Gozo fast ferry operators have financial assistance doubled, but government wants to give them €12 million more in state aid

Industry experts baffled by the government's decision to seek approval to offer direct state aid to two companies competing with state-owned Gozo Channel on a daily basis

Government has obtained the green light from the European Commission to offer state aid to the two fast ferry companies operating the Valletta-Mġarr route
Government has obtained the green light from the European Commission to offer state aid to the two fast ferry companies operating the Valletta-Mġarr route

Updated 23.12.2022 11.10pm with revised information from the European Commission Representation in Malta

The government has been given the green light to offer the two Gozo fast ferry operators up to €2 million each, under the EU's Temporary Crisis Framework scheme.

But in the meantime - to the disbelief of experts and other players in the transport industry - the government has again approached the Commission, seeking approval to offer the same two companies an additional €12 million two-year public service contract, which amounts to state aid.

The government had already secured approval for Virtu Ferries and Gozo Fast Ferry to each receive up to €500,000 in financial aid under the EU's Temporary Crisis Framework for state aid measures to support the economy following the aggression against Ukraine by Russia. 

But in it had subsequently approached the Commission seeking to increase the aid offered and extend the scheme's mandate beyond 2022.

And in September, the Transport Ministry had confirmed the government had sought permission from the European Commission to be allowed to offer the companies the €12 million in direct aid and that the contract would be validated pending final authorisation from the Commission.

When contacted by sister newspaper BusinessToday earlier this week, a spokesperson for the European Commission Representation in Malta initially confirmed that this state aid had been given the green light by the Commission.

Following publication of the article on Thursday, the newspaper was subsequently informed that it was the government's request to expand and extend the framework of the original financial aid under the EU's Temporary Crisis Framework, that had been approved.

That authorisation came on 2 December when the Commission ruled that the government's scheme "is compatible with the internal market pursuant to Article 107(3)(b) of the Treaty on the Functioning of the European Union".

The Commission has yet to declare itself on the government's additional request to be allowed to offer the two fast ferry operators an additional €12 million in direct state aid.

Experts in the transport industry have expressed doubt that the Commission could sanction state aid to two competing companies within a market that clearly does not merit two operators, more so when these are competing against a regular ferry service, operated by Gozo Channel, a state-owned company.

They told BusinessToday that it was clear that the two fast ferry services were floundering because of low passenger take-up, and not as a result of the war in Ukraine.

"What has the war in Ukraine got to do with the fast ferries?" one operator in the sector said. "When the service was launched it immediately became clear that two companies operating the same route were unnecessary. Moreover, passenger take-up never ramped up, possible due to the pricing of the service and the companies' schedules."

When the service was launched in June 2021, the two operators offered alternate routes and different prices, but the two companies later reformed their ticketing system so that any tickets bought can be used interchangeably between services on a shared schedule. 

If confirmed, the two-year service contract would bind operators to maintain a schedule in line with people's needs as well as fix prices, the government said.

The contract will also allow people receiving treatment at Mater Dei Hospital and the Gozo General Hospital to make use of the fast ferry service for free.

The objective of the existing aid scheme is to remedy the liquidity shortage faced by undertakings that are directly or indirectly affected by the serious disturbance of the economy caused by the Russian aggression against Ukraine, the sanctions imposed by the EU or by its international partners, as well as by the economic counter measures taken so far by Russia.

Malta approached the Commission to amend the existing aid scheme as follows:

  • to prolong the existing aid scheme until 31 December 2023, both as regards the period for which aid can be granted and the final date by when the aid will be granted;
  • to increase the maximum aid amount per beneficiary undertaking at any given point in time to €2 million; and
  • to increase the overall budget of the existing aid scheme from €1 million to €4 million.

In its submissions, Malta confirmed that no further amendments were proposed to the existing aid scheme and that all other conditions of that scheme remain unaltered.