Etihad in talks for Air Malta

Abu Dhabi based airline Etihad Airways is in advanced talks with government over an equity investment in the ailing Air Malta.

Yesterday, union representatives of Air Malta’s employees issued a press release in which they urged government to “guarantee that the airline remains Maltese” and insisted that there was no need to privatise the company.

MaltaToday understands that the statement was issued following discussions between the unions representing the company’s workers who are concerned with the latest developments in Luqa.

Sources said that this week, Air Malta was asked to provide information on its workforce, the wage bill and other financial data to Etihad, which prides itself in rescuing struggling airlines.

During the company’s general meeting held last month, tourism minister Edward Zammit Lewis confirmed that government was in talks with a number of airlines in its pursuit of a strategic partner for Air Malta. He also insisted that any deal will see the government retain its majority shareholding in the national airline.

Air Malta is in the final year of a five-year restructuring plan that the previous government had agreed with the European Commission in 2012 in return for its approval of around €130 million in state aid. 

Audited figures announced during the October meeting show that the airline posted a loss of €16.4 million for the year ending March 2015 and is set to reduce its losses to €4 million by 2016. 

Over the past five years, the carrier was forced to trim its staff, reduce its number of operating planes, and cut capacity. The plan should have seen the company return to profitability this year but it has fallen way short of its restructuring targets. 

A number of airlines have been linked to Air Malta, including Turkish Airlines, China’s Hainan Airlines and Etihad, however, Zammit Lewis has been tight-lipped over the ongoing negotiations.  

But MaltaToday is informed that over the past days, Air Malta’s administration has been inundated by requests from Etihad for information about the company’s financial situation and its contractual obligations. 

A deal with Etihad could see Air Malta retain services such as cargo handling while overhauling its software and booking systems. Apart from code sharing, a partnership agreement could see Air Malta gain from flying to Etihad’s Abu Dhabi hub, where the company can then transfer passengers to and from a range of destinations to which it has not previously had convenient access.

Such a deal would need the approval of government which is the sole shareholder and the unions before getting the seal of approval by the European Commission. 

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds and to prevent concentrations that would significantly impede effective competition in the single market.

Etihad is not new to such agreements as last year it saved Alitalia from bankruptcy, reinforcing the Gulf airline’s reputation as a “rescue investor” for ailing airlines.

In December 2014, Etihad bought 49% of loss making Alitalia in a €1.76 billion rescue plan, giving it access to Europe’s fourth-largest travel market and 25 million passengers.

Etihad plans to return Alitalia to profitability by 2017 and the deal has seen the fallen Italian giant expand its operations outside Europe. Following its link-up with Etihad, Alitalia launched new direct long-haul flights to Asia and the Americas.

The negotiations for the Alitalia bailout were led by Italian prime Minister Matteo Renzi who in June of this year thanked Etihad Airways CEO James Hogan for “believing in Italy and in Alitalia” during the unveiling of the Italian carrier’s livery. 

Hogan said that his carrier’s equity partnership with Alitalia represented “the last chance” to save the long-struggling Italian carrier, and noted that Etihad’s rescue plan for Alitalia would require a “radical change in its way of working to lower costs and boost productivity.”

The Gulf airline demanded cuts of 2,250 jobs in exchange for its life-saving €387 million investment, however some 300 workers were reemployed in June 2015. 

Etihad, which has eight equity partnerships including Alitalia, has expanded its wider network to 400 destinations, allowing the youngest of the three major Gulf carriers to compete with Dubai-based Emirates and Qatar Airways.

The cash-rich Abu Dhabi airline, which has minority stakes in Air Serbia, Air Berlin, Ireland’s Aer Lingus, Virgin Australia and Air Seychelles, wants to boost its presence in the European market, where it lags behind its regional competitors and flag carriers such as British Airways and Lufthansa.