Air Malta cannot be saved by repeating the same mistakes

As US President John F. Kennedy put it, after the ‘Bay of Pigs’ debacle of 1961: ‘success has many fathers; but failure is an orphan.’

This may explain why Finance Minister Clyde Caruana had publicly fronted last January’s announcement of an ambitious plan to ‘restructure’ the national airline: in view of pressures by the European Commission to bring the company in line with its State Aid regulations.

The plan involved reducing the airline’s current staff complement of around 900, to around 420: with workers being offered alternative employment with government. This measure, we were told, would save the airline some €15 million per year.

And yet, Minister Caruana is nowhere to be seen today: when that same restructuring plan can be not only seen to have clearly failed... but has now been replaced by an early retirement scheme (of the kind that Caruana himself had categorically ‘ruled out’ last January).

Nor did the minister address any press conference, to announce his new government’s new restructuring plans for the airline: which have (understandably enough) provoked furious reactions from constituted bodies such as the Malta Employer’s Association.

Nonetheless, the problems at Air Malta are certainly not of Caruana’s own making. Nor, for that matter, can they be attributed exclusively to the present government’s efforts to restructure the airline (even if Labour appears dead-set on simply repeating the same old strategies as its predecessors).

In actual fact, the original January plan was in a sense ‘doomed’ to fail: for two reasons, primarily.

Firstly, because the prospect of reabsorbing Air Malta employees into other government departments, would only expose the enormous wage gap that exists between the national airline, and the rest of the public service.

Effectively, government discovered that it was impossible to transfer well-paid Air Malta employees into the public sector, without disrupting the civil service scales and stirring a hornet’s nest.

It would also have come at an exorbitant expense to the national exchequer. Absorbing almost 600 people into the public sector would increase the national wage bill by far more than €15 million a year; and this would appear reckless – to say the least - at a time when Caruana is seeking budgetary cuts to the tune of €200 million, to make up for the fuel and electricity subsidies.

Secondly, because it transpires that government’s decision to absorb the extra employees could itself fall foul of the EU’s state aid rules: since it is indirectly relieving the airline from a financial burden.

Either way, this also attests to a problem that far predates the present situation. As long ago as 2015, former Air Malta chairperson Marisa Micallef had said it was amply clear that: “the realities of the industry are such that the airline’s profit margins will always remain wafer-thin unless we rethink our business model to truly ensure viability.”

In fact, it is the ‘business model’ that has always been the problem with Air Malta. Successive governments have always treated the airline - not as a commercial company in competition with other airlines – but as a government employment agency, to satisfy constituent demands.

As Caruana himself also noted last January: “The Commission made it clear it did not trust government to implement reforms because of past pledges over a span of years that were never adhered to”: precisely because “political decisions in the past [had] replaced common sense.”

Unfortunately, the same could be said for some of the decisions being taken in the present. Having failed to entice Air Malta employees to join the civil service, the government first extended the original deadline (from August to October); then embarked on a different strategy, which involves offering very generous ‘golden handshakes’ to induce them to retire.

Predictably, this has ruffled the feathers of the Malta employers’ Association, which described the severance package – whereby workers are being offered roughly €16,000 for every year of service - as “the most obscene agreement in Malta’s industrial relations history.”

“There are thousands of better ways to use such funds than wasting them on golden handshakes. This agreement is morally flawed, and only intended to appease an advantaged class of workers, many of whom should never have been employed at Air Malta in the first place,” the MEA added.

It is hard to really argue with that reasoning. Such an outlay on early retirement schemes does indeed jar, within the context of public finances being under pressure because of the Ukraine war (among other issues).

Besides, the government seems to be ignoring other options at its disposal: such as, for instance, the MEA’s own proposal to ‘second Air Malta employees to the private sector’: where there are labour shortages in certain sectors; and where their skills and experience may be put to profitable use.

Above all, however, the government’s approach simply does not address the root cause of the problem itself. Cost-cutting may be, as Caruana puts it, the ‘last chance to save the airline, at this stage’. But unless it comes accompanied by a complete rejection of the former business model, in favour of one that focuses on long-term commercial viability... this too, will be doomed to fail.