Air Malta restructuring exercise in the coming weeks

Updated: adds background - Restructuring at Air Malta would be carried out intensely in the coming weeks and months to ensure that the airline remained viable and able to overcome the hurdles it was facing, Prime Minister Lawrence Gonzi said this morning.

Speaking at a Radio 101 interview, Dr Gonzi said that Air Malta had a strategic role, but it was essential that the airline was viable.

Restructuring would therefore be made over the coming weeks and months to ensure that Air Malta could overcome the hurdles which it was facing.

He said a study was also needed on how best to maximise the routes operated by Air Malta.

Earlier this morning, Opposition leader Joseph Muscat said that Air Malta was a vital national asset and no actions should be taken to undermine it, or lead to its sale.

"A Labour government would not feel itself bound to any commitment by this government which would lead to the sale of Air Malta," Dr Muscat said during a One Radio interview.

He said that Air Malta had never to date depended on government subsidies and it had given a valuable contribution to the national economy. Indeed, it was a pillar of the Maltese tourism industry.

The root of current problems, he said, were major strategic errors made in the past, including the purchase of RJ-70 aircraft and the setting up of AzzurAir, which had absorbed millions of euro.

TALKS WITH THE EU ON AIR MALTA

The Times reported last week that talks have been held between Malta and the European Commission on a new business plan for the airline that will see it take cost-cutting measures to be in a better position to compete.

The airline made a €31 million loss in the last financial year.

The Finance Ministry would not comment and did not even want to say whether the talks would lead to direct state aid. To do so would require the EU's green light, although no such consent would be necessary if the government opts for a recapitalisation exercise.

Sources close to the European Commission said talks over Air Malta's prospects had been going for months and involved top officials from the government and the airline.

"Talks are ongoing and there have been meetings in Brussels involving the top hierarchy of the Office of the Prime Minister, the Finance Ministry and Air Malta," the sources said.

"However, so far, Malta has not yet presented any formal notification to the Commission on state aid required for Air Malta," the sources noted.

Following the announcement of Air Malta's loss last January, the ministry had said the government would be having talks with the Commission on a recapitalisation programme for the company that respected EU state aid rules.

Commission sources explained that EU rules permitted granting state aid to Air Malta "as long as this is just a one-time opportunity and is tied to a restructuring programme aimed at putting the national airline on a sound financial footing".

In the past years, the EU gave the green light to similar state aid packages to other national airlines, the most recent being Alitalia.

ST MICROELECTRONICS

Turning to the situation at ST Microelectronics Dr Muscat said this morning that the workers should carefully heed what they were being told by their union and the management and to consider the situation today, but also tomorrow and beyond. He hoped that there would be good news from this enterprise shortly.

In the national context, Dr Muscat said workers were struggling to make ends meet and thus seeking better conditions, and the biggest reason for this was called Lawrence Gonzi and the high utility bills. The high water and electricity bills were also undermining industrial competitiveness.

The government boasted that it had removed subsidies, but it as the workers and the companies which were paying the price.

The current situation was that the Maltese had EU prices but non-EU wages.

In other comments Dr Muscat hit out at the steep increases in gas prices and said that the Malta Resources Authority had still not explained how, it appeared, the workings had reached the government before they were publicly announced.

Here again, he said, the government was boasting that it had removed subsidies. By that yardstick, Dr Muscat said, taxpayers would be right to demand a cut in income tax once the government was saving so much on subsidies.