Air Malta’s restructuring is expected to cost taxpayers more than €200 million over four years as the government seeks to increase the airline’s share capital and buy the company’s property.

The government is seeking the European Commission’s approval for the re­structuring plan that includes an injection of €78m to raise the company’s share capital and the conversion of a €52m emergency loan given last year into share capital.

The plan also includes the sale of Air Malta’s property, excluding the area close to the old terminal building and Selmun Palace, to the government for €66 million.

The airline is expected to eventually build a new office block close to the old terminal but in the meantime will be seeking office space in the area and is also looking at the possibility of moving headquarters to Malta International Airport’s Skyparks business centre.

Air Malta chairman Louis Farrugia said the company expected the Commission to send over an investigative team next week to evaluate the restructuring exercise. Brussels will only deliver its final opinion in June.

The details emerged yesterday when the airline presented its annual accounts for the financial year that ended in March

2011. Air Malta and the government signed a promise of sale agreement last month for the sale of the land and property and a deposit of €20 million was made this month.

The company also secured €30 million in bank financing for the next three years.

Finance Minister Tonio Fenech said the financial package the country had to fork out was affordable and signalled the government’s commitment to save the airline, which he described as being strategic for the economy.

“The cost to finance the restructuring is included in the three-year term projections submitted to the Commission as part of its evaluation of the country’s financial sustainability,” Mr Fenech said when asked whether the high cost could derail deficit projections.

Mr Fenech said that, despite the government being the sole shareholder, the airline should not be viewed as another government department.

The situation is still not rosy with chief executive Peter Davies saying that the airline made an operating loss of €33.9 million in March, which represented an increase of 57 per cent over the previous year. The increased losses were primarily attributed to higher fuel costs.

But Mr Davies said improvements were registered in the six months between April and September (the first half of the current financial year) with operating losses dropping to €9 million from €15 million in the same period a year before.

Mr Davies said the airline had to operate on commercial lines and non-profitable routes would be dropped.

He did not identify the routes.

The airline plans to break even in 2014 and return a profit in 2015.

He admitted to having been too optimistic last summer when he said negotiations with the unions would be concluded by August.

“After all, our decisions will affect the lives of 500 employees, even though we will have saved the jobs of another 800 and so we felt the need to be more sensitive and prolong the talks,” Mr Davies said.

Asked to reveal the pay packet of the chief officers appointed to carry out the restructuring exercise, Mr Davies said that was a matter for the board of directors to do.

Mr Farrugia, however, declined to reveal the information, insisting it was commercially sensitive.

400 workers apply to leave

More than 400 Air Malta workers have applied to leave the airline over the past few weeks, benefitting from various compensation schemes agreed with the respective unions.

According to information given by the Finance Minister, about 370 workers had until yesterday applied for the voluntary redundancy or early retirement schemes and another 60 had opted for alternative employment with the government.

Air Malta is expected to fork out almost €30 million in compensation. The airline reached agreements with the General Workers’ Union and the Union of Airline Engineers last month and signed a third agreement this week with the Union of Cabin Crew.

The airline has to shed about 500 workers as part of the restructuring exercise and will also loan out some pilots to other airlines.

ksansone@timesofmalta.com

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