Airport properties to be transferred to MIA for Lm350,000 annual groundrent

The House of Representatives yesterday started debating a motion which provides that the title of the land held by Malta International Airport would be converted from freehold to a 65-year emphyteusis. The company will pay an annual Lm300,000 groundrent which will be periodically revised by 15 per cent every five years, or Lm45,000 after the first five years, Lm25 per day.

The motion was debated in the audit committee of the House last week but since there was a lack of unanimous agreement on its provisions, standing orders provide that it has to be debated in the whole House.

Home Affairs Minister Tonio Borg said the government would be buying back the site and properties used by Malta International Airport including the terminal building for Lm36 million and MIA would in return pay the government Lm36 million for the emphyteutical grant.

The contract involved the terminal building, the terminal and the parking area, the aerodrome site and "other sites."

It excluded the runway, the taxiways and the "airfield." The company would, however, enjoy exclusive management of those areas but would also be responsible for their maintenance according to international standards. Military aircraft and other state-owned aircraft would be able to use the airport for free.

MIA would enjoy exclusivity to operate an airport within a radius of five miles from its site, the exceptions being facilities for air freight operations by Air Malta and Maltapost and the operation of a helipad or a small airstrip for aircraft of less than 10 tons.

The minister said the use of the terminal building may be only as an international and domestic airport passenger terminal with commercial outlets as at present. The terminal land may be used for commercial purposes such as the building of a hotel and leisure and entertainment facilities. The aerodrome site may be used only for aviation-related commercial activities and the "other sites" may continue to be used only as at present.

The company may not transfer the properties granted to it on emphyteusis except in particular circumstances. With regard to the terminal the company may sub-contract any activity to a third party. It may grant third parties sites for related terminal activities, such as lease of duty free shops.

Sub emphyteusis, such as for the building of a hotel, would be allowed on the land near the terminal as long as the contract term does not go beyond the term of the emphyteusis. The government would have the right to object to any sub-emphyteusis to "undesirable persons" or companies as defined in the contract.

In public emergencies the government may resume control over the airport but compensate the company for loss of earnings.

Dr Borg said that because of this agreement, MIA would also pay Lm5.4 million in capital gains tax and Lm3 million on duty on documents (stamp duty) to the government. The government's net gain would therefore be Lm8.4 million plus the groundrent of Lm300,000.

Opposition finance spokesman Leo Brincat said the government was making this out to be a one-way favourable deal, when this may not be the case.

How much sense did it make to debate this deal when the draft contract for the privatisation of MIA had not been published? Had this property contract been discussed with the Mediterranean Link Consortium, which would be buying a stake in MIA, and the other companies which had bid for the airport as part of the privatisation process.

The opposition felt this property deal was one sided to the advantage of MIA and its partners.

The land valuation had been made by consultants of the Privatisation Unit, not the Lands Department. How was the valuation of Lm36 million made?

This contract represented a potential public liability yet the government in the committee proceedings had not said what maximum amount the government would be liable for. The contract said a lot on the government's obligations to MIA but hardly anything about compensation by MIA to the government.

The contract said nothing on the hours of the operation of the terminal.

The government should be able to monitor the operations of the company and any transfer of shares. The contract laid down that the government could see documents to ensure that the company took proper insurance cover, but that did not mean it would always have copies of the insurance policies and renewals.

Certain guarantees being given by the government, such as with regard to debts, needed to be quantified.

Mr Brincat said that the use of the airport by foreign military aircraft should be sanctioned by the Ministry of Foreign Affairs, as at present.

Would the new shareholders of MIA be involved in the payment of Lm8.4 million in stamp duty and capital gains tax or would these amounts be paid by the company as currently constituted? Would this deal affect the value of the transfer of MIA shares?

While it was good that the government was regularising the position over the title of the land used by MIA, particularly as there was no clear title over some of the sites, the opposition felt this should have happened before the privatisation deal so that all bidders would have had a level playing field.

Mr Brincat questioned the 65-year term for the management of the airport, pointing out that there could be many developments in civil aviation during this time and this could therefore hinder Malta's own development.

Would the company pay anything for using the runways?

Mr Brincat said that if the Maltapost sorting room was to be moved to a site at the airport, it should be ensured that there was proper customs supervision.

The Labour MP said the company would retain the right to change its shareholders. Given the national importance of this company, this situation needed to be closely monitored.

Turning to the privatisation programme, Mr Brincat said there was no doubt that the programme had fallen back. The government in the privatisation White Paper had said it would privatise the Libyan Arab Maltese Holding Company, but nothing more had been heard since then on this. Could it be that the Libyans did not want anyone other than the government as their partners in this company?

Notary Charles Mangion (MLP) said the contract was not in the national interest since its consequences could be to Malta's detriment.

For example, if the company went insolvent, it would be the government, and the Maltese people, who would have to pay the debts.

There were no safeguards regarding tourism. MIA, particularly if it was fully privatised, could in future decide to raise tariffs at the airport terminal so as to improve its profits, even though this could be detrimental to Malta's tourism.

Neither did the contract provide any consideration for Air Malta, despite its importance in the national economy. In future there could well be airport development which clashed with Air Malta's needs. For example, the airport could be promoting hubbing while the national airline concentrated on point to point services.

He observed that there was nothing in the contract which would prevent MIA from even sub-contracting its own core operations.

Notary Mangion observed that although MIA would enjoy a management agreement regarding the runways, the government would not earn anything from the profits which such use would earn the company.

The contract provided that MIA may not grant properties under sub-emphyteusis except in particular circumstances and subject to government control. This provision, however, did not apply for leases and sub-contracting within the terminal building. The opposition felt there was need for an amendment in this case.

Notary Mangion said it was worrying that in terms of the contract, the company would be able to use its property as guarantee for borrowing made by itself or subsidiaries not just for capital investment within the terminal, which was acceptable, but even for its own operations. This was worrying since if the company went bankrupt, the government would be obliged to settle the debts up to a certain level. Such a clause underlined the need for the government to have a strong regulatory role.

Mr Noel Farrugia (MLP) insisted that the governemnt should ensure that national interests should come before private interests even in companies which were privatised.

The contract under debate did not provide many guarantees and compensation for the government if terms were violated by the company.

The privatisation of MIA as handled by the present government would be detrimental to the general interest since the profit motive would come first. One could see what happened after Mid-Med Bank was privatised.