Updated | Selling off Air Malta will mean taxpayer picks up €66 million bill to zero airline’s debts

UPDATED with hotelier's, MP Marlene Farrugia's comment • Tradition of creating ‘new’ companies fit for private market follows in tradition of Malta Shipyards' debt cancellation in 2003 and Enemalta more recently

Selling off Malta debt-free means picking up a €66 million tab
Selling off Malta debt-free means picking up a €66 million tab

Taxpayers will have to cough up the €66 million necessary to reduce Air Malta’s current debts to zero, if it is to be picked up by Alitalia.

The Times reported that the national airline and Alitalia had led to an agreement in principle that Air Malta will be bought debt-free – and that means zeroing the national company’s debts, which currently stand at some €66 million.

That figure was released in court by the lawyers representing the national airline in a court injunction they field against pilots’ union ALPA, who have since declared they will not take industrial action.

The pilots are renegotiating their collective agreement with Air Malta, and their demands are tagged at some €7 million over and above their current €11 million salary bill.

Alitalia, a subsidiary of airline Etihad, owned by the emirate of Abu Dhabi, was reported to have expressed the wish to take over a 49% stake in Air Malta at zero debt.

Such a developments would be in line with public comments made by the chairman of Alitalia, Luca Cordero de Montezemolo, who said Alitalia would not be investing a single euro in Air Malta, adding that the Italian carrier’s risk in such merger would be “sotto zero” (less than zero).

The ‘strategy’ is not new: in 2003, the Nationalist administration cancelled €750 million in debt to restructure the dockyards, and absorbed 900 excess shipyard workers into a surrogate entity, the Industrial Projects & Services Ltd (IPSL). The workers were retained by government to be given alternative work in the public sector and public-private partnership.

The same can be expected to happen at Air Malta, where excess workers will be transferred to a government-owned company, as has happened to Enemalta employees more recently.

Independent MP Marlene Farrugia was first to launch a scathing criticism of the news. “Are we going to give [Alitalia] Air Malta and €66 million. Are we paying them to take the airline instead of us being paid? I expect a reaction from Maltese businessmen. Incredible.”

Hotelier Michael Zammit Tabona told MaltaToday that whatever needs to be done to save Air Malta, has to be done, irrespective of who would have to carry the financial burden. “We cannot afford to lose Air Malta,” he said. “We need Air Malta and we need to ensure that it survives.”

Zammit Tabona said although there were a number of low-cost airlines operating to and from Malta, Air Malta was different in that it was also crucial for the country because of its cargo and freight transport services, crucial for import and export.

He said that Malta should have negotiated better terms for the national airline when negotiating its accession package with the European Union, given Malta’s island status and its reliance on air travel for a percentage of its total imports and exports.

“We must do everything and anything to make sure that the deal with Alitalia goes through, even if it means the taxpayer having to pay the airline’s debt,” Zammit Tabona said.

“And Air Malta employees should grow up, understand they situation the airline is in and cooperate to ensure its goals are met,” he said.

Tony Zahra, president of the Malta Hotels and Restaurants Association (MHRA), told MaltaToday the association stood by its claims that the issue of Air Malta shareholding should have been put to Maltese private companies.

“We cannot understand why the government did not even attempt to reach an agreement with Maltese companies,” he said.

Zahra said that what was also worrying for the tourism industry, was that recent reports were suggesting that Air Malta would also lose its point-to-point destination network and serve mainly to boost Alitalia’s footprint in southern Italy.

“This is a very serious consideration for the MHRA,” he said. “This would mean that we would lose any control whatsoever on which markets to target for our inbound tourism.”

A spokesperson for tourism minister Edward Zammit Lewis said that government's key objective is the positive turnaround of Air Malta.

"Our national airline is of strategic importance to the tourism industry and the country. Hence we are working to make sure that it truly becomes a modern, profitable and more relevant airline," she said.

At the moment, government was analysing the business plan and would then be able to take any decision needed to save the airline and guarantee its long-term viability.

"Government will definitely not postpone this challenge, or hide the problems as previous PN administrations had done after creating them."

The spokesperson added: "We have repeatedly stated that a deal with a strategic partner will only be done if there are evident benefits to Air Malta aimed at guaranteeing its long term commercial viability.

"Once the analysis stage is over, Government is committed to informing stakeholders and the general public about progress and developments regarding this strategic partnership."

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