Air Malta's future: 'recapitalisation' and more cost-cutting in new business plan

The national airline is refuting claims that new chairman Sonny Portelli told pilots that Air Malta needed “government subventions”, but did not deny that the government was looking into ways of how to circumvent the EU’s strict rules on state subsidies, or that the airline was seeking foreign credit.

MaltaToday yesterday reported comments by Portelli made to cockpit crews in a meeting organised by pilots’ union ALPA at the Intercontinental Hotel in St Julian’s.

Air Malta is denying Portelli mentioned the issue of subventions when he told his shocked audience that unless government intervened financially to support the airline, the company would be unable to operate by the end of 2010.

“The Chairman took the opportunity to explain to ALPA that, among other things, measures were being taken to finalise a sustainable business plan that, together with the recapitalisation of the company, would take the airline forward in these very challenging times. A very important element in the plan consists of a number of cost cutting measures,” the airline said, without specifying what cuts were being contemplated.

Air Malta said Portelli made “no mention of government subventions or circumventing of EU regulations… The chairman was also categorical in confirming that the sale of Air Malta assets (namely: Hal Ferh, The Crown Plaza Hotel and eventually the Selmun Palace Hotel) was not, in any way, linked to the airline’s current financial situation, but to a strategy that the company has been following consistently to streamline its activities and concentrate on core competencies.”

Air Malta currently has 12 airliners operating 36 destinations, with some critics claiming that the airline should consider cutting down on both aircraft and routes.

Pilots at the meeting raised the issue of how Ryanair, the Irish low-fares giant which has set up a base in Malta, could receive direct funds from government and great financial advantages at Malta International Airport, but not Air Malta. Ryanair benefits from discounted landing fees thanks to government subsidies that form part of the route development support scheme: an EU-sanctioned system of supporting underserved routes, which airlines like Ryanair thrive upon. In the past, Air Malta chief executive Joe Cappello said Malta is already dependent on Ryanair.

Pilots who spoke to MaltaToday also said the last batch of Air Malta trainee pilots had been given definite contracts that will expire by the end of 2010. “That’s a sign of how bad the situation is,” one pilot said – a fact that Air Malta has not disputed in its statement.

Air Malta pilots, who earn between €72,000 and €120,000,already accepted salary cuts back in 2004, which Air Malta says is money paid back to the company to aid its restructuring.