Government threatens to stop rotation of chairman

Government Investments Minister Austin Gatt has told Malta International Airport's board of directors the government would review an agreement to rotate the company's chairman between the two major shareholders "if it considers that ethical principles no longer motivate the management of MIA".

Dr Gatt's strongly worded letter was sent as the government's reaction to the controversy over the award of a concession at MIA to Franks Travel Retail Limited and the exclusion of the current occupant, Salvo Grima Group of Companies.

Sources close to the government had said Leaders Ltd, a Salvo Grima subsidiary which has operated Skincare & Cosmetics at the airport since it opened in 1992, had submitted a much better offer but FTR's lower offer had been accepted instead.

MIA chief executive Peter R. Bolech had no comment to make yesterday when asked whether he could confirm that the last meeting of the board of directors had taken place on June 4 and that it had not met since the annual general meeting on July 9 because of problems it would encounter in electing a chairman, given the present state of affairs with the government. Mr Bolech said this was an internal matter.

Asked for the MIA position on the government statement over the rotation of the MIA chairmanship, Mr Bolech said he did not have any stand on the issue as this was a matter pertaining to the shareholders.

Mr Bolech said the decision to grant the concession to FTR Ltd had been taken on May 30 as per their letter of intent.

Asked to confirm or deny whether the board of directors had given its unanimous consent to granting the concession to FTR Ltd., Mr Bolech said this was an internal board matter on which he did not comment. However, he reaffirmed his belief that MIA has acted correctly in this whole matter.

Asked whether MIA was considering reviewing its decision, Mr Bolech said the situation had already been reviewed twice "and it has received the backing of the board".

MIA says the choice of FTR Ltd instead of Leaders was taken in consequence of a board decision supported by the board on more than one occasion. The airport says it sought and obtained professional advice to this effect and that its decision was sound from a legal as well as commercial point of view.

MIA also holds that the government's concern with respect to corporate governance "appears to be unfounded and artificial and could only be because the government is not aware of the full facts of the case".

The government has a 40 per cent shareholding in MIA and Malta Mediterranean Link Consortium Ltd (made up of Vienna International Airport, SNC-Lavalin of Canada and Airports Investments Ltd, an associated company within the Bianchi Group) holds another 40 per cent. The general public holds the remaining 20 per cent.

The Times has learned that the MIA board of directors has not met since June 4. The post of chairman has remained vacant after Lawrence Zammit was named chairman of Air Malta.

In a forceful, as yet unpublished letter sent to MIA earlier this month, Dr Gatt said his intervention in the controversy regarding the award of the concession was being made "on instructions of the Prime Minister" and "was intended to make clear the position of the Maltese government, as minority shareholder".

Dr Gatt told the MIA directors the government was fully aware it does not intervene in the management of the company. Nevertheless, it insisted that management "is carried out according to ethical rules; in accordance with the rules of corporate governance and does not prejudice the rights of the minority shareholders".

The letter, a copy of which has been seen by The Times, followed a meeting between Dr Gatt and Mr Bolech.

Dr Gatt did not mince words: "From the facts as known to us (and in essence agreed to by Mr Bolech) the MIA management's decision to substitute the present concessionaire with a new one when the latter's offer is Lm35,000 less per year gravely prejudices the rights of the minority shareholders.

"The December 2002 letter to the Salvo Grima Group clearly indicates that there was no cause to refuse a renewal of the concession agreement and it was MIA's intention to issue a letter of intent. The fact that, subsequent to this letter, offers were received and negotiated with third parties and then negotiations re-opened with the Grima Group, points to a lack of transparency in the process of selection and gravely prejudices corporate governance rules.

"These circumstances, coupled with the fact that Franks, the selected concessionaire, is directly controlled by members of the Bianchi family who indirectly control a part of MIA shareholding - smack of unjust preference."

Dr Gatt said that government was aware that the final decision was up to the board of directors: "Government is taking this opportunity to make it clear to the directors that it is in total disagreement with the decision taken by MIA's management and will say so publicly should the need arise.

"I would like to also make it clear that the issue is not simply legal in nature but has clear ethical overtones on which the government is not prepared to compromise. The government believes that these ethical principles bind the directors and management of MIA as well and augurs that they will be adhered to. Non-adherence thereto does not augur well for future relations both at board and at shareholder level, the more so when this unfortunate incident follows the government's prompt agreement with the request of the other major shareholder to rotate the position of chairman between the two major shareholders.

"In fact, government reserves the right to review this decision, given in good faith, if it considers that ethical principles no longer motivate the management of MIA.

"In the interest of maintaining the hitherto good relations which have existed and in the interest of furthering these relations not only within MIA but also with other stakeholders in MIA operations, government enjoins the board of directors to review the decision taken by MIA management."

It had been agreed that the post of chairman would be occupied by a Maltese and by an Austrian by rotation.

Last week the court provisionally upheld an application filed by Leaders Ltd against MIA. Leaders requested the court to stop MIA from taking any action to impede the company and its employees from entering the shop Skincare and Cosmetics at the airport departure lounge.

In their reply, MIA categorically denied the allegations of favouritism and nepotism made by Leaders and added that it had acted correctly in accordance with the contract it had with Leaders.

A director of Bianchi Group of Companies, Michael Bianchi, has sued Leaders Ltd director Robert Aquilina for libel.

Mr Bianchi, who filed the suit in his personal capacity, also sued Leaders Ltd for libel over excepts of a letter dated July 19.