Editorial | Air Malta: déjà vu or starting afresh

If Brussels gives its nod to State aid, this will definitely come with strings attached. The airline will probably have to give up some routes, possibly cut the number of aircraft and reduce its employee base

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Government’s State aid application with the European Commission to be allowed to pump cash into Air Malta and rescue it is a déjà vu.

The circumstances today may be completely different, given the COVID-19 pandemic force majeure, but we’ve already seen this played out in 2004 and 2010.

The previous two rescue packages have cost the country millions of euros and yet the return on investment has continued to be a loss-making airline.

Politicians have to shoulder part of the blame for using Air Malta over the years to award jobs to constituents, burdening the airline in the process. They also must shoulder the burden of failing to take hard decisions when faced with intransigent unions.

But looking back and trying to find blame is a futile exercise and will do nothing to solve the current problems. One can only hope that Finance Minister Clyde Caruana does live up to his commitment for a hands-off approach.

The COVID-19 pandemic has wracked airlines the world over. Air Malta is not the only European airline to seek State aid.

The reported €290 million subsidy government is planning to pour into the airline pales into insignificance when compared to the billions of euros the French and German governments have been allowed to invest in Air France and Lufthansa, respectively. Many more European legacy airlines have resorted to State aid for survival.

But with Air Malta’s accounts not having been published for two years running, it appears the pandemic exacerbated an already precarious financial situation.

There is no doubt that Air Malta has a strategic importance to ensure the island’s connectivity with Europe and the surrounding regions remains strong.

However, in trying to save Air Malta from failure, it may be high time to consider shutting down the airline and starting from scratch with a new business model.

The government had set up an airline in 2018 – Malta Medair – which subsequently bought Air Malta’s most lucrative airport slots in Heathrow and Gatwick airports in London.

The latest move was the sale of the Air Malta brand to another government-owned company administering intellectual property rights for a consideration of €21 million.

Over the past decade, governments have been hiving off the airline’s assets, offering in return cash injections that just escape the State aid rules.

With this fragmentation and another airline already in place, government should not discard the option of dissolving Air Malta to start anew with fewer labour costs, a greater emphasis on efficiency and a sounder footing bereft of the legacy problems that hound Air Malta.

The choice will not be an easy one. It could also backfire politically but radical surgery cannot be excluded at this stage.

If Brussels gives its nod to State aid, this will definitely come with strings attached. The airline will probably have to give up some routes, possibly cut the number of aircraft and reduce its employee base.

The situation will not be nice, in any case. This is why an alternative to déjà vu could be starting afresh.

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