Editorial | Air Malta déjà vu and brutal honesty

Air Malta’s pitiful state was laid out bare by Finance Minister Clyde Caruana in comments he gave sister newspaper Illum on Sunday.

Caruana was brutally honest in his assessment of the national airline’s financial problems and its bleak prospects unless the EU allows state aid.

He did not mince his words either on political interference at Air Malta that has been a constant feature since the airline’s inception in the 1970s.

Caruana said Air Malta is losing some €170,000 every day in operational losses and its survival now depends on the European Commission giving the green light for state aid that will run into tens of millions of euros.

The context of this bleak scenario is the COVID-19 pandemic and the restrictions on travel that grounded airlines everywhere.

There is no doubt that the pandemic was a major blow to Air Malta but the truth is that it also exacerbated an already dire situation.

The airline’s accounts for 2019 were not even published and a clear picture of the financial situation to date remains elusive.

This leader believes that Caruana’s honesty must be accompanied with transparency about the true state of affairs at Air Malta.

State aid to the airline will come at a very big cost to taxpayers and the least people could expect is a clear picture of the extent of the airline’s losses, its debts, expenses, income and capital.

Cooking the books, postponing the annual publication of accounts, shifting the financial year and other creative ways of massaging the poor state of affairs should be practices that are binned.

This becomes more important when dealing with the four unions that hold sway at Air Malta. It is very likely that any recovery plan will lead to job losses, pay cuts and reduced work conditions. But to achieve this with the least resistance possible government must be outright clear about the airline’s financial state.

Government must also outline its direction for the national airline, whether it sees a future for it and what level of commitment it is ready to meet.

The situation today is a déjà vu of another three occasions when Air Malta had to be rescued by the government. The first was on the eve of Malta’s EU’s accession when last minute talks mediated by president emeritus George Abela paved the way for a restructuring exercise.

Emergency aid was required again in 2010, followed by the European Commission’s approval in 2012 of a €130 million state aid package bound by a five-year recovery plan that saw the airline cut down on its aircraft, routes, staff and assets.

Another indirect aid package was granted in 2018 when Air Malta was stripped of some of its most lucrative landing slots, which were transferred to a new state owned company that leased them back to Air Malta.

In each case, discussions were tough but the outcome does not seem to have led to long-lasting results since the airline continued to struggle.

Unfortunately, political interference to avoid electoral backlash has constantly hindered progress. Caruana’s pledge to stop this is commendable but we stand to be convinced that he will not baulk under the pressure when push comes to shove.

There is no doubt that Air Malta plays an important strategic role in Malta’s economy, more so at a time like now when rebuilding will require exploring new markets.

But Malta must make a strong case for more flexibility in the EU’s state aid rules, especially when these concern small islands that suffer from natural connectivity disadvantages.