Air Malta mulls plan to hive off €70 million Heathrow landing slots

Under Konrad Mizzi's watch, Air Malta now considering hiving off its Heathrow landing slots into a new company 

A protective measure to safeguard one of Air Malta’s most precious assets is in the offing.

The first signs of a new approach to turn around the beleaguered airline under tourism minister Konrad Mizzi appear to be a plan to hive off Air Malta’s landing rights into a new company.

Landing rights in airports that are already at over-capacity, such as London Heathrow, are crucial gains for airlines seeking slots for profitable routes.

“We’re not yet at the stage where we are seeking a strategic partner,” said a government source. “The plan is to get the company on its feet instead of just selling off a minority stake,” the source said, highlighting a difference in strategy between that employed by Mizzi’s predecessor, Edward Zammit Lewis.

Air Malta’s take-off and landing slots at Heathrow, the world’s second-busiest international airport and the main access point for the British economy, come with price-tags as high as €70 million for a pair. The price is itself informed by the capacity constraints at Heathrow.

Another airline source, who would not be drawn into comment, said there was talk at top management level of hiving off Air Malta’s landing slots into a new company.

“You don’t want a strategic partner buying up 49% of the airline, and then eventually taking over and controlling these landing rights,” the government source said.

Once hived off into the new company, Air Malta would ‘lease back’ those landing rights while retaining full control on them.

Air Malta has been seeking more cost-cutting opportunities since it took on Maria Micallef as chairperson over the past years.

But Mizzi has already mooted that the airline is now reconsidering a decision to eliminate the Frankfurt route.

“We’re looking at growth, not cutting routes,” said the government source. “That is why there is talk of restarting the Frankfurt route, and to even introduce new routes.”

In January, the plug was pulled on talks between Air Malta and Alitalia for the sale of 49% of the national airline’s share to the Italian airline.

Doubts on the deal always focused on whether the agreement would ultimately benefit Air Malta’s employees and the country.

Air Malta was hoping that Alitalia, a subsidiary of Etihad, would acquire a stake in the ailing airline in a bid to remain afloat after a massive €260 million restructuring package negotiated under strict EU state aid rules.

But Etihad Airways, hit by slowing growth, announced in late 2016 that it would be eliminating jobs across several units after acquisitions in Air Berlin, Air Serbia and Alitalia failed to turn a profit, with Etihad losing €2.5 billion on these investments.

Additionally, Alitalia’s president Luca Cordero di Montezemolo had hinted in 2016 that Air Malta would potentially be used as a feeder airline – a move which would definitely go against the government’s vision for Air Malta.

In 2016, Air Malta’s board of directors moved to axe two routes – Frankfurt and Manchester – insisting they were performing weakly.

The national airline – whose first flights were in 1974 with scheduled services to London, Birmingham, Manchester, Rome, Frankfurt, Paris and Tripoli – continues to face stiff competition from low cost airlines, especially Ryaniar, which is close to taking the majority market share of Malta’s incoming passenger market.

Air Malta went through a massive restructuring imposed by the EU after the government saved it from bankruptcy in 2010 with a €52 million loan. Two years later, the EU approved €130 million in State aid on condition that the airline was restructured.

Under Peter Davies, roped in by the then Nationalist government to effect the necessary changes being demanded by the European Union, Air Malta almost halved its workforce, reduced the number of jets in operation and cut capacity.

During the summer months, it was revealed that Air Malta was €66 million in the red. At the end of the 2015 financial year, Air Malta lost €4.2 million, after losing €16.9 million the previous year.