Negotiations between Air Malta and the pilots are on hold, meaning the end-of-year deadline set by Tourism Minister Konrad Mizzi is unlikely to be met.

Reacting to a news report that appeared in The Sunday Times of Malta, Dr Mizzi insisted it was not true his ministry was mulling plans to offer pilots a tax-free concession on their salaries as part of a new, five-year collective agreement.

However, the Times of Malta was told that Air Malta negotiators did, in fact, approach the Finance Ministry seeking approval for the move.

“Yes, Konrad Mizzi’s ministry did ask whether it was possible for pilots to get some tax-free allowance on their salaries. They told us this would solve the current impasse on negotiations with the pilots,” senior government officials said.

They said the Finance Ministry was adamantly against such a proposal, deeming it illegal under EU State aid rules and also fearing it could set a precedent.

“Minister Mizzi’s team was politely told that although it was appreciated that the discussions with the pilots were tough, they should find another solution. The tax-free option was no-go,” they said.

Proposals for tax-free arrangements for pilots and cabin crew were, in fact, made in the past. The Finance Ministry always shot down such suggestions, trade union sources said.

The new collective agreement with the pilots, represented by ALPA, is the only one outstanding, as negotiations with other airline staff, including cabin crew, engineers and ground staff, have been concluded successfully.

Read: Cabin crew sign Air Malta agreement for five years

Dr Mizzi, who took over the responsibility for Air Malta after the last general election, set an end-of-year deadline to conclude all collective agreements. According to Dr Mizzi, commercial banks would only release the financing needed for his new plan to turn around the airline if all human resources agreements were concluded by the end of this month.

A few days ago, Prime Minister Joseph Muscat himself urged the pilots to sign, but their union is holding onto its claims, demanding a better pay package and improved conditions.

Read: Pilots still not happy about Air Malta’s offer

“The pilots have not received any new offers yet, and the negotiations are now on hold. No new meetings are scheduled, as the ministry is still trying to come out with a new alternative,” civil aviation industry sources said.

They said that although it was true that, by Maltese standards, the pilots seemed to be earning lucrative salaries – an average of €120,000 a year – they were underpaid when compared to similar airlines.

“Pilots have always been the most difficult of Air Malta’s staff to negotiate with, because they are not easily replaceable.

“It seems that Konrad Mizzi is now experiencing what his predecessors faced,” the sources said.

The ailing national airline is in dire straits and needs fresh bank financing to continue flying.

It was hoped that Air Malta would break even by the financial year ended March 2017. However, the latest published financial report showed it posted a €13 million loss instead.

Dr Mizzi now projects that the airline will reach break-even point by March.

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