Air Malta will die and rise again as a new airline after the European Commission rejected government’s request to inject millions of euros in the ailing company.
The changeover is expected to be announced on Monday by Finance Minister Clyde Caruana after talks between Brussels and Malta came to an end.
Government had been seeking authorisation to pump €290 million to save the airline from bankruptcy after two previous unsuccessful restructuring attempts. Air Malta is beset by decades of political interference and bad management decisions that led to losses made worse during the COVID pandemic.
Employees who spoke to MaltaToday on condition of anonymity said intensive work was underway at Air Malta headquarters in preparation for the changeover. The livery and website of the new airline have, however, been kept under wraps.
The reincarnated airline will operate with eight aircraft, the same as present, after government insisted with the Commission that reducing the fleet would be detrimental.
Sources have said the transition is expected to be seamless for customers but workers will have to be made redundant and re-employed by the new company.
Sources said the government is committed to re-employ all of Air Malta’s workforce that currently stands at just under 400 people but they will be engaged on new contracts and pay arrangements. It is understood pay packets will be less generous than those currently enjoyed at Air Malta.
Sources said new work agreements will ensure aircraft utilisation will be much higher than it is today, increasing the airline’s capacity to carry more passengers.
The dissolution of Air Malta and the creation of a new airline is expected to cost taxpayers some €300 million in capital investment but sources said the new structure would ensure the company is profitable.
Air Malta halved its workforce over the past two years as part of restructuring undertaken while talks were underway with Brussels. Hundreds of millions of euros of public funds were used for severance packages, voluntary retirement schemes, and job transfers with other government institutions. The ground handling operation was also hived off into a separate company.
However, despite these efforts the airline continued to lose money and Brussels saw no option but to close down the company and create a new one, similar to what happened in Italy with Alitalia.
The airline first underwent a restructuring exercise in 2004 just before Malta formally joined the EU thus escaping the clutches of the European Commission. But just six years later the government had to step in again to bail out the airline. A restructuring process agreed with the EU saw Air Malta shed most of its assets, including the Selmun Hotel and its sprawling headquarters alongside the airport.
Matters became more complicated when former minister Konrad Mizzi had entered into a side agreement with pilots in 2017 that afforded them very generous redundancy arrangements if they were to be let go.
Two years ago, Clyde Caruana said the airline was losing more than €170,000 daily to operate its aircraft.
