Air Malta was given wings yesterday after the European Commission approved the government’s five-year restructuring plan that will see a €130 million boost of state aid injected into the troubled carrier.

Ryanair objected to state aid

“This is a good day for the country,” said Finance Minister Tonio Fenech, as he hailed the plan for withstanding five months of “tough” scrutiny.

“If the Commission had said no – as happened in the case of Hungary a few weeks ago – our country would have been talking about closing down Air Malta.

“Instead, we are talking about its future and giving it a new start.”

Mr Fenech especially thanked Malta’s outgoing EU ambassador Richard Cachia Caruana, who sat on his right at the press conference and whose office played a “pivotal” role in the process.

“Without his diligent leadership we would not be where we are today. He was a key player.

“He gave a big contribution to this country... Our country has lost a lot by losing him at this juncture,” Mr Fenech said, dismissing the idea that his presence at the press conference was intended to send a message to those Nationalist MPs who were criticising him.

Also present was Air Malta chairman Louis Farrugia who said the airline, which is still making a loss, would turn a profit by 2014 after breaking even next year.

Announcing the positive conclusion of its in-depth investigation, the European Commission said: “The restructuring plan adequately addresses the financial problems of Air Malta.

“The measures foreseen, which include a significant capacity reduction and the sale of assets, should ensure long-term viability without continued state support, while avoiding undue distortions of competition.”

In November 2010, the Commission had authorised an emergency loan of €52 million, subject to the submission by the Maltese authorities of a restructuring plan within a six-month period – submitted in May last year.

Following a number of “doubts” about whether the plan complied with EU requirements, the Commission opened an investigation last January, only to find that it was based on “realistic assumptions” and should enable the airline to become viable within a reasonable timeframe.

Apart from the €130 million Air Malta will receive from the government over the next five years, it must contribute to the cost of restructuring by selling some of its land and other assets as well as securing a private bank loan to raise another €130 million.

Brussels also found that a capital injection in 2004 was carried out on market terms and did not constitute state aid as defined by EU rules.

Mr Fenech thanked workers and Air Malta management for having already begun implementing the restructuring plan, a move that helped convince the Commission.

He added that the plan was approved as per the latest submission, meaning there will be no further route changes from current operations.

Mr Fenech pointed out that the investigation had been open to submissions by third parties.

Among these were competitors of Air Malta, which argued against state aid and “for the airline’s closure”.

Asked to name the objectors to state aid, Mr Fenech mentioned budget airline Ryanair.

Mr Farrugia expressed the airline’s “confidence” and thanked the Finance Ministry, the Permanent Representation in Brussels and the airline’s management for working “exceptionally hard” as one team.

“I wish also to thank all employees, past and present, together with all the unions for their understanding and maturity during these difficult changes that the airline has to face”, he said.

We have a lot of work to do to remain on the right track- Air Malta CEO Peter Davies

CEO Peter Davies pointed out that the approval was subject to continued monitoring of the plan.

“We still have a lot of work to do to remain on the right track.”

He thanked the staff and the unions for showing trust in the process during these “trying” times.

Tourism Minister Mario de Marco welcomed the decision, pointing out that Air Malta brought more than half the island’s tourists to Malta, while linking the island to EU destinations and further afield.

The Commission’s decision was also welcomed by the Malta Hotels and Restaurants Association, which had helped Malta’s case by showing the Commission how the airline was pivotal to the tourism industry’s sustainability.

The Labour Party “noted” that the Commission approved the restructuring, a reduction of the workforce and state aid.

It called on the government to be transparent and publish the final plan that had been submitted.

“One must also express solidarity with those workers and families who had trusted GonziPN’s written assurances on their jobs only to end up out of Air Malta or having to accept inferior conditions,” the PL said.