Air Malta being ‘subsidised’ through €35 million government freephone contract

The government has found an innovative way to inject more public funds into the beleaguered national airline, this time by awarding a €35 million direct services contract to a private company in which Air Malta owns half of the shares.

Through a form of direct order known as a negotiated procedure, the Office of the Prime Minister issued a €35 million contract in 2020 to call centre operator Centrecom Ltd, which also handles Air Malta’s customer services.

Through the agreement, which expires in 2025, the government handed over its freephone and other related customer services to the company, in which Air Malta has a 50% shareholding.

The other half of the company’s shares are owned by the Australian-registered Lac Investment Company. That company is owned by well-connected Maltese-Australian businessman Leslie Cassar, who is closely linked to the aviation industry and Air Malta.

Centrecom already handles Air Malta’s own customer services through a separate contract. This new government contract was awarded to the call centre through a new public agency, Servizz.gov, which was set up just before the direct order’s finalisation.

The new agreement between the government and the Air Malta company was never announced. Such an announcement could raise the alarm in Brussels on state aid.

A new National Audit Office investigation found the Centrecom contract one-sided and failed to safeguard the government’s interests.

The audit also found lax control and monitoring of the contract by the government, including many instances in which payments were being based on information supplied solely by the private service provider, which operates from a subsidised factory at the Mosta Technopark.

“The fee structure applicable for the contact centre services is mainly variable, depending on the number of calls, emails and chats undertaken by the public. As a result, the Agency has limited control over such expenditure,” the NAO found.

It added, “Other than charges related to the calls covering a six-month period, which were verified through an information technology audit performed by an independent auditor engaged by the agency, verification carried out by the latter to confirm the billings were entirely based on data provided by the service provider (Centrecom) and subcontracted employees.”

A surprise inspection by NAO officers at two hubs operated by the government agency, in Birkirkara and Msida, found that employees had already signed their attendance sheets for the rest of the week without anyone verifying their presence at work.

The new agency currently costs taxpayers more than €10 million annually but registered a deficit of almost half a million euro for the last financial year.

Air Malta Chairman David Curmi also forms part of Centrecom’s board of directors, while the government’s Principal Permanent Secretary, Tony Sultana, controls the government agency.

Air Malta is currently in financial trouble despite all the subsidies and will have to be grounded if the EU does not approve new subsidies over and above the hundreds of millions of euro that have already been injected into the ailing airline in recent years.

The Shift has revealed that the government already has a plan to shut down the airline and start a new one based on the low-cost model and foreign employees.