Air Malta must remain a national asset

The government remains committed to turning the company around and make it “commercially viable by 2016” – but past efforts, including a five-year, €230 million restructuring plan overseen by the European Commission, have all so far failed.

Cartoon by Mark Scicluna
Cartoon by Mark Scicluna

These are uncertain times for Malta’s beleaguered national airline. 

By the end of the year, the transitional period during which the government can continue to subsidise Air Malta will have come to an end. The government remains committed to turning the company around and make it “commercially viable by 2016” – but past efforts, including a five-year, €230 million restructuring plan overseen by the European Commission, have all so far failed.

Both time and options seem to be running out. Speaking on Reporter on Monday, Prime Minister Joseph Muscat confirmed that the government is now seeking a ‘strategic partner’… and Turkish Airlines, the world’s fourth largest carrier, has been named as the likeliest candidate. Negotiations are understood to be at an advanced stage.

Muscat however insisted that the Maltese government would remain a majority shareholder in the airline, along the same lines as the recent partial privatisation of Enemalta (33% of which was sold to Shanghai Electric). 

Meanwhile there are other suggestions for the future of the national airline: including a rather radical proposal by the Malta Hotels and Restaurants Association (MHRA), for the government to divest itself of majority shareholding, allowing the association itself to buy 75% of the airline’s shares.

Before entering the merits of all such proposals, one must bear in mind the central argument – common to all approaches by different administrations of government – that Air Malta is an irreplaceable strategic asset of utmost importance to the country’s most basic exigencies.

Sadly, past efforts to convince the European Commission of this undeniable fact were unsuccessful, and Malta failed to secure any special concessions to continue State subsidy beyond 2015. It is perhaps too late to point fingers of blame at the negotiators who missed this opportunity; but this newspaper would argue that even at this late stage, efforts could still be made in this direction.

Malta has solid and robust arguments to justify such a concession, if the Commission could be made to listen. The EU must recognise (and in other instances already has recognised) that Malta, an EU member state, is severely disadvantaged compared to other states because of its extreme isolation as an island state on the periphery of the Union.

The argument can and should be made that our geographical circumstances make it impossible to guarantee the citizens of Malta the full freedoms associated with EU membership: including the free movement of persons within the Union. Accessibility to other parts of Europe – not to mention other parts of the world – depends on a flexibility that simply cannot be guaranteed through dependence on low-cost models alone.

At present, Air Malta operates all its short haul flights at a loss. If strict free competition rules (as demanded by EU membership) were to be applied to the aviation industry without the additional leeway offered by State subsidies, it would place Malta at an unfair advantage which would de facto reduce the country to an inaccessible, provincial backwater state… rather than a full EU member state enjoying the same rights and freedoms as the other 27 members.

Moreover, Malta has come to depend on Air Malta for a host of services that are indispensable for the ordinary, day-to-day administration of a country. The postal service, freight, cargo delivery… all these would not be viable, if certain routes were not allowed to be run at a loss.

One clearly understands that it is no longer possible to return to the pre-EU membership scenario whereby governments regularly wasted obscene amounts of money on an airline which was run almost as if it were a government recruitment agency. Those days are very emphatically over. But neither can Malta perform a complete cycle, and end up without a national airline at all.

These are the considerations that must underpin the solutions currently being proposed or contemplated for the successful turnaround of Air Malta. What this implies is that the government must on no account relinquish its majority ownership of this national strategic asset.

It is therefore welcome that the Prime Minister has a priori ruled out this possibility. By the same token, the MHRA’s proposal to buy a majority stake in the airline cannot be seriously considered. This is primarily because the MHRA is primarily thinking of its own interests, rather than those of the country as a whole. And while it is true that the interests of the tourism sector are largely concomitant with other financial and commercial interests, Air Malta’s contribution to incoming tourism is by no means the only advantage of having a government-owned national carrier.

This leaves us with the proposal for a strategic partner; and it is here perhaps that questions may be asked concerning other aspects of MHRA’s proposal. If one excludes (as the Prime Minister has done) the option of government selling the majority of shares, it by no means follows that the proposed strategic partner must perforce be a foreign airline. 

There is merit in the argument of a private-public partnership whereby Air Malta would remain fully owned by Maltese owners, with government retaining majority ownership. But whatever the decision taken, the integral strategic benefit of a government-owned national airline must be retained at all costs.

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