Dad, political sociologist, local councillor, drummer from Malta

Monday, August 29, 2016

Allow Air Malta to fly


There is no other way to put it: Air Malta is in a mess. I am not referring to the service given to its customers, which I think is excellent. I am referring to its current existential crisis.
In the past, the airline carried out some dubious purchases of assets and was (is?) often used by politicians in government to employ party supporters in return for votes. As a result, its workforce became too bloated, leading to persistent heavy losses.
An Air Malta representative recently stated in court that, despite a five-year restructuring programme, it has about €66 million in outstanding debts. During this period, the government paid about €200 million to the airline. To add to the unease, Times of Malta recently reported that the airline’s latest financial results have not been published yet.
Some argue that low-cost airlines are the biggest threat to Air Malta. Though it is true that such airlines are involved in cost-cutting measures at the expense of workers’ rights, one should also keep in mind that they have expanded possibilities for different travellers, including tourists heading Malta’s way. And this also creates jobs.
National airlines must also fulfil social and strategic functions of utmost importance
Yet, low-cost airlines may come and go depending on their financial interests. But, in the absence of other alternatives, national airlines must also fulfil social and strategic functions of utmost importance. And a small island like Malta must ensure that such functions are not lost.
Perhaps this is why the government of Malta has stated that it is willing to absorb Air Malta’s debts in its talks with Alitalia. Maybe this price would be acceptable to taxpayers if Air Malta’s future is guaranteed. Still, it is unclear whether EU state aid rules would allow such an arrangement.
What I think is less acceptable is the news that Alitalia would require Air Malta to forfeit various European destinations and, instead, increase flight frequency to North Africa and the Middle East, thus acting as a feeder airline to Alitalia and its Etihad owners. In the meantime, Alitalia would not inject any capital into Air Malta and the government would absorb all surplus workers in addition to current debts.
Let us assume that this deal takes place and that it is not a decoy by the government’s PR machines to present something that looks ‘better’ and ‘more acceptable’ in the days to come.
How would such a plan guarantee that Malta benefits from routes that are so important to its tourist industry? Wouldn’t Malta become overdependent to the commercial interests of Etihad Airlines, Ryanair and others? And do such interests necessarily reconcile with the interests of Malta’s tourism industry and other strategic objectives?
I would assume that the Minister for Tourism is seriously evaluating such legitimate questions that are being put forward by all and sundry, from the Malta Hotels and Restaurants Association to Joe Public.
In this regard, Martin Degiorgio (August 23) put forward some pertinent arguments and proposals on the future of Air Malta. He proposed a ‘third way’ hybrid solution. In short, this involves selling 40 per cent to another airline while floating the rest on the Malta Stock Exchange and leaving 25 to 40 per cent of shares in government ownership.
For this type of strategy to work, the airline has to be free from the short-term partisan interests. At the moment, the low interest rates offered by banks would make such an investment attractive for Maltese people but investors have to be assured that ministers will not use the airline anymore as an employment agency.
I would imagine that, in negotiations on the issue, different stakeholders are also putting forward their own proposals which the government may consider. But here, an immediate question comes to mind: is the government really consulting with different stakeholders? And is the Tourism Minister commissioning studies from experts in the field about possible ways forward? Is it looking beyond the next general election?
The government’s top-down non-transparent way of doing things is only fuelling speculation and disenchantment by various stakeholders.
In the meantime, let’s realise time is running out for Air Malta.

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