€440 million ‘seamless’ AirMalta transition aimed at profitability

A new national airline set to replace Air Malta by next March was announced by Prime Minister Robert Abela and Finance Minister Clyde Caruana on Monday, with plans for the new airline to retain the same name hinging on the result of a tendering process.

The “transition” from Air Malta to the new airline will cost the government an estimated €440 million, with Caruana claiming the airline will become profitable by 2025.

The new airline’s announcement follows years of financial mismanagement, which put the national airline in dire straits, and a bid for a €290 million state aid cash injection, which the European Commission shot down.

In August 2022, The Shift exclusively revealed the government’s Plan B, making it clear that the closure of Air Malta was imminent.

During Monday’s announcement, Abela and Caruana claimed the new airline will be completely restructured to maximise profitability and will also see partial privatisation in the coming years as part of the agreement reached with the European Commission during tight state-aid negotiations.

Abela all but confirmed that current Air Malta Chairman David Curmi will also be retained in the new company’s leadership, claiming he was and will be “instrumental” in the airline’s transition.

Last August, The Shift revealed how Caruana lied to parliament, claiming Curmi was not paid for his role when he was, in fact, paid €21,500 a month.

A ‘seamless’ but pricey transition

Of the transitions, €440 million in costs, up to €90 million will go toward current Air Malta pilots and cabin crew’s collective agreements, including early retirement schemes.

The pilots’ and cabin crews’ respective unions are expected to coordinate gradual resignations over four years, with pilots who choose to resign and benefit from the schemes being barred from ever flying with the national airline or working in the public sector again.

Cabin crew are to be given a cool-off period of six years before they can reapply with the government committing to be “vigilant” in both their and pilots’ reemployment with the government.

The Shift has previously reported how some former Air Malta pilots, who accepted to ‘retire’ in exchange for a generous taxpayer-funded golden handshake running into hundreds of thousands of euros only a few months ago, were already back on the books of Malta Med Air, another airline owned by the Maltese government.

Some €300 million of the transition cost will go toward acquiring new assets for the airline, which the government is hailing as an investment. These will include three new Airbus aircraft, which will form part of the new airline’s eight-plane fleet – the same size as Air Malta’s current fleet.

The assets also included a hangar and surrounding land and the reacquisition of London’s Heathrow and Gatwick slots, which were sold off to another government company for €58 million some years ago.

The remaining €50 million of the transition’s costs will be injected as working capital into the new airline.

A new but nameless airline

Abela also said the new airline is expected to retain Air Malta’s current branding and livery as it will submit a bid for the branding in an upcoming tendering process. The name is currently held by IP Holding Ltd., a wholly government-owned company.

Answering journalists’ questions, Abela admitted to the possibility of a competitor outbidding the government for its own airline’s name and branding but dismissed it as improbable.

Given the short transition period, Caruana said the tendering process would be sped up.

The Shift has reported how the European Commission opposed the new airline’s retention of the branding as the old airline’s assets were prohibited from being directly transferred.

These include Air Malta’s Flypass air miles programme, which Caruana claimed would be given back in cash to customers who do not redeem their miles, estimating costs of up to €2 million.

Any flights booked with Air Malta after 31 March will also be refunded, the government claims.

How the new airline will operate

The new airline is expected to operate 17 routes, which Caruana claimed were chosen for either “low competition or high demand”. Air Malta’s current routes to Palermo, Naples, Nice, Geneva, Lisbon and Tel Aviv will be cancelled, with increased frequencies planned for existing routes.

Caruana claimed the changes, which would lead to more time in the air for the aircraft and higher seat occupancy, are expected to bring about €2,000 in profits for each flight rather than the current €4,000 in losses.

The new airline is also expected to reemploy all of Airmalta’s current workforce, totalling some 390. The number was slimmed significantly in recent years through layoffs and restructuring, having previously numbered just over 1,000.