Air Malta accounts still unpublished as new State aid bid beckons

Air Malta has refrained from publishing its accounts for the financial year ending 2019, with over seven months elapsing since the national airline’s annual appointment with the press.

The national airline usually publishes its annual figures in April. In February 2020, MaltaToday had revealed that Air Malta’s journey to sustainable finances had once again been hampered by a year in which operational losses had climbed to €30 million.

But that was the figure right before the COVID-19 pandemic shut down the international travel industry, grounding all airplanes, and contributing to well over €100 million in losses for the beleaguered airline.

The Maltese government could be playing for time ahead of an official request from Brussels for a substantial state aid injection for the airline. The effects of the COVID-19 pandemic will allow the government to state its case, even though Air Malta itself has not yet resolved its own operational issues.

If Air Malta was insolvent before COVID-19 hit, it might not qualify for State aid.

Way back in February, despite structural reforms and new acquisitions for both aircraft and flight management software, Air Malta still suffered the brunt of reduced air travel to Mediterranean destinations like Tunisia, as well as from the price of oil.

In 2019, auditors PricewaterhouseCoopers noted “proposed transactions” in Air Malta’s business plan would “give rise to funding that meets liquidity requirements”.

While in 2017, the company reported operating losses of €10.8 million, the airline registered a small €1.2 million profit, prior to restructuring costs.

But this was down to clever book entries that allow the Maltese government to inject more cash in the airline. Under state aid rules, Air Malta can no longer use taxpayers’ cash after the €200 million restructuring programme of 2012.

So in 2018, the airline revalued its properties upwards, which gave it a €16 million boost and pad €223 million in accumulated losses from previous years.

The real money-spinner for Air Malta however were the millions paid by the Maltese government to buy the airline’s landing rights at London Heathrow and Gatwick airports. To do this, the government created a company to acquire the slots and then lease them back to the airline.

Those landing rights were given a speculative value of €33.8 million just for the summer alone. That gave Air Malta a much-needed cash boost, despite its selling and distribution costs climbing to €15 million and administration expenses to €17 million.

The same was expected to happen in the financial year ending March 2019, which accounts are not yet published, where the winter slots would be valued at €22.8 million.

Yet even PWC had highlighted major issues relating to the company as a going concern: “the underlying assumption [is] that the business plan 2019-2021 can be successfully implemented... and [that] the confidence that the government has expressed, on the basis of the legal advice obtained, that the proposed arrangements do not give rise to any form of state aid and that all restructuring actions are pursued within the framework set by the European Commission.”