Kurt Sansone
Air Malta revamp will cost €200m
Airline to sell headquarters
Air Malta, which is going through a restructuring exercise costing taxpayers €200 million, plans to break even in 2014 and return a profit in 2015. Photo: Darren Zammit Lupi
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.
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Joe Grech
Jan 21st, 20:35
Tonio Fenech was responsible for Air Malta for several years. He did nothing to correct the situation. We Maltese know that we have a Prime Minister who unconstitutionally dished out taxpayer money to ex-Ministers and backbenchers while giving the entire Cabinet a huge pay rise behind taxpayers' backs.
Minister Tonio Fenech, financial guru seems to be trying to emulate his boss.
This explains the immense ''bail out agreements'' being given to Air Malta employees.
But who will be carrying political responsibility for Air Malta's slip into the red?
Hopefully people will remember this episode come election day.
Joseph Calleja
Jan 21st, 15:54
€200 million euros? Can you imagine how many roads they can fix or rebuilt with that money? €200 million euros is a lot of money, don't forget we are talking millions here. I know a lot of people do not agree with me but why not privatize Air Malta, sell all their assets and put the money in Malta's coffers? Instead of paying €200 million euros, get back triple that money in return and stop wasting the TAX PAYERs money. How much more money can the government (the TAX PAYER ) be able to squander on a dying airline. Pride does not feed the family and the only people benefiting from all this is the Top Brass because they get paid those high salaries whether the airline is making money or not. Think about that..The buck stops here Dr Gonzi.
Joseph Calleja
Jan 21st, 18:37
I wonder how much the total salary is for those Seven Execs sitting behind the desk in the photo? Could it total over €1,000,000M euros a year? Give us all a break Mr Tonio Fenech, Mr Louis Farrugia and Mr Davies? Squandering Tax payers Money is a sin. Stop pouring money into an endless money pit. Instead of concentrating on Air Malta why not concentrate on saving Malta first? Priorities. Why is the Maltese Government buying Air Malta assets when the Government already owns Air Malta? Mela kulhadd fis-sakra?
Paul Smith
Jan 21st, 13:41
I cant imagine what the price of aviation fuel will be in 2015. All i know is, global oil production peaked in 2006 and has been on a plateau for the last 6 years. I recently read from IEA insider, that global oil production will go into terminal decline as early as 2014/15.
Air Malta will not return to profit IMO. But when the survival of your bread and butter relies on being a bit collective with the truth, who can blame them. The above reasons are why a third runway at Heathrow was ditched and why Boris Island will never get a green light, The British Government is well aware of global Peak Oil as i was chatting to my MP who is a conservative Government chief whip the other day about the very subject. Why do you think we were so keen on Libya intervention - Can anyone say last bastion of light sweet crude on the Planet? And why tensions are increasing between UK and Argentina because deposits of oil have been found around the Falkland Islands, in the grand scheme of things what was found is just a puddle and will not change anything in reality. The UK is seeing the writing on the wall and we are starting to invest heavily in Rail transportation.
Joseph Calleja
Jan 21st, 18:27
Yes Mr Smith, but don't forget Malta has the rights to explore for oil, remember? !00 years from now.
E. Azzopardi
Jan 21st, 12:11
I hope ( but hope is eternal) that this money is returned to the taxpayers. Taxpayers are fed up of forking out money to companies which were making a loss. 1,000,000,000 euros went to the Drydocks alone. And what did we get? And we all know how these losses came about!! VIVA MALTA!!
Joseph Calleja
Jan 21st, 15:41
Mr Azzopardi you must be joking. Return money to the Tax Payer? Hoss fl-ilma. That is like asking Tonio Fenech, Louis Farrugia, Mr Davies and his foreign regime to give up their wages. Make me laugh.
Victor Vella
Jan 21st, 11:57
Jekk jitla` l-lejber u ma jaghmilx inkjesta serja biex min wassal il-kumpanija f`dan il-falliment sa anke d-dar bieghu biex ihallsu il-kredituri, ikun komplici f`komplott infami ta` politika ta` hokkli dahri u nhokklok darhek.U bl-ghajjat li ghajjat ta` accountability b`kollhox ma jkun xejn hlief parroli u bzieq fil-vojt li issa saret il-karaterristika tal-politikanti Maltin. Franco Debono din it-tip ta` politika jrid li min hawwad u qassat biex flus il-poplu spiccaw fil-but ta` xi erba` al Copone style of management, jaghtu rendikont ta` eghmilhom. Altrimenti, Joseph Muscat seta` baqa` hemm fuq l-iskaffa u nkomplu lil dan ir-Regim mahmug jaghmel li jrid u li jghogbu, ihawwad u jkarwat fejn hadd ma huwa accountable ta` ghemilu. Qed nghid Joseph Muscat ghax Malta zewgt partiti hawn fejn s`issa ma ghamlu ebda differenza hlief Franco Debono.Jien sincerament nghid li ghandi iktar fiducja fi Franco Debono milli F`Gonzi jew Joseph Muscat. Jekk johrog Franco Debono jien il-vot lilu ntieh u nitlaq il-barra.
Peter Murray
Jan 21st, 11:06
How many staff will be forced out in total number ,i.e. UNILATERALLY MADE REDUNDANT ?That is the big answer that no one is answering or addressing.Also isn't this plan to financially assist an EU member state's national airline illegal as in the case of MALEV-Hungary's national air carrier?
sandro grech
Jan 21st, 10:06
Dear Mr.Davies is it true that air malta pays €7.00 for the half a sandwich and a cheap plastic cup of juice you serve on your flights. If so that will make it the most expensive sandwich in malta .
Joseph Calleja
Jan 21st, 14:31
The worst part of that story is that fabricated sandwich they sell you for €7.00 on board is so disgusting that you won't even finish eating the whole thing. Better if they sell you a dozen Pastizzi, original Maltese food for that price. By the way Air Malta is not the only airline vending these disgusting sandwiches on board flights. I ran across this problem on other carriers on international flights. Make a sandwich at home and take it on board with you if they deem that legal anymore? Maybe daqxejn hobs biz-zejt u tadam sound good right now..
Mr Kevin Zammit
Jan 21st, 10:00
euro 30 miljun lesti biex inehhu 500 ruh jigu Euro 60000 kull wiehed. Prosit ghall min hu mpjegat tal airmalta. Tghamel it telf, tmexxi l kumpanijja bl addocc u wara kollox tiehu rigal sabih. Jiena li nhallas it taxxa jekk jonqos ix xoghol nispicca fit triq.
Din hi s sistema ta dan il pajjiz. u iva issa jhalsuh uliedhom w uiledna dan id dejn kollu, l aqwa li nirbhu l elezzjoni hux?
Qiedin taraw kif f hakka tghajn min 80% tal GDP dejn nisparaw ghall 100%? 200 miljun hawn, 500 miljun l enemalta ... ma nistax nifhem kif nistghu nibqu sejrin b din l atitudni fuq din in naqa ta blata.
Carmel Farrugia
Jan 21st, 09:53
What a waste of money. Another dockyard in the making. Money placed in a shredder.
Victor Vella
Jan 21st, 09:52
Making more than 30m€ year on year is not a problem for Air Malta. According to the chairman of Air Malta for a company to make net losses year after year for the last 8 years is a milestone and showing good performance indicators for the future. The big truth comes from Davies when he says that he found a demotivated staff. But Davies failed to say Why he found such a demotivated staff and How he is going to tackle such important issue when demotivation will increase when the present staff that are going to remain see 500+ of their colleagues leaving the company. Those who are going to remain with the company are not going to find a rosy bed, but a very hard environment of work and the worst conditions ever encountered at Air Malta. Let alone the issue that the social aspect of Air Malta is at stake because there is no long term plan for Air Malta. A company that has to shrink instead of finding the fodder to make the company stronger as it was in the past is enough to put Air Malta`s future in the red. Imagine having a child not given enough food to grow up. That child will get sick and if he does not die today, he will die tomorrow. This is the future of Air Malta. If Air Malta does not find new routes before its competitors, keep its competitive edge as a differentiated airline and not punish its clients by charging unreasonable charges as the LCCs, and solving the big issue to its staff that have to make things happen there is no future for Air Malta. Up till now the show is being run by these foreign English people who are seen by the remaining staff as the guillotine brought by the PN government because any Maltese found himself safe to make havoc of employees who have always done their part at the helm of a corrupted, bankrupt company. These foreign brains have nothing to lose but taking the hefty monies from the pockets of the taxpayer and the remaining staff and will leave when their contracts are expired.
Patrick Zammit
Jan 21st, 09:33
Will Air Malta pay rent at the Malta International Airport’s Skyparks and if yes, how much and for how many years?
Would it not be better for Air Malta to move to one of its own properties until the new Air Malta offices are built?
But that would not earn third parties a good sum of money which the taxpayers would have ultimately to fork out. I smell a rat.
Joe Fenech
Jan 21st, 09:10
And who is going to bear responsibility for its abandonment during these last 25 years?
As usual, no accountability!
C Cassar
Jan 21st, 11:36
How about the unions and empoyees for demanding unrealistic pensions and salaries? The airline was vastly overstaffed due to the intransigence of the unions. Employees has pensions which were unsustainable and which became a future millstone around the airlines neck.
Now the airline can run as a lean efficient business, not a charity to drain the tax payers coffers.
Joseph Calleja
Jan 21st, 15:44
Mr Cassar why not put those same question to Tonio Fenech who has been overseeing the airline for so long?