Lately we had the Malta International Airport and Air Malta making headlines; one, the MIA, for yet another very successful year, and Air Malta for failing to reach agreement with Alitalia for the part-privatisation.
It is obvious that these contrasting results are directly attributable to so many decisions, some of which absolutely crucial, taken in the not-so-distant past which now, with the wisdom of hindsight, we can appreciate whether they were beneficial or not.
Let’s look first on MIA. It was privatised in 2002, only four years after being completed by a Nationalist government. Four years after this privatisation – quite a considerable period of time to study whether this was successful or not – the present Prime Minister Joseph Muscat, then a member of European Parliament, passed his judgement in an opinion in the GWU daily L-Orizzont on October 25, 2006.
He wrote: “The experience of MIA’s privatisation shows that it is unwise for the State – in a small economy like Malta’s which depends heavily on tourism – to renounce to the running of its practically only effective link between Malta and the outside world. The latter for our future is a clear one… this experience should be enough to show us that no privatisation of Air Malta should be considered.”
On the strength of this reasoning, we can fairly conclude that Muscat’s reading of the situation, 10 years ago, was dismally wrong.
A record five million people travelled through Malta International Airport last year, an eight per cent increase in passengers, performing better than the EU average. Aircraft movements increased by 4.5 per cent and seat capacity was up by 7.6 per cent. In a press conference addressed by MIA chief executive officer Alan Borg, it was revealed that the company expects passenger traffic to reach 5.2 million this year.
This, I think, is enough proof to confirm that, undoubtedly, the privatisation of MIA is a success story, indeed. But it is interesting to consider other factors as well. MIA says it has over 30 partner airlines; more than 80 destinations served; the second best airport in Europe; 9.2 per cent of Malta’s GDP is supported by MIA; over 1,200 tonnes of cargo handled, on average, each month; and more importantly, 3,800 jobs are directly supported by MIA.
Malta International Airport became fully operational on March 25, 1992 – just 29 months after the foundation stone was laid in September 1989 on the 25th anniversary of Malta’s Independence. In July 2002, after expanding considerable time and investment on a robust and successful operator, the Nationalist government sold 40 per cent of its equity to the Malta Mediterranean Link Consortium Ltd (with Vienna Airport as its majority shareholder) and a further 40 per cent to the general public.
MIA states that the move to full privatisation marked the start of a new chapter for it while Malta’s worldwide connection continues to improve, thanks to the airport’s commitment to innovation and tradition.
It is always odious, as they say, to compare, but being so much interlinked and having similar vision statements, it comes only natural to focus on how Air Malta is faring in this whole scenario.
Given the tourist boom Malta has been passing through over the last seven years, it would have been logical to expect that our national carrier is also on this positive path
Given the tourist boom Malta has been passing through over the last seven years, with arrivals and departures breaking all previous records, it would have been logical to expect that our national carrier is also on this positive path. Alas, this is not our present reality.
With the official announcement that Air Malta and Alitalia called off the deal which would have seen the Italian airline buying a 49 per cent stake in Air Malta, another undefined period of uncertainty looms ahead. To be blunt, this operation with Alitalia, was always seen as unpractical and also very risky.
When Tourism Minister Edward Zammit Lewis came to Parliament last year to inform about the memorandum of understanding between both airlines, Opposition leader Simon Busuttil said the Opposition would keep an open mind and seek consensus on the deal although he questioned why Alitalia was chosen given that it too is going through a financial revamp.
Zammit Lewis said the deal with Alitalia was a win-win situation. He said that consumers would benefit from Alitalia’s global partnership through improved connectivity, while the tourism industry would benefit as a much wider network of tourists would be accessed.
The Nationalist Party continued to observe attentively what was happening with regards to this deal and its possibility to success or otherwise. Personally I spoke in Parliament on various aspects of Air Malta’s challenges but mainly about the need for the government to be honest with the employees who were, and still are, passing from dire uncertainty and anxiety.
The PN, mainly through Claudio Grech and other spokespersons, also helped by proposing that Air Malta be floated on the stock market after its liabilities are absorbed by the government, and introduces private institutional shareholders to prop up the ailing airline. The government however, shot down the proposal alleging that this is creating more confusion.
It was thus a welcome statement by Zammit Lewis who, after announcing the ditching of Air Malta-Alitalia deal, was quoted as saying that “Maltese investment in Air Malta is not being excluded by the government”.
This Air Malta saga has so many unanswered questions. One of them is how did we arrive to the present situation when in October 2013 – six months after this government came to office – then chairman Ray Fenech told this newspaper that there were “no plans to sell Air Malta”. Under the heading “No plans to sell Air Malta as bosses record a profit” (October 31, 2013), Fenech said the airline was on track with its restructuring obligations as per Malta-EU agreement.
That report also said that “the results look more encouraging for the current year [2013] with the airline registering an operational profit of more than €6 million between March and September”. Air Malta reminded the report, was saved from financial ruin after the government pumped in emergency aid in 2010 and this was only possible after Brussels gave the go-ahead on condition that the airline stuck to a strict restructuring plan.
This begs the important question: what really happened between September 2013 and September 2016 given that a lawyer appearing for Air Malta in a court case last July said that if a strategic partner was not found by October 2016, Air Malta may not survive?
I will definitely not speculate about the future of Air Malta and the government’s vision for the airline, but isn’t it fair to comment that Muscat was so much ‘off target’ in his 2006 judgement in L-Orizzont when he wrote off both the privatisation of MIA and an eventual privatisation of Air Malta?
Kristy Debono is an economist and Opposition spokeswoman on financial services.