Months of speculation about which strategic partner Air Malta would end up discussing a partnership with eventually brought Alitalia to the negotiating table.
With 49 per cent of Alitalia itself being owned by Etihad of the UAE, few analysts doubt that the former Italian flag carrier itself has, in practical terms, ceded effective control to the Gulf airline.
All around the world, where regulatory restrictions impede foreign investors from owning an outright majority of shares in a company, the government reaches some kind of agreement, though not always a formal one, whereby it takes a back-seat position and allows the minority shareholder, in this case Alitalia/Etihad, to effectively control the business.
Though legally and formally in control, the Maltese government risks being coerced or, in the worst case scenario, ‘bullied’ into allowing the new Air Malta management to put aside our national interest in favour of one-sided commercial considerations.
Even with a minority stake, they would run the show, and history has shown us that this is exactly what happened when the government initially sold to foreigners just 40 per cent of Malta International Airport.
Insiders would tell you who really called the shots at the time.
To be fair, for a number of reasons the EU-approved restructuring plan was not enough to save Air Malta. The cost-saving cuts were for political reasons not deep enough and, as pointed out by the chairwoman of Air Malta, the market has changed drastically over the past six years.
For a number of reasons, the EU-approved restructuring plan was not enough to save Air Malta
In the circumstances, the government took the right step in seeking a foreign airline partner, but, on the other hand, ceding effective control would be like buying a one-way ticket.
Objectively taking into account the whole scenario, one should really opt for a third way. That is to sell say just 40 per cent to Alitalia (or some other strategic airline partner) and float the rest of the company on the Malta Stock Exchange, possibly offering a small specific stake to the Malta Hotels and Restaurants Association (which has a strong interest in protecting the flight routes that are commercially not high performing) and leaving anything from 25 per cent to 40 per cent of the shares in Air Malta in government ownership.
An additional safeguard could also be to give the latter the right to appoint a chairman (as is the case with Bank of Valletta), thus ensuring a certain element of social conscience in the airline’s boardroom.
Such a move would also conform to the government policy on privatisation.
This hybrid kind of ownership would additionally give a crucial say to capable Maltese businessmen and common shareholders, as opposed to regaling with carte blanche some CEO who receives his or her instructions directly from Rome or Abu Dhabi, potentially drawing up policies in contrast to what Malta needs best.
Until a final agreement is reached with Alitalia (or some other airline), Air Malta should not waste further time. The decision to save money by hiving off non-core departments, such as engineering and ground handling, is certainly commendable, albeit years late.
The airline should drastically reduce its still bloated workforce and at all costs not give in to the recalcitrant demands from the pilots’ union.
All Air Malta needs to do is concentrate on flying its aircraft and maintain a small administrative and commercial team at its head office. That is the only way forward.
Martin Degiorgio is a former managing director of leading travel companies.