Dayna Camilleri Clarke met with JOSEPH GAFA, CEO of MaltaPost to discuss how they have navigated the pandemic and adapted to changes in regulation of mail as a result of Brexit
How did COVID-19 impact you as an entity?
The outbreak of the Covid-19 pandemic tested the resilience and agility of MaltaPost as we faced unprecedented significant challenges as we responded, at short notice, to unchartered waters. Over a year later, we are proud that we did not falter even when faced with the closure of the Malta International Airport for three whole months that had a major impact on our ability to connect to the international postal network.
Consequently, we experienced a sudden drastic drop in postal volumes and revenues. The re-opening of the airport in July 2020, albeit with a greatly reduced flight network, brought some respite. The overall reduction in postal volumes persists to this very day due to the accelerated e-substitution of the traditional letter and the lack of regular international flights to service the parcel business. The minimal air cargo capacity available and the adverse impact this had on the global supply chain continues to constrain the postal network.
The national measures taken to mitigate the spread of the pandemic also created a general economic slowdown, which in turn affected local postal volumes and business through our extensive Post Office network of 41 outlets. To minimise the potential risk of contagion and to avoid concentrations of clients in a limited number of Post Offices, the company purposely kept the whole Post Office network open throughout the pandemic.
Our team had to re-route all established cross border connections via these three airports working with an irregular flight schedule and trucking where possible. Between March and July 2020, Malta was only connected by air to London, Frankfurt and Amsterdam with a minimal number of flights. This led to increased transportation costs and lengthier transit times. We managed to find alternative routes to all countries although service levels were impacted.
Although the number of flights in and out of Malta has, in recent weeks, increased slightly, the country remains serviced by only 30% of the flight capacity it had prior to the pandemic.
The increase in the number of online cross border orders, coupled with less flights and reduced cargo conveyance capacity to transport mail, created bottlenecks and delays at the major airports around the world. This disruption is expected to continue until airlines resume normal operations and sufficient air transport capacity becomes available.
We were also negatively impacted by fake tracking information published by independent mail consolidators in Asia servicing e-sellers on various online marketplaces. These international mail consolidators are posting automatic updates showing that mail items arrived in their destination country when in fact they did not. Before the pandemic, mail packets from Asia used to arrive in Malta by air weekly. Today, these are arriving by sea weeks after the wrong dates entered in these fake tracking reports.
What measures did you undertake to adapt to the changes, both in stores and internally?
Our strategy was primarily focused to safeguard the health and safety of our employees and clients while ensuring that the company continues to provide postal services classified as essential services. We also wanted to ensure that the company remains commercially resilient without making anyone redundant.
We were pro-active in acquiring all individual protective equipment and sanitisation products required for our employees before the pandemic actually landed on the Maltese Islands.
On the commercial front, we immediately executed a major cost management strategy while ensuring business continuity, adequate liquidity levels, safeguarding the employment of over 800 employees while respecting the Health Authorities’ directives. We also kept the workers representatives fully in the know of the developing situation. Contingency plans, based on some worse case scenarios, were prepared in order to have fall-back plans that could be implemented at short notice should the financial situation of the company deteriorate.
Being that postal services are considered as an essential service, we remained a key partner in government’s response to the pandemic and this was formally recognised by the President of Malta, government and the National Health Authorities. In fact, we provided the following pandemic specific services, namely:
1. Delivered an educational Covid-19 booklet to all households in March 2020;
2. In April 2020, printed and delivered, at short notice, over 125,000 letters on behalf of the National Health Authorities, which letters were addressed to the most vulnerable members of the community being directed to quarantine;
3. In July 2020, delivered 450,000 communications to businesses and residents as part of the Government Vouchers Programme; and
4. Delivered letters providing vaccination appointments.
Staff members have worked hard, not in the easiest of conditions, to maintain a smooth collection and delivery process. No Post Office was closed and our opening hours were not reduced, while mail was delivered every single day – six days a week. The EasiPik Parcel Locker network remained fully operational on a 24/7 basis and provided a solution for those who wished to avoid any human interactions and collect their parcels at any time, day or night.
To ensure social distancing, we leased five additional sorting centres so as to reduce staff concentration within our last mile delivery network. Administrative staff were re-deployed to different locations in order to ensure that business continuity is assured in case one is Covid19 positive or quarantined, while ensuring adequate social distancing at the work place.
Staff were kept regularly updated on how best they can prevent the spread of the virus in line with preventive guidance supplied by the Health Authorities. New procedures around mail deliveries have also been introduced to minimise physical contact and protect both our staff and customers.
We created an online facility for customers to buy their postage stamps electronically, as well as to pay for any delivery, Customs’ clearance fees and related tax dues, thus reducing the handling of cash by our clients, our post offices and delivery staff.
To continue managing the health and safety of our staff during this pandemic, and given that we provide an essential service, last February staff voluntarily participated in the vaccination exercise conducted by the company in collaboration with the Health Authorities. The take-up rate for the first dose was remarkable and truly indicative of a responsible workforce that felt dutybound to protect itself as well as the wider community through risk mitigation.
How did Brexit affect you?
Well as they say, it does not rain but it pours. The last thing we wanted was a no-deal Brexit as we were managing our response to the pandemic. On 24 December 2020, the EU and the UK reached a Trade and Cooperation Agreement which entered into force on 1 January.
Consequently, the UK was no longer part of the EU’s single market and Customs union and new rules applied. In fact, when sending goods to or from the UK, customers must now complete and attach a Customs’ declaration (CN22 or CN23). Letters, postcards and documents are usually exempt from this requirement. The recipient in either country now has to pay VAT/Customs’ duties and a handling fee in the receiving country before parcels can be claimed. These charges depend on the country of origin of the goods, the value of the item and whether it is a gift or commercial good.
Brexit coincided with the start of the new calendar year, a new year that brought about new challenges. The more contagious Covid strain discovered in the UK brought about a temporary border closure with the EU, creating a large backlog of items to be transported in and out of the UK. This backlog is today cleared.
Had Brexit come at a time when we were living normal circumstances, without the pandemic and its global effects, the only delay that would have been experienced by clients compared to pre-Brexit would have been those related to delays associated with the new Malta Customs’ clearance process.
Unfortunately, Brexit came at a time when Malta continues to be serviced by a greatly reduced flight network with the UK and lack of cargo carrying capacity both in terms of volumes and frequency. Clients are presently experiencing additional delays in the arrival of mail due to the drastic reduction in the number of scheduled passenger flights that carry cargo between Malta and the UK. Flights have decreased from an average of 21 flights a week to around only three a week. This greatly reduced air cargo carrying capacity is creating delays for mail to reach Malta from the UK as there is more demand than capacity. In view of this, MaltaPost is presently receiving mail from Royal Mail in the UK via a weekly trucking service. Trucks hired by Royal Mail take close to a week to drive to Malta and truck departures only take place after a consolidation process which delays mail into Malta by additional days.
MaltaPost was well organised, manned and equipped to handle the extensive operational changes that had to be implemented at the end of the transition period given that we receive and send mail to both EU and non-EU countries. Today, mail from and to the UK is processed as all the other mail coming from or leaving for other non-EU countries. This change has increased our workload but we are geared up to handle it.
If a Maltese seller or company is sending an item of value up to 135 Sterling, the seller needs to have a UK Eori number and charge the UK buyer UK VAT. The seller will then be required to declare the UK VAT with HMRC (UK Customs). For items, whose value is greater than 135 Sterling, UK VAT is paid by the addressee in the UK.
MaltaPost is obliged to transmit Customs’ related information electronically to Royal Mail. This information must be compiled in an appropriate format prior to despatch to include information such as value, the sender and receiver, etc. To speed up the process and to avoid spending unnecessary time at the MaltaPost Post Offices, one can also declare their items from the comfort of their home or office by following this link www.maltapost.com/sendyouritem.
While it may still be too early to reach certain conclusions, we do expect a shift in consumer behaviour by witnessing more orders from EU-based websites instead of from the UK.
What are your plans for the future including the introduction of any new services?
We continue to sustain our core postal business by striving to deliver services of the highest quality within the constraints of the new normality, while managing costs of the Postal Universal Service within a highly regulated framework where tariff revisions require the approval of the Malta Communications Authority. MaltaPost today is carrying an unfair financial burden in order to provide a Universal Service and we are in negotiations to have this critical matter addressed.
We shall continue to structure the business to meet the needs of our clients and to shift the last mile delivery network in line with the evolving market realities and the demands of our customers. Our vision is to be the partner of choice in the last mile delivery in Malta while continuing to meet the Universal Service Obligation. To this end, we have in place a dedicated management team that, together with a committed staff complement, have delivered satisfactory results in these extraordinary circumstances. Efficiency improvement efforts continue on various fronts. Digital transformation is not only facilitating access to our services but also assisting us to meet ever-growing local and international customer expectations. This digitalisation process will continue in the coming months. Additionally, our eSeller service provides an easy-to-use platform to help online retailers manage the increase in online sales by allowing them to focus on the sales part and leaving the fulfilment delivery to us; thus helping them to expand into the local and international markets.
We are currently preparing ourselves for the removal of VAT exemption for Goods up to €22 in value originating from outside the EU. Following an amendment to the Union Customs Code Delegated Regulation (EU) 2015/2446, as from 1 July, the existing VAT exemption for goods up to €22 will be removed. This decision shall impact all items originating from outside the EU and which are today exempt from the collection of VAT. To counter this, the EU shall be introducing a process for the collection and payment of import VAT for B2C distance sales of goods from third countries to consumers in the EU.
We are also committed to reduce our carbon footprint by minimising our impact on the environment while improving our last mile delivery network through the expansion of our fleet of electric vehicles.
We also plan to continue strengthening our Post Office network so as to meet customer expectations and facilitate the introduction of new services. A new Post Office has just been opened for business in Attard. A property in Fgura was secured to open a new Post Office in this locality by the end of this year, while our Post Office in St Julian’s is being refurbished. Moreover, a new post office in Zejtun is under construction.
We shall also continue our investments in the other non-postal sectors of our business including document management, insurance and financial services, investments which bode well for the future and which are expected to provide a fair return on investment.