Equity firm with strategic partner approaches government on Air Malta
● PM says government retaining majority shareholding is ‘preferential option’
An equity firm with a strategic partner has expressed interest in involving itself with Air Malta, Prime Minister Joseph Muscat announced yesterday, while stressing that talks are still ongoing with multiple consortia.
The Prime Minister was addressing a press conference in St Paul’s Bay.
He said that there are good leads regarding partners for Air Malta, in which informal talks are ongoing and the due diligence on these is being conducted. “We had informal meetings with the consortia and in one case, there is one led by a large equity firm.
When they first came to us we told them we did not want to speak with an equity firm without a strategic partner being involved, and they came back with a letter of commitment from strategic partners who are ready to join that consortium. Thus now we can move ahead with discussion.”
He said that things are happening without events being rushed and stressed that certain things need to be done about Air Malta and government is focusing on getting “the house in order.”
Dr Muscat said that over the past four years this government stabilised Air Malta, “and now we have to do thing that need to be done without firing people. However the rumours that Air Malta is being divided up into parts is nothing but speculation.”
The PM was asked at the press conference whether, with regard to strategic partners, only a letter of commitment has been received and whether any real talks have started.
“Our discussions occur in parallel,” he said, stressing that until all due diligence is done, there is what one calls a data room. “You can’t give access to this before all stages of due diligence are done. If you have a consortium made up of five groups, and due diligence has concluded on four but is ongoing on one then one must be careful. In addition if there is a strategic partner who is interested, you must see what date one would give. If you give him all the date, and talks breakdown, they would know all your ratios and your business model, and might try to take over your market. I can confirm that talks are ongoing in parallel with this process.”
PM’s preferred option
Dr Muscat also said that the “preferred option” for Air Malta would be for government to keep a majority shareholding.
“Air Malta has a future. We have no intention to fire any workers. We intend that, as the unions are asking, to provide early voluntary retirement schemes. We know that the financial results for Air Malta are improving. Our intention is to reach an agreement with a strategic partner.
“We have a number of informal talks ongoing. They have not been made formal as the MU has not been arrived at. What I can confirm is that there are different consortia from different continents.
“We would like the consortium we conclude discussions with to include a strategic partner, and not only include persons or entities which are equity or investment funds. One of the biggest challenges for any small airline is its purchasing power when it comes to leasing airplanes. If you have a fleet of 10 planes it’s one thing, but if there is a strategic partner with 70 or 80 aircraft then you are able to get a better price.”
He spoke about the usefulness of a strategic partner when it comes to the purchase of fuel, and in the IT systems. He said IT systems controlling booking and revenue need to be cutting edge.
“As we saved Enemalta we are committed to save Air Malta. We are not excluding any form of structure or shareholding, including local shareholding, in this regard. I must add that the preferred way we would like to work with is that government, as happened with Enemalta, keep the majority of shares in the company. This, obviously will always be a bone of contention in discussions as everyone would want majority shareholding.
“The difference between what the PN is saying - regarding the BOV model, which provides that government have a say but won’t hold majority shareholding, is that we still believe that given the strategic value of Air Malta we should still hold the majority and that is our preferred option.”
Asked by The Malta Independent whether by saying that it is government’s “preferred option,” then he means that this could see a situation where government would no longer hold the majority shareholding, he turned his guns on the PN, saying that, “this is the Opposition’s proposal, that government should not be the majority shareholder, but be the main shareholder. This is not our preferred option and our negotiating position is that we want government to remain the majority shareholder.”
Simon Busuttil’s position
PN Leader Simon Busuttil was also asked about Air Malta, and said that he believes government needs to keep the control of the national airline, however not necessarily through a majority shareholding.
Replying to questions by The Malta Independent, Dr Busuttil said that the government needs to understand the role of Air Malta in the local economic sector. When asked if he agrees with Joseph Muscat that the government needs to have the majority shareholding of the company, Dr Busuttil said there are ways by which the government can have control of a company without being a majority shareholder. He said the government should then be open for private investment.
Dr Busuttil said that the national airline needs to stay, adding that the PN has presented a number of proposals to help safeguard the national airline. He said the government should have concluded the restructuring plan by the previous administration for Air Malta.