This has been another positive year for most of Air Malta's subsidiary companies. All subsidiaries are currently under evaluation in order to determine what restructuring needs to be made to ensure their longer term prospects in a competitive and open market.
Air Supplies & Catering Co. Ltd. has had another successful year. Its turnover increased by 6% and it contributed Lm2.4 million to the Air Malta Group's profit before tax. This was the result of the change in the sales mix, an increase in sales and a determined effort to minimise costs. Sales, distribution and administrative costs were in fact reduced by 4%. Air Supplies needs to target new sources of business that will serve to sustain its sales in an EU environment. Air Supplies will have to identify alternative high margin goods to sell from its outlet at Malta International Airport. At the same time it is already actively seeking new sources of business that will ensure its continued future viability. Air Supplies has taken a 50% shareholding in Sabratha Duty Free Co. Ltd. that has been awarded the duty free concession at Tripoli Airport. This exclusive five-year concession commenced on September 1, 2000. Investors include companies that have made a name in the duty free business. The departures duty free area covers 360 sq. m. and 120 sq. m. at arrivals. They sell a wide range of duty free products. Four Maltese employees, a manager and three supervisors, seconded from Air Supplies will join another 38 Libyan employees to run the duty free shops. Another three-year concession has been awarded to Air Supplies at Palermo Airport that has a through put of 3 million passengers per annum. The shop was inaugurated on July 18, 2000. It sells exclusively perfumes and cosmetics. Following the evaluation of various proposals made by duty free operators, Air Supplies has also been awarded the supply and management responsibility of Air Malta's in-flight duty free sales, effectively taking over from the previous operator the internationally renowned IDFS.
Holiday Malta Co. Ltd. has maintained its good level of profitability by combining an effective marketing strategy with an efficient distribution system, good customer care and efficient administration. The diversification of its markets has been crucial to its success. Its turnover increased by 24% to Lm9.5 million. Passengers generated increased by 14% while Belleair Holidays has successfully established its brand name in Ireland.
Holiday Malta GmbH commenced operations in Germany in March 1999, trading under the name of Malta Direkt Reisen. The brand gradually is becoming established among German travel agents following investment in advertising and promotion campaigns.
Holiday Malta (Russia) Ltd. is a Malta registered company with a representative office in Moscow, trading under the name of STB Tours. This was launched in March 1999. Its objective is to establish itself as one of the leading specialist tour operators to Malta from the Russian Federation. This company has good potential. The Holiday Malta brand was also launched in the Czech Republic to support Air Malta's new destination, Prague. This market also shows encouraging signs of growth. In June 1999 the Malta Direct Travel web site was successfully launched and with it the company's Internet strategy. The web site provides information on special offers, enables clients to request brochures as well as make on-line enquiries.
The three hotels in the Air Malta Group, namely the Crowne Plaza, Selmun Palace Hotel and Hal Ferh, performed better than last year. They had increased turnover although occupancy would have been even better were it not for the adverse effect of the millennium syndrome. Two key parameters that are adversely affecting profitability are the low ratio of Food & Beverage to turnover and the high ratio of payroll to turnover when compared to industry benchmarks.
Accor Air Malta Co. Ltd., the joint venture between Air Malta p.l.c and Accor S.A., took a 45% shareholding in Stakes Holdings Ltd. with the remaining 55% taken up by Accor Casinos S.A.. Stakes Holdings Ltd. took up 50% shareholding in Dragonara Casino Ltd.
Dragonara Casino Ltd. runs Malta's foremost casino following a Lm2.2 million refurbishment and re-equipment programme. The casino officially re-opened on June 10, 1999. The very high management standards initiated by Accor Casinos ensured excellent performance of the Casino from the first year also exceeding expectations.
Sterling Travel & Tourism Ltd. registered a modest profit in the year under review. It has ventured into new markets, increasing customers and turnover. Staff efficiency has increased and related costs have reduced. While benefiting from synergies with Holiday Malta (UK) and now Holiday Malta GmbH, it expanded its independent business by generating additional business from new tour operators in France, Belgium and Portugal. Sterling operates the Valletta travel sales shop and is opening another outlet in Sliema.
Osprey Insurance Brokers Co. Ltd. decreased its turnover by 14% and reduced its operating expenses by 6%, securing profitable results for the fourth consecutive year. Turnover was positively affected by the increase in fleet values of Air Malta and especially AZZURRAair, as well as the increase in the portfolio of other clients, however revenue was eroded as lower rates were negotiated on existing policies.
Shield Insurance Co. (Guernsey) Ltd. sustained a good profit albeit lower than the previous year's.
Malta Falcon Finance p.l.c. and Peregrine Aviation Leasing Co. Ltd. are both involved in the aircraft ownership and leasing business. RJ85 assets held by Malta Falcon were transferred to Air Malta while Peregrine proceeded to fulfill its function of leasing aircraft to AZZURRAair.
Malta Air Charter Co. Ltd. carried 56,324 passengers mainly on the scheduled helicopter service between Malta and Gozo. After years of operation it is proven that this is not an economically viable operation. Its high sensitivity to fuel price has made it even worse. At the same time the market is very price sensitive. Consequently increases in unit costs could not be recovered. The helicopter service consequently sustained a loss of Lm234,000 which amounts to more than Lm4 per passenger. These losses directly hit the Group's profitability. Air Malta holds 50% of the equity of World Aviation Systems Ltd. (Malta). It increased its profitability this year and continued to be the largest sales agency in Malta maintaining market leadership by providing excellent service and innovative products.
Malpro Ltd. made a nominal profit. This associate company owns and manages a seven storey building in central London housing the Malta High Commission, the international publishing company Forbes, the London & Amsterdam Bank, Mabanaft Ltd, Malta Development Corporation, Malta Financial Services Centre and at street level Air Malta's office as well as those of the Malta Tourism Authority.
Mediterranian Aviation Co. Ltd. commonly known as Medavia, another associate company of Air Malta, once again concluded a profitable year even if figures were actually lower than the previous year's.
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