The government and Air Malta yesterday insisted they will not be breaching EU State aid rules and the provisions of the airline’s restructuring plan with the direct sale of the Selmun Palace Hotel to the government.
As part of its efforts to return to the black by 2015 under an agreement with the European Commission, the ailing airline must sell off some assets, including the hotel.
After failed attempts to sell the hotel on the open market, Air Malta has now agreed to sell it to the government to meet the deadline envisaged by the five-year plan.
Answering a parliamentary question on Monday, Tourism Minister Edward Zammit Lewis said a competitive process would be announced within the next few months, leading to the renewal of operations at the hotel.
The restructuring plan lays down that the sale of assets must be “conducted in an open, competitive, transparent and non-discriminatory manner”.
Asked to state whether this government-to-government transaction respected rigid EU State aid rules and the restructuring plan, Finance Minister Edward Scicluna yesterday insisted it did not constitute State aid as the government intended to privatise the hotel.
“We are buying the property so that we will then privatise it. We are buying it at market prices so this is not State aid,” he said.
“The issue is that instead of Air Malta privatising the hotel, we are buying it from Air Malta to do it ourselves. For the European Commission this makes no difference.”
The airline echoed this position: “Air Malta’s divestiture of Selmun Palace, which was part of the 2012 restructuring plan, is expected to be concluded in the coming months.
“This transaction between the government and Air Malta will not be State aid. It will be in accordance to EU rules and in line with past practices that have already been screened by the European Commission in similar situations, when other member state airlines sold a part of their portfolio of assets to their respective governments,” a spokesman for Air Malta said.
The spokesman refused to give the value of the deal.
The government-owned airline is struggling to meet the terms of the restructuring plan, which aims break even by autumn 2014 and to make profit by 2015. Its chairman Maria Micallef admitted in an interview with The Sunday Times of Malta last week the airline would post a loss of some €16 million by the end of the current financial year.
However, she was confident that by 2015, the company would be back in profit.
The 2012 restructuring measures oblige the airline to streamline operations in return for State aid of €238 million, including a €52 million rescue loan.
It must sell four subsidiary companies including the Selmun Palace Hotel Co Ltd. The plan is to raise between €10 and €12 million from these companies, which also include insurance broker Osprey, captive insurance company Shield Insurance, and Holiday Malta, a UK based specialist tour operator.
If the airline fails to achieve viability it cannot be given more State aid and will have to either close down or be privatised.