Minister skirts around questions on management, future of UK routes
• Air Malta will not become a feeder airline – Edward Zammit Lewis
Tourism Minister Edward Zammit Lewis yesterday insisted that the most crucial routes for Air Malta would be retained but the network would have to change to fit with that of Alitalia.
He was replying to questions by PN MP Robert Arrigo, who asked if it was true that all of Air Malta’s UK routes, apart from Heathrow, would be stopped and that the frequency of the Frankfurt route would be severely affected.
Dr Zammit Lewis said he could not give the assurances the PN MP sought at this stage. “What we have so far is a Memorandum of Understanding, which means that negotiations are ongoing.”
The Tourism Minister was delivering a statement after he tabled the Air Malta-Alitalia MoU in Parliament.
The government announced last month that it had signed a preliminary agreement with Alitalia that could see the Italian airline buy a 49% stake in Air Malta.
Alitalia is itself 49% owned by UAE airline giant Etihad Airways. The MoU was tabled as Alitalia President Luca di Montezemolo said yesterday that the Italian airline has already started the due diligence process on Air Malta which, he said, could take up to two months.
This paper is informed, in fact, that several Alitalia and Etihad officials are currently in Malta going through Air Malta’s books and studying its current business and operations models.
Last week controversy erupted after Mr Montezemolo said that if the Alitalia-Air Malta deal goes through, it would be a sub-zerorisk operation for the Italian airline.
“It is an investment that would not cost a euro, and would open up interesting connections with Sicily. Let us work on it, let’s carry out a management and economic due diligence,” he was quoted as saying.
Dr Edward Zammit Lewis subsequently told The Malta Independent that the deal would be off if it is not advantageous to the national carrier.
Speaking in Parliament yesterday, Dr Zammit Lewis said the MoU was just the first step in the long road that lay ahead. He insisted that no agreement would be signed unless this was beneficial to the Maltese airline.
“If the interests of the country, and of its tourism industry, are not protected then there is no agreement.”
Air Malta will not become feeder airline
Air Malta would not become a feeder airline and would remain under Maltese government control, the Minister said. The government will retain its 51% shareholding and Air Malta would retain its name.
“Whilst I understand the anxiety of the employees, we should not get lost in speculation”, the Minister said. “We will make the necessary announcements when we have news in hand.”
The future workforce has to make sense for a restructured airline. This would also depend on the number of routes and aircraft operated by Air Malta.
“I will not make sweeping statements about the employees,” he said, noting that talks were underway, led by President Emeritus George Abela.
The advantages of such a partnership included Air Malta becoming part of an extensive network instead of a standalone airline and economies of scale, especially when it came to procurement.
Another advantage would be joint purchasing, which would help improve profitability and growth, and a vision to expand the current fleet.
Dr Zammit Lewis also said the results of decisions taken in the past two years were being felt. These including the catering contract, the lease of aircraft and IT services. Practices employed today, he said, contrasted highly with what had become standard practice under previous administrations.
Air Malta was leasing out two aircraft it was itself leasing, but was still losing around €1 million a year.
He again denied that Air Malta would become a feeder airline, which meant that its passengers would only be flown to one airport and would have to catch connecting flights to their destination of choice.
In order for any deal to be reached there were several mandatory points laid out by the government. This included that Air Malta had to carry more tourists to Malta and a plan to expand the current fleet.
Another mandatory point was that Air Malta workers have to have opportunities to further their careers with Etihad partners.
The Maltese airline has to become more competitive and offer better prices, including to its Maltese customers.
Frequent Maltese passengers would have to be awarded through an Etihad Airways Partners frequent flyers programme.
Opposition demands assurances on jobs
Economy Shadow Minister Claudio Grech asked about Mr Montezemolo’s comments, pointing out that this was not some random pundit making the comments. “It also seems, from Mr Montezemolo’s comments, that there will be no capital injection. Maybe it is still early days but the Opposition would like to know if there is some form of investment planned for the future.”
He also asked if the day-to-day management of Air Malta would be taken over by Alitalia, as reported in a section of the media. Did it make any sense, he asked, to change the airline’s management once again if, in the words of the minister himself, they had brought about positive changes?
PN MP Robert Arrigo demanded to know whether Air Malta employees would still have a job and retain the same salary and conditions after the “rationalisation exercise.”
He also questioned the choice of Alitalia, which was going through its own restructuring plan and was facing strikes. Dr Zammit Lewis interjected, saying that Alitalia’s restructuring programme was voluntary, and was not being carried out at the request of the European Commission.
The airline will also be investing some €40 million. Mr Arrigo countered that the restructuring was a state of fact, as was the reduction in workers’ salaries.
The PN MP also said there was talk that most UK routes would be scrapped and that the Frankfurt route would suffer greatly. “Can you give us a clear answer?”
Independent MP Marlene Farrugia said both sides should start working to get the best deal for Malta. She asked what would happen to Air Malta, its aircraft and its workers.
“Can we at least guarantee to the employees that they will have a living like they have now? Can we put their minds at rest? Can we assure the Maltese that they will still be well-served by Air Malta?” She also asked for clarification on Mr Montezemolo’s comments, and whether any talks had been held since then.
Closing the debate, Dr Zammit Lewis skirted around the management ‘take-over’ claims, saying that the airline’s leadership team would be a mix of Maltese and foreigners. He noted that the current management team also includes foreigners.
He said, however, that the composition of the board of directors would reflect the shareholding in the company - the government will retain majority shareholding through a 51% stake. “It is obvious that we will not relinquish the board majority.”
“I did not come with all the replies on the negotiations and the future of workers. I felt I had to make this statement because I had to clarify some points raised in the media, including speculation that Air Malta would become a feeder airline. This is not true,” he said, appealing to all MPs to show responsibility.
Dr Zammit Lewis said the government had tabled the agreement at the earliest possibility, describing the step as a “new style of politics.”
“The MoU reflects the wishes put forward by both sides. There will now be a process to reconcile the interests of both sides. This is certainly not the final agreement.”
Replying to Claudio Grech’s questions on investment, the Tourism Minister said an extensive business plan was being drawn up by competent individuals.
Air Malta’s books have 70 million euros hole
An equity valuation exercise is being carried out, he said, pointing out that Air Malta’s balance sheet has a €70 million hole.
“Debts have been racking up since 2003. Cash injections (without changes to the business model) were unsuccessful. The airline’s commercial viability remains the biggest challenge but most other goals have been reached.”
He also pointed out that Air Malta made profits of around €900,000 a month from the Libyan routes alone but this revenue went up in smoke with the Libyan crisis.
Dr Zammit Lewis said it was true that Air Malta was reaching a break-even scenario, but the strategic partnership with Alitalia went beyond this – it offered benefits that Air Malta could never reach on its own.
Replying to another question by Mr Arrigo, Dr Zammit Lewis said he could not confirm or deny that Air Malta would start leasing a wide-bodied aircraft.
“We will if there is the need for one. But we will definitely not lease such an aircraft just to have it sitting on the tarmac.”