aviation business.

Are there any areas where the company could have fared better? Why?
It could always be better. As I said, we are very happy with 2007. There are things where we didn’t succeed, but I wouldn’t just refer to 2007. We still need to get off the table the Business Park, and the Cruise and Fly didn’t really take off, so those are two very strategically-important projects to me where we are not as far as we would like to be.

During the last financial year, the amount of passengers rose by 10.4% over 2006. Can you please elaborate on which were those countries from which the MIA registered increases last year and by how much?
What we experienced in 2007 was that the main drivers of our growth were Germany, Italy and the United Kingdom, Malta’s three main markets overall.
In fact, in 2007 there was an increase of 17% from Germany, an increase of 16.5% from Italy and a 10% increase from the UK when compared to 2006. On the other hand, from smaller markets such as Austria, Belgium, Switzerland we had a slight decrease last year when compared to 2006.
In my opinion the strategy of the Malta Tourism Authority (MTA) to concentrate on the main core markets really paid off, and the traffic results really reflect that strategy.
The results also reflect the additional capacity coming in, with Ryanair operating from the UK and from Pisa in Italy, as well as GermanWings operating from Germany.

Do you attribute this increase to the emergence of low-cost airlines?
Obviously, low-cost was a main driver of the growth. Still, what one should not forget is that Air Malta still carries 55% of all passengers coming to and flying out from Malta.
Although they had a very difficult and competitive environment, they still managed to increase their passengers last year. Furthermore, one should not forget that British Airways had a very good year and that Emirates is constantly on the increase.
Therefore low-cost was the cherry on the cake, but you still need a very strong home carrier and you need legacy carriers that grow as well.

During the last financial year, the amount of cargo handled by MIA dropped by 4.3% over 2006. To what do you attibute this slump?
We did registrer a drop in the amount of cargo carried last year, especially in the last few months of the year, but so far this year was a very good one with regards to cargo.
It seems that in November and December, because of the Euro changeover, companies stayed back, waiting till the single European currency was introduced on January 1 and hence avoid foreign exchange charges.
January and February this year were phenomenal in terms of cargo as we registered an increase of 25% over the same bi-monthly period in 2006. Moreover, if you also take into account the mail carried and add that to the cargo as is the international practice with regards statistics, then the decrease was in fact only 1.2% when compared to 2006.

Can you elaborate on whether or not MIA has any new destinations and airlines in the pipeline for this year?
There will be Vueling, who will be starting very soon with a test service to Madrid. We also have Volareweb from Milan and Norwegian Air Shuttle from Oslo. We are informed that they are very happy with the pre-sales, so they should do very well.
As you know, Ryanair started with some new routes at the end of last year. Moreover, we are indeed satisifed that Easyjet confirmed and signed a five-year contract to serve Gatwick and Manchester, whilst British Airways will continue to operate the direct flights from London.

How many new passengers is MIA forceacasting to handle this year?
We forceasted an increase of 6.8% for this year, which would mean roughly 3,180,000 passengers. We got very near the three million mark last year, so it should be roughtly 200,000 new passengers for this year.
The results of the first quarter this year are indeed encouraging but the crucial months are still to come and in the end, the peak period from June to October will have a decisive influence on the actual increase this year. Our forecast in November was of 6.8%, and we are currently reviewing this forecast and we will be able to give a revised one by mid this year.

So are you keeping up with the expectations for this year?
So far, yes. In the end, January and February are our weakest months, so although we are very happy that we had an increase of 23% during this period, as I said, the crucial months are still coming. We therefore stick to the 6.8% forecast right now, but let’s see what summer will bring.

Is the MIA infrastructure ready to cope with another huge increase in passengers this year as well or not? If yes, what preparations have been made in this respect?
Definitely. As you might have
noticed, we are closing off the area between the Check-In and the Arrivals Halls by building a new extension. What we have experienced last summer and, more recently over the Easter period as well as on Sundays and Tuesdays mostly, is that we have a bottleneck at the security checkpoints.
By June this year, we would have doubled the capacity in the security area from the current two lanes, to four security lanes. That’s very important for us. I do not foresee a capacity problem since the only hindrance we have will be resolved in a few months time.
Furthermore, the new extension currently under construction shall be increasing the retail space as well as provide for a new, more spacious Executive Lounge.
By mid-2009 we expect to finish works on the complete revamping of the Departures area with the introduction of new concepts and outlets as well as additional retail space by approximately 1,000 sq. m. With the expansion works currently underway, a project that will cost €4 million, and the re-design of the Departures area, we would have managed to solve our capacity/flow problem as well as adding a lot to the ‘passenger experience,’ all to our gain as we should also increase our non-aviation revenues.

As a shareholder in VISET plc, the cruise passenger terminal operator, MIA in the past has promoted the “Cruise and Fly” concept, whereby a tourist would fly to Malta and then board a cruise ship from here. Has this concept caught up well or not with the tourists coming to Malta?
In all honesty, not really, or at least not as much as it was anticipated. This was due to several factors, not least that we were also unlucky, such as when we had a ship home-porting in Malta but then decided to convert it into a casino and sail in Asia instead.
Generally speaking, we are not fully satisfied with the outcome so far, but I personally still strongly believe that the cruise market will grow in the foreseeable future in Europe, especially in the Mediterranean.
If you compare the data of the last five years, the cruise industry always grew more than the average growth of the tourism industry in general. Moreover, the growth rates in Europe and in the Mediterranean were higher than in other countries.
So I think this is an international trend and I still believe that this is an opportunity for us, but it won’t come overnight. Right now we are working on a study on home porting and which should propose an action plan. This study is financed by the MIA, MTA, MMA and VISET to really make it happen.
We do not expect any immediate changes in the cruise liner industry since this market tends to plan more ahead than airlines. Ryanair might decide to pull out from a destination overnight, however the majority of other airlines plan at least 6 to 14 months ahead. In the case of cruise liners, it’s even longer. What you start today will probably leave an impact in 2010 rather than in 2009.
The Grand Harbour is beautiful; I think that the passenger experience there is beautiful. We also have a good connectivity by air, so I strongly believe that it should be possible to have ships home-porting here.
However, it will require some more work and some more years. I see this as a long-term strategic project and it won’t have a high impact on us for the short time.

In view of the fact that MIA registered substantial profits during the last financial year, would the company consider reducing the fees it charges to airlines, which are still hefty when compared to other EU airports or not? Why?
I do not agree that we have hefty fees when compared to other airports. The method of benchmarking the airport charges is a very tricky one and I was responsible for airport charges in a former post in Vienna.
I don’t know to which benchmarks you are referring, but for instance we have very low landing charges. For an airline to land a Boeing 737 or an Airbus A-320, which are the most common aircraft at MIA with an average 170-seat capacity, it pays less than €300. And this is highly appreciated by all the legacy carriers, including Air Malta.
I agree that at €15.73, our passenger service charge is not cheap. However, a passenger pays an average €200 for a ticket back and forth, and only 7% of that amount goes to MIA.
When you take into account the average costs of an airline, including the landing charges, our charges are reasonable.
To answer your question, given the services that are provided, MIA is a very well-run company. All over Europe there is a big discussion whether we have enough capacity or not.
The charges that are applied for the services we provide are re-invested in new or improved facilities and any cuts in charges would jeopardize investment in growth and increased capacity.
Since the airport was privatised, charges were regulated and reflected the way that inflation developed, so in the end it’s not that we increased the airport charges tremendously. And that’s what we want to do – we intend to be in a position to increase the charges according to inflation, even a bit less than that.
MIA is a private company with around 7,000 Maltese shareholders – people who entrusted us with their savings – so on the other hand we also have an obligation towards our shareholders and therefore if we reduce the charges we would essentially devaluate the money that people entrusted us with. I strongly believe that we have managed to strike a good balance and our charges are therefore reasonable.
For instance, our security charge is extremely low - €2 – whilst in Vienna you pay €8 for the security charge. Therefore you have to consider all charges applicable when making your assessment.
We want to encourage growth and that’s why we are investing in an incentive scheme where we support new destinations and we support new areas. Every airline which starts a new service to Scandinavia, to Spain, to certain areas of Germany, or to Eastern Europe will have up to 60% of the passenger service charge deducted for a maximum of three years.

The MIA was planning to develop a business park at its premises in Gudja which would have hosted top-notch businesses. With the development of SmartCity close by starting late last year, is this plan still on the cards or not? Why?
We’re still working on this project, but I personally think that sooner or later, I would like to have a clear picture if this new project will take off or not. My personal impression is that we have in the past over-rated the project.
I would like to continue working on it, and if we find the right investor, we would do it, but I really do not see the influence of Smart City here. I don’t have a problem if it turns out that the business park project does not take off.
We have been following this project for nearly five years, and sooner or later, we have to decide whether it still is a strategic initiative for us. I have made it a point that either way, a decision is taken within the next twelve months.
In the last few years, Malta really managed to create a climate where an investor really feels welcome and willing to invest. I strongly believe that a project like SmartCity will help other projects to take off and I do not see that there is a competition.
I met German companies here such as Lufthansa Technik, and you get the feeling that it is highly appreciated from foreign companies that Malta has the right climate with regards to investment.
That’s a big advantage not only for MIA but also for the island in general.

Would you consider a partnership with SmartCity in this respect? It could be an option although we never discussed it. We are very open for all kinds of partners in this project. If we don’t find the right partner for this project, I don’t mind still having the most beautiful car park in the Mediterranean. We recently took over the car park and we wish to improve services there as well.

What kind of facilities are you envisaging in the Business Park?
I think what would go well is a hotel with proper conference facilities, because the CIT (Conference and Incentive Travel) market did very well in Malta recently.
I think Malta will soon need more hotels and more beds and we have to increase our capacity even in the peak months because otherwise, the increase in tourism that we experienced during the past few months would not be sustainable as there will not be enough hotel capacity in summer.
Moreover, a shopping centre with office facilities should work as well given that the airport is ideally located in Malta.

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