Restructuring costs weigh as Air Malta full-year losses deepen

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Air Malta full-year net losses deepened to €76.7 million ($99.1 million) in the 12 months to March 2011 as exceptional costs compounded the difficult market conditions.

But the restructuring carrier is pointing to an improvement in its underlying results for the first half of its current financial year, having trimmed a third off its operating loss for the six months ending September 2011.

Operating losses at the Maltese carrier, which awaiting European Commission approval for a restructuring plan to move ahead on a planned refinancing to secure its future, widened €12 million to reach €33.9 million in the year ending March 2011. But higher restructuring costs and lower revaluations of its property assets compounded higher fuel costs and led to a sharp rise in net losses. These jumped from €11.6 million in 2009/10 to €76.7 million for the year to March 2011.

"The operating performance and financial position of the group has deteriorated from the previous reporting period," said Air Malta chairman Louis Farrugia. He noted the operating results, restructuring costs and property revaluation has put the group's equity base "under significant strain" as a result.

Air Malta secured EC approval for a €52 million rescue loan in November 2010 while it prepared its restructuring plan. It is now awaiting approval of this restructuring plan to allow the Maltese government to recapitalise the airline through a fresh equity injection. Under this five-year refinancing the airline secured a €30 million bridging loan from banks in December, will generate €62 million from the sale of property and the government would commit new equity of €78 million and eventually convert into equity a commercial loan of €52 million.

"Whilst the recovery of the airline remains in a difficult and delicate position pending the Commission's approval and the external market conditions, positive trends have started to emerge," added Farrugia. The airline, under a new management team led by chief executive Peter Davies, in 2011 began implementing measures in line with its restructuring plan and Air Malta points to a 4.5% increase in revenues for the six months to September 2011. It also cut sales and distribution costs by a third. And even with its fuel bill jumping a third, the carrier points to a €6 million cut in its first operating losses to €9 million.

Under its restructuring plan Air Malta is targeting a 30% increase in revenues and 30% cut in costs to help it return to profit by 2015.