Air Malta headquarters sold for €66.2 million to government

Air Malta has sold its headquarters in Luqa for €66.2 million to the government, the airline has announced.

The cash sale's promise-of-sale agreeement was signed in December 2011, with a €20 million deposit to be paid this month and the rest of the balance due within the next three years. The sale, signed last December with the government, covers all Air Malta property except the Selmun Hotel and land it owns in Pembroke.

Air Malta today announced its financials for the year ended 31 March, 2011 and interim figures up to September, registering €33.9 million in operating losses. Government will also taking up a large chunk of equity in the national airline in return for the cash it will be injecting to keep the natoinal carrier afloat.

Air Malta's refinancing plan over the next five years comprises €30 million in bridging finance from commercial banks, the €66m sale of its head office, as well as new equity of €78 million from the government while its initial €52 million loan will be converted into equity on approval of the restructuring plan by the European Commission. This brings government's funding to the airline close to €140 million. At least €200 million will be injected into the airline over the next five years.

The airline is being touted to move to the Skyparks business centre as its possible next site for its headquarters.

The European Commission also asked for an independent evaluation of the Air Malta head office's value, leading to a substantial devaluation of €18 million from its book vale.

The airline said it expected to return to profitability by 2015 once it increases profit by €30 million and decrease costs by the same amount.

During the year ended March 2011, the Air Malta group reported an operating loss of €33.9 million before one-off times, a 57% increase over the €21 million losses in 2010. When adjusted for non-operational items such as profit on sale of capital assets, and property re-evaluation including tax charges and restructuring costs, the Air Malta group's total losses total €76.7 million.

"We have a long way ahead of us to recovery," airline CEO Peter Davies said. "Revenue is moving up... they are green shoots, but we are steadily moving forwards," Davies said of a €5 million increase in revenue in the April-September 2011 period, and a €4 million reduction in cost of sales. Fuel costs however increased by €10 million as a result of escalating fuel prices.

Severance schemes amounted to €28.2 million alone.

"It is critical to shed more from the workforce. We need to create a sense of camaraderie. The process of looking for a new property, which has been identified, requires a cultural transformation," Davies said.

Davies, whose salary with the national airline amounts to €448,000 inclusive of performance bonus, said the company was trying to save 800 jobs, and that there were 400 applications already for the voluntary retirement schemes.

The airline will also dry-lease one more aircraft, bringing its active fleet down to 10, while more of its pilots are to be outsourced to other airlines. Nine pilots are to leave for Qatar Airlines.

Finance Minister Tonio Fenech said that this injection has to be approved by the European Commission, he felt very confident that the government's position was being understood by the EC. "This injection is affordable, but with sacrifices. We have seen a change in these results... despite the increasing cost of fuel, we are improving on these results. Efficiency is improving."

Davies said Air Malta can look forward to a positive Easter booking period, while new flights from Libya are creating good profits. A new route to Benghazi, the city that gave birth to last year's Libyan revolution, is expected to be launched.

Finance Minister Tonio Fenech said there was an "urgent need" for a culture change inside the airline, citing work practices and modern operations as necessary within a highly competitive industry. "We have had to convince banks and the European Commission that Air Malta was a viable operation."

Fenech lauded the airline's new management team, saying the government had ensured the right support to the airline's board of directors. "It is the right, professional team we have in place here. We needed people with experience to make this turnaround, with a mixture of foreign and local expertise."

There are around 140 sub-projects that are part of Air Malta's restructuring plan, Fenech said. "Air Malta is not a major airline but a national carrier with obligations to its coutry - it's a European carrier that needs to be present within this challenging environment.

When Louis Farrugia was asked to reveal the executive officers' salary packages, 'for the sake of transparency' he said that he would "not do anything of the sort, unless it goes through government."