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[WATCH] Government open to negotiating Air Malta derogation with EU

Tourism minister Edward Zammit-Lewis says that the government is open to trying to negotiate a derogation that would allow the government to subsidise Air Malta, despite the fact that this would be difficult

Yannick Pace
27 October 2016, 11:36pm
Last updated on 28 October 2016, 9:02am
Edward Zammit-Lewis and Claudio Grech during Xtra
Edward Zammit-Lewis and Claudio Grech during Xtra
Edward Zammit-Lewis has said that the government is open to negotiating a derogation with the European Union that would allow the state to subsidise the national carrier.

Zammit-Lewis acknowledged that this would be difficult especially since the previous administration had not tried to do so and had also already made use of the “One time, last time” principle that governs state-aid for the restructuring of firms in difficulty. The principle prevents firms that have received state aid from doing so again within a period of ten years.

The minister made these comments during the programme Xtra on TVM in response to assertions made by Dominic Azzopardi, the president of the pilots’ union in Malta, that Air Malta could not realistically be expected to compete with low-cost airlines, like Ryanair, which were receiving large sums of money in subsidies.

“Ryanair is receiving subsidies from the government yet the same government is unable to give any help to the national airline which is of such strategic importance to the country,” said Azzopardi.

Tourism minister Edward Zammit-Lewis
Tourism minister Edward Zammit-Lewis
Zammit-Lewis said that the government had inherited an airline that had been losing money for 15 years. He said that Air Malta had not been managed well and that the previous government had simply thrown money at the problem rather than taking concrete steps to change the airline’s direction.

Nationalist MP Claudio Grech said that previous administrations had no choice but to inject money into Air Malta. Grech defended past administrations and said the restructuring plan had been on track until recently and that it was unreasonable to say that everything that was done before 2013 was a complete failure.

Both Azzopardi and Noel Mercieca, president of the cabin crew union, said that they were disappointed that there was no mention of Air Malta in the budget and both stressed that the uncertainty currently surrounding the airline needed to be addressed.

Ian Fitzpatrick from the chamber of commerce agreed and said that at this stage it was essential for a solution to be found as quickly as possible, adding that uncertainty was having a negative effect on the country.

In a filmed interview, Malta Hotels and Restaurants Association (MHRA) president Tony Zahra said that the current problems faced by Air Malta were similar to those faced by a number of legacy airlines after the introduction of low cost carriers. He said that legacy airlines had not taken the threat posed by low-cost carriers seriously enough and were suffering because of their failure to adapt to changes within the industry.

Left to right: Dominic Azzopardi, Pilots Union; Noel Mercieca, Union of Cabin Crre; Ian Fitzpatrick, Malta Chamber of Commerce
Left to right: Dominic Azzopardi, Pilots Union; Noel Mercieca, Union of Cabin Crre; Ian Fitzpatrick, Malta Chamber of Commerce
Former Air Malta chairman Louis Farrugia, who was also interviewed on the programme, said that during his time as chairman he had tried to minimise the degree of political influence in Air Malta.

“We tried to be less politically motivated. Air Malta is a national airline that is competing with other commercial airlines that do not have as many pressures placed on them by political lobbying. The airline needs to be run by a chairman that is not at the mercy of decisions being taken with political motives,” said Farrugia.

Farrugia also said that when he became chairman of the national airline back in 2011, he found a €50m million emergency loan from the government as well as an emergency plan that was in place. However, the EU restructuring package was not acceptable to former CEO Peter Davies and was renegotiated.

Contacted by telephone, Davies said that at the time he did not feel he could move forward with the plan because of a number of concerns, chief among which was the fact that the plan did not include a €100m expense required for aircraft engine overhaul.

He said that while he was CEO he had found a great deal of support from the government and his main frustration was that in order for the airline to survive it needed to be downsized to six aircraft.

Asked what he would do if he were still in charge of Air Malta today, Davies said that his priorities would be strengthening the airline's brand as well as cutting costs by outsourcing big chunks of the operation.

Zammit-Lewis pointed out that this was part of the reason the government felt that a strategic partner was necessary for Air Malta. He said that a strategic partner would help the airline when it came to issues of economies of scale in purchasing of aircraft as well as other expenses.

Grech said that PN has always agreed with the concept of a strategic partner and added that there is also need for local investment in shareholding with each investor being allowed no more than 10% of the company’s shares.  

Claudio Grech
Claudio Grech
He accused the government of having embarked on a path that would require Air Malta to give up shares, however did not to commit to saying that under the PN’s proposed plan, the government would retain majority shareholding in the company.

Grech concluded by saying that he believes that there is a lot of common ground between the government and the opposition on the way forward for Air Malta and expressed optimism that consensus could be reached.

Zammit-Lewis agreed that the problem was one that required unity and dialogue between the two parties. Asked about whether talks with Alitalia had failed, the minister refused to answer and said that a decision would be communicated in the near future.

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