Air Malta would cease flying to nearly a third of its current European destinations and instead increase the frequency of its flights to North Africa and the Middle East, under a business plan drawn up by Alitalia.
The proposed business plan is part of a deal being negotiated between the government and the Italian airline, which is bidding to take over nearly half of the stake in Air Malta.
The plan, which has been kept under wraps ever since it was presented to the government, also confirms that Alitalia will not make any fresh capital injection into the ailing Maltese airline, sources close to the negotiations have told this newspaper.
According to the sources, the business plan maps out Air Malta’s future over the coming four years, covering the 2017-2020 period.
Among the significant aspects included in the plan are a complete flight rationalisation, aggressive cost-cutting initiatives, including the axing of many jobs, and shifting the airline towards the southern market.
The latter move would be aimed at feeding the bigger route networks operated by Alitalia and Etihad Airways, which owns half the Italian carrier.
Non-profit routes to be dropped
The business plan envisages that Air Malta will cease operations on a third of its current schedule during the first years of operation under the new Alitalia/Etihad management. In particular, it will drop routes to Europe which are not making a profit but are operated purely for tourism purposes.
At the same time, however, the airline would be expected to increase its frequency on profit-making routes such as London, Rome and Brussels.
In the meantime, in order to compensate for the lost seat capacity, Alitalia is proposing to increase Air Malta’s capacity south of the island, with new and more frequent flights to Northern Africa and the Middle East including Tunis, Tripoli, Casablanca, Larnaca and even Jeddah, in Saudi Arabia.
This strategy confirms Alitalia’s plan to use Air Malta as a feeder airline to the already established networks operated by Etihad and the Italian carrier.
Although the ‘southern’ strategy is being proposed as one which makes business sense and which would fill an existing void in the industry, the new routes have little or no significance to Malta’s existing tourism markets.
Air Malta will initially fly with its current eight aircraft but the plan is to increase its capacity by another three aircraft during the latter part of the plan’s timeframe in order to carry more south-bound passengers.
New company - Government to absorb debts, surplus workers
The plan is also tied to financial commitments to be made by the Maltese government. The new airline company to be formed will not take over any of the current debts or liabilities of Air Malta, currently standing at some €66 million.
Also, taxpayers will have to foot the cost of employees at Air Malta deemed surplus to requirements. They will be transferred onto government payroll in a scheme similar to the one put into place for Enemalta employees.
Sources said the financial aspect of the deal, including how Alitalia takes over its shares, are not mapped out in detail yet as both airlines fear the European Commission may raise concerns due to the EU’s rigid state aid rules.
The Sunday Times of Malta is informed that although the Commission is being kept briefed about the ongoing talks, no details on the financial swap between the Maltese government and Alitalia have yet been passed on to it.
With regard to the current workforce, the plan proposes that none of the 1,200 Air Malta employees will be made redundant.
However, many would not work for the new airline but would be transferred to jobs in unrelated public sector roles.
While all airline pilots were assured they would keep their jobs, no similar guarantees have been given to the other categories of workers.
As already revealed by the Times of Malta, the plans include the hiving off of significant Air Malta departments, including ground handling and engineering.
Having received the proposed business plan, the government has embarked on a number of meetings with unions and is trying to sell them the deal.
It has managed to reach agreement with the pilots’ union but hit a snag with the cabin crew union who are demanding job guarantees for all current cabin staff.
The government has so far refrained from giving the union a written guarantee.
It has yet to take a final decision on whether to accept Alitalia’s deal. At the same time it warns that the airline might fold by as early as October if no strategic partner is found.