Air Malta v2 ruled out as current branding needs to be abolished

The government will not be able to use any of Air Malta’s branding for a new national airline it is planning to establish by the end of this year, the EU has told Finance Minister Clyde Caruana and the airline’s Chairman David Curmi.

The Shift is also informed that given rigid EU state aid rules, the European Commission has also insisted in its talks with the government that there needs to be a clear “economic discontinuity” between the closing of Air Malta and the opening of its replacement.

According to EU state aid rules, an economic discontinuity is assessed on several criteria established by the Union’s courts, such as the scope of the assets transferred and the economic logic of any transaction.

It is also being made clear that the process will not be a “seamless transaction” despite the positive spin the government is giving the upcoming transition.

The new airline will need to be smaller than Air Malta and it will not be able to operate routes that are not economically viable as the airline does today.

According to sources close to ongoing negotiations, which are close to being wrapped up, the Commission has informed the government that it will not allow the transfer of some of Air Malta’s current assets to the new airline.

These include flight tickets already bought from Air Malta by the day of its closure, its loyalty Flypass programme, which rewards regular clients with discounts and upgrades, and the KM (Knights of Malta) brand. The latter had been already hived-off years ago and purchased by the government in one of its book-balancing creative accounting exercises.

The government is still trying to negotiate concessions, but The Shift is informed the government has very little room in which to manoeuvre.

The Shift is informed that although Finance Minister Clyde Caruana is still trying to give the public the impression that there is still a chance of saving Air Malta, this is not the case.

According to sources close to the strained negotiations, the Prime Minister and finance minister have both been told that Air Malta was to have been wound down by last year because of its increasingly dire financial situation.

But although the government has had a plan in place since last summer to close the airline down, it kept telling the public and interested business parties that this might not be the case.

After veering considerably from the 2012 five-year restructuring plan and posting tens of millions of euros in losses every year, Caruana asked the European Commission for a new €290 million state aid package to save the national airline.

Caruana’s plan, however, was quickly shot down since it was in clear breach of EU rules and given the fact that the government had strayed so far from the original restructuring plan.

The sole option the government has been left with is to shut down Air Malta and create a new national airline, with a different name, fewer staff and different operations.

For the new airline to take on some of Air Malta’s current assets, including valuable slots at London airports, it will most likely have to compete with other airlines by tender.

The same will apply to other assets, which are very few.

Air Malta even lost its brand when it was sold to a new government entity, IP Holding Ltd, in 2019 as part of another creative accounting exercise spearheaded by disgraced former minister Konrad Mizzi, who cooked the airline’s books to declare a profit.

The company holding the Air Malta brand is fully owned by the government with former airline chairman Charles Mangion, Mizzi’s then-right-hand man, Permanent Secretary Ronald Mizzi, still being on its board of directors.

The closure of Air Malta, which, according to its chairman David Curmi, will take place by the end of the year, will come at a hefty price for taxpayers and its remaining employees.

While the current 350 staff members will all be made redundant, including around 100 pilots, they will not all be re-employed at the new company, which will offer remunerations in line with other low-cost airlines.

Millions more will need to be spent to prop up the new airline and to compensate the redundant staff. Caruana has already paid out €61 million to hundreds of Air Malta staff who have been made redundant and who were given an average golden handshake of approximately €175,000.

Caruana has said that thanks to a secret agreement struck between Mizzi and the pilots, the latter will be eligible for compensation of between €750,000 to €1 million each.