Air Malta and the government have both moved to ease concerns about the feasibility of the beleaguered airline’s restructuring plan, saying they were confident the plan was viable and in line with EU regulations.

All is on track ...

The reassurances come in response to leaked excerpts of a Commission letter sent to the government and published in The Times yesterday. The letter said that the Commission still “has doubts whether the optimistic forecasts are realistic to achieve.”

But government sources have insisted that the Commission’s letter was a normal part of EU state-aid inquiries and that the language used in the letter was part-and-parcel of the legal scrutiny into such procedures.

“All is on track... the government is convinced that Air Malta’s restructuring will not lead to significant distortions in the EU aviation market,” a Finance Ministry spokesman said yesterday.

An Air Malta spokesman spoke in similar terms. “We are confident the restructuring plan is viable. The Commission naturally has to scrutinise such plans and ensure they’re in line with EU fair competition laws, but we believe there aren’t any problems.”

Spokesmen for both the General Workers’ Union and the Air Malta Pilots’ Association said they would not be commenting on the letter until it was officially published in the Official Journal of the EU.

The letter is due to be published next Tuesday, with any objecting parties then having a one-month window in which to voice their objections to the plan.

In November 2010 the European Low Fares Airline Association, which represents low-cost carriers such as Easyjet and Vueling, had said it intended to object to any state aid given to Air Malta.

Finance Minister Tonio Fenech had at the time said he was not surprised by the announcement: “Every company in the EU market will seek to protect its interests.”

When contacted yesterday, an ELFAA spokesman declined to say whether it intended to object to the plan, saying simply that it had not yet seen the proposals.

Malta’s national airline has been in the red since at least 2003 but has so far managed to hobble on, albeit with the help of emergency government aid. The EU is renowned for its scepticism of state-aid programmes, with the EU Treaty effectively prohibiting its member states from granting firms state aid as a safeguard against distorting fair competition.

This prohibition is however not absolute: governments are allowed to provide ailing firms with rescue and restructuring aid in specific cases, with “social or regional considerations” being taken into account.

Any such aid must adhere to a number of principles outlined in a set of state aid guidelines issued by the Commission in 2004. The guidelines differentiate between rescue and restructuring aid and lay out several parameters for any such aid.

A “one time, last time” principle laid out in the guidelines effectively means that if the government’s restructuring plan for Air Malta is rejected by the Commission, the airline will be left with little option other than to file for bankruptcy.

Those concerned by the doubtful tone adopted in the Commission’s letter can take heart in the legal precedents set by the EU in previous cases of airline restructuring aid.

Previous restructuring plans for Cyprus Air, Austrian Airlines and Olympic Airways were all met with similar Commission scepticism and opened to investigation. All three restructuring plans were eventually approved by the EU.