Air Malta: Ball remains stuck in Brussels’ court

Air Malta’s fate hangs on a thread and the hand holding it belongs to the European Commission as it navigates the treacherous waters of state aid.

Brussels has so far not given any indication of when it will deliver its verdict on the Maltese government’s request to inject state aid into the airline.

Sources in Brussels have told MaltaToday the Commission is being “extra careful” in its deliberations in the wake of rulings by the European Court of Justice that annulled state aid decisions in favour of Lufthansa and SAS.

“The Commission has already been bitten twice having seen the ECJ annul its decisions on state aid and it does not want a repeat, which is why it is taking its time to reach a conclusion on Air Malta,” the sources said.

In June 2020, the Commission had approved German plans to contribute €6 billion to the recapitalisation of Lufthansa subject to commitments to limit distortions of competition.

A month later the Commission approved the Danish and Swedish aid to contribute up to SEK 11 billion (approximately €1 billion) to the recapitalisation of SAS.

However, both decisions were annulled by the ECJ last May following complaints by low cost carrier Ryanair.

After the court decision, Executive Vice-President Margrethe Vestager said the Commission will “carefully study” the judgments and their implications.

“We are aware of the uncertainty the judgments generate for the airlines concerned and the aviation sector at large. While it is too early to give any indication as to what the appropriate course of action may be, at this stage all options are on the table,” she said.

It appears the ECJ’s rulings have put a spanner in the works, leaving Air Malta’s future in abeyance.

Meanwhile, Finance Minister Clyde Caruana remains mum about the negotiations that have taken place. “Everything is with the European Commission and we just have to wait for their decision,” he told MaltaToday.

The minister insisted he will speak only when he has something new to say.

The toing and froing between the Maltese government and the European Commission has been going on for more than two years. The grounding of aircraft during the pandemic worsened an already dire financial situation at the airline.

Meanwhile, government embarked on a rationalisation exercise last year by drastically cutting down the number of employees at Air Malta. The redundancy and early retirement schemes cost more than €60 million.

Air Malta has already benefitted once from a concession to be granted state aid since Malta’s membership of the EU. But the 2012 exercise failed to make the airline profitable despite a reduction in employees and a mandatory reduction in the number of aircraft.

The latest attempt is a last-ditch effort by the government to save the airline but any state aid agreement with the European Commission will come with conditions if approved.

The ministry has plans in place to set up a new airline if Air Malta is forced to close down but Caruana has been adamant that the intention is to save the airline and put it on a profitable footing.