MHRA says Maltese investment is solution to Air Malta woes

The Malta Hotels and Restaurants Association (MHRA) has called on the government to consider the Bank of Valletta model as a potential solution to Air Malta’s financial woes.

MHRA president Matthew Pace said the model is “a tried and tested case of how Maltese private investment could be combined with government interest in an effective and successful manner.”

BOV is a public limited company with the Maltese government holding a 25.23% stake while the rest is owned by private shareholders, including Italian banking and financial services giant UniCredit, which has a 14.45% stake.

In comments to MaltaToday, the newly elected MHRA president explained that for years the association has underlined Air Malta’s strategic importance as the national carrier, “not only to the tourism sector but rather to the whole economy.”

Air Malta is currently undergoing a massive restructuring programme imposed by the EU after the government saved it from bankruptcy in 2010 with a €52 million loan.

Two years later the EU approved €130 million in State aid on condition that the airline was restructured. Air Malta almost halved its workforce, reduced the number of planes in operation, cut capacity and became profitable. The plan expires in 2015, by which time the air carrier should be turning a profit.

In clear reference to the airline’s unremitting financial problems, Pace said “any restructuring model for Air Malta should now lead to concrete results as to-date too much time and money have been wasted on this front.”

Last week, Air Malta chairperson Maria Micallef declared that the airline is trying to cut costs across the board in a bid to bring a forecast €25 million loss for March 2015, down to €16 million.

MaltaToday’s report that insiders had seen a €30 million forecast loss for 2015, was never denied by the airline.

In October, the airline will be expected to present the latest figures for the year ending March 2014.

In March 2013, the second year of Air Malta’s five-year restructuring, the airline reported an operating loss of €13.7 million, down from €29.7m in 2011.

The airline is now expected to post €16 million in losses in the coming weeks for the year ending March 2014.

With talk of part-privatisation gaining ground, Pace argued that “it is critical to ensure that the Maltese interests are retained at the fore of any change initiative adopted by Air Malta, to make sure that operations reflect the specific commercial and social needs of our national airline and the economy respectively.”

In 2012, former Air Malta chairman Louis Farrugia had said that the only way to expand the national airline’s operations is through private investment.

Asked whether a strategic partnership with another airline was the preferred solution, Pace said that although the association is not opposed to a potential strategic partnership, the preferred model would be the one applied at BOV.

“It is critical to ensure that the Maltese interests are retained at the fore of any change initiative adopted by Air Malta, to make sure that operations reflect the specific commercial and social needs of our national airline and the economy respectively,” he said.

Pace explained that the MHRA proposal is “a concept to be explored by the authorities and accordingly the details would have to be worked out and adapted by the relevant experts in the process of assessing other potential options.”

He called on the government and Air Malta to pursue the right changes to strengthen the organisational structure in line with the restructuring objectives outlined by the EU Commission.

“Air Malta is a strategic organisation and hence critical for the tourism sector and our economy, so at this stage all efforts must be concentrated to ensure the sustainable turnaround of operations and long-term viability of the national airline.

“The MHRA has however already made it public and known to the authorities that it disagrees in principle with any potential change model or tactical plan that would lead to or increase the risk for the divestment of key slots in airports which could potentially reduce Air Malta’s standing.  To avoid any unnecessary speculation the MHRA emphasises that it has not been consulted by the government, Air Malta or any other stakeholder that such action is being considered.”