The common ground between the PL and PN
Despite the fact that the government and the opposition appear to be at loggerheads over the future route of the national airline, there nevertheless appears to be common ground of a sort.
For starters, both the government and the opposition are in agreement that the airline is in need of a strategic partner. They are also both of the opinion that a share offering for the airline could become a reality.
That the two parties are more or less in agreement on these two main aspects for the future of the airline is positive, the only difference is in the timing.
It is more than clear that the airline is in need of a strategic partner. Not only is this the direction in which much of the global industry is heading, but, for an airline the size of Air Malta and with the airline’s small fleet, the roping in of a larger strategic partner makes a great deal of sense.
But is an immediate initial public offering really the way to go?
According to the PN, there should be an initial investment into Air Malta from local institutions and agencies, through a transparent process that limits any local private shareholding to no more than a 10 per cent stake.
Moreover, the PN suggests that any investor would be held to a lock-in obligation so as to avoid share speculation and investors selling off their shares for profit within short timeframes.
The PN also insists that share options should be given to Air Malta workers and that, after a period of two years, more shares should be sold to the public.
The Opposition leader has been repeating for months now that Air Malta should be made public, and that the airline’s employees and the
Maltese public at large should be given a chance to buy into the airline.
But, as matters currently stand, there is no investment case whatsoever for Air Malta to be floated on the stock exchange and even if investors could somehow be tempted to invest in a company with negative equity such as Air Malta, the company’s financial predicament would not even qualify it for a listing of its shares.
The PN’s suggestion that the airline should first get its financial house in order before offering any IPO is a no-brainer as the airline would not even qualify for a Malta Stock Exchange listing given its current financial status.
Even if it were to qualify, an investor would need to have more incentive than pure patriotism to invest in the airline. A financial analysis of the option commissioned by the government last summer found that there must be a compelling case made as to why an offering of government shares in Air Malta, through an initial public offering, would constitute an attractive investment proposition to the public investor since any company that is in negative equity territory is hardly the best investment opportunity for investors.
Air Malta has been sustaining significant losses for a number of years and it is public knowledge that the airline required a rescue plan to allow it to merely survive, let alone turn any kind of profit.
On this basis alone, it would make little, if any, sense for an investor to place any money in such a company. Unless one can make a compelling case for significant future returns on investment, the past does not seem to provide much solace for potential investors.
There is no business case that can be made for floating and selling to the general public shares in a company that has negative equity and as such there is hardly any investment case to be made to the market.
The PN’s other suggestion that the airline be given two years before any such IPO would be made also accounts for the MSE’s listing rules, which stipulate that for a company to be eligible for a listing of its shares it is required to have shareholders’ funds less intangible assets of a minimum of €600,000.
Air Malta clearly does not qualify for a listing as matters stand, with the airline still being some €43 million in the red.
In essence, the PN, despite having given a thorough explanation of its vision for Air Malta, has not proposed anything that is even remotely doable in the short-term, and possibly not even in the medium term.
But in the meantime, an urgent solution is required.
The government, for its part, stressed yesterday that all options, including a future public offering, are still on the table.
What would help matters along superbly would be for the government to stop holding its cards so close to its chest and to open up about its real plans for Air Malta and about the real state of negotiations with Alitalia as a strategic partner.
Air Malta is, after all, the national airline, and as such it requires a national solution in the national interest. The fact that there appears to be some form of common ground about the way forward for the national airline is heartening, but the continuous political over the fate of Air Malta is anything but productive.