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Updated: Air Malta losses to hit €50 million
The shedding of 1,000 workers is the price to be paid for a planned government injection of €50 million in State Aid into Air Malta, in a bid to save the airline from imminent collapse.
10 November 2010, 12:00am
Karl Stagno-Navarra
Karl Stagno-Navarra
4 min read
Adds statement by Finance Minister Tonio Fenech (1pm).
This injection will technically ‘cover’ the estimated and unprecedented €50 million in losses that the national airline is expected to register for 2010.
Caught between tight EU regulations and limited cash availability, government is now left with little room for manoeuvre after years of unexplained postponement on strategic decisions originally intended to avoid such a situation.
In a statement, the finance ministry attempted to play down reports on Air Malta’s precarious state as “speculation”. “Speculation on figures may damage the effort to look for solutions so that the company finds the route to sustainability,” finance minister Tonio Fenech said.
“It’s a sensitive moment for Air Malta, and government is appealing for prudence and caution. A restructuring plan is being drawn up and no decisions have been taken on the company’s operation or the number of workers to be cut down.”
It was only last week that government formally communicated with the European Commission its plans for a restructuring plan at Air Malta, and halved the proposed €100 million in capital injection to €50 million, that will now have to invested as state aid.
Under EU rules, government cannot grant any state aid to Air Malta without the European Commission’s consent, as EU member states are obliged forward a credible justification report to be scrutinized by EU experts.
With this emergency in hand, it comes with no surprise that President George Abela has this week stepped in to chair talks between government and opposition in a bid to find common ground on the way forward to salvage the beleaguered airline.
An initial plan was immediately shot-down by the EU Commission services during informal contacts, whereby MaltaToday is informed that the experts were ‘shocked’ at the work practices adopted by the airline over the years.
Some even reportedly commented that it was a ‘miracle’ that Air Malta has survived all this time with millions in accumulated losses, when one considers its fleet of 11 leased aircraft, as against the 1,500 workers it employs, and a wage-bill that amounts to €52 million a year.
The EU immediately refused to approve government’s plans for a capital injection of €100 million and leave the status-quo in place, to the detriment of a whole nation.
The only concession the EU is ready to accept is a ‘one-time’ €50 million State Aid allowance to the airline, on the strict basis that it must complete a thorough restructuring programme within six months.
The EU is adamant that any government intervention must guarantee the viability of Air Malta as an airline. Other than that, the Commission experts didn’t mince their words, and warned that planes will have to be grounded.
Prime Minister Lawrence Gonzi is continuously being informed on the outcome of ongoing discussions with the EU Commission by permanent representative Richard Cachia Caruana.
Sources say that the Prime Minister is insisting with the EU that Air Malta is a vital and strategic social asset for Malta, being an island that cannot fall to the mercy of private airlines.
Auditors Ernst & Young, who have been engaged by government to conduct a ‘study’ on the current state of affairs at Air Malta, have so far kept silent on their findings, much to the frustration of the trade unions who don’t even know how much the experts will be paid for their services. Some even complained that even finance minister Tonio Fenech has not said anything new during his talks with the trade unions yesterday.
As government and unions agreed yesterday to set up a steering committee that will oversee the impending restructuring programme, some have even expressed skepticism on its outcome.
Government is so far assuring unions that although Air Malta will be shedding its workforce, these workers will not lose their jobs, but work is underway to see where they will be absorbed.
MaltaToday is informed that discussions are already underway with the Employment and Training Corporation (ETC) in a bid to see what re-training programmes are available or can be created to re-introduce the different worker categories into alternative work places.
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L-iktar haga bla sens li smajt f'hajti! 1000 ruh barra!!! U x'xoghol min jaghmlu? Liema professur matematiku hareg biha din ic-cifra? X'formula uza biex wasal ghal din ic-cifra statosferika? Jaqaw min hadimha wiezen il-paga man-numru ta' haddiema? Ahjar min ikun se jikteb jahseb ftit qabel jikkommetti ruhu! Ahna l-haddiema rridu gustizzja..... Ma rridux xoghol mhux produttiv u bla qliegh, izda dan ma jiddependix minni u minn Tejfit, imma mill-kbarat li jfasslu 'strategiji' li suppost iwasslu x'imkien.......
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Airmalta is a moribund 'patient'. The Government inflicted a destructive 'tumor' in Airmalta by unprofessional management. We all know that the Government has always embarked in a systematic stripping of the workers in all public entities such as Seamalta, Maltacom, Drydocks etc etc.
Airmalta can still be viable if there is a good will from the Government but we all know the agenda.
This present Government is the worst administration since WW2.
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It's about time we really started thinking of waving good-bye to the EU diktats and leave. Don't be fooled by those who say we cannot or its not in our interests. When they say this they mean "their" interests not yours or ours. And yes we can leave. Have a look at this video.
http://www.europarltv.europa.eu/YourParliament.aspx?action=viewVideo&packageid=f5077c6b-3b92-4a1f-8271-c7a49c3bc6e8
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Hope that all Air Malta employees will stay united with their Union so that this Disgrace for all the families who work at AirMalta will not happen. Dr Gonzi cannot cut off 1000Air Malta staff from 1300. It Means he will dismiss 8 out of 10. Currently the majority of AirMalta workers are demoralized and need an urgent reply of proposals from the Government because this Speculation is demoralizing their families.
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@t bambinu
How right you are! They have sucked dry all the capital accumulated with a lot of prudence in the 70's and 80's.The same thing with Government finances, we have arrived at a stage, when the Governmnet cannot continue borrowing beyond three years.... and when at the same time, the interest will suffocate us, not for a year but for generations to come. But who cares? The culprits wan't be there, they would be happy enjoying their ill- gotten fruits.
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One thing that is being overlooked in all this mess is this.
Why allow the same circle of clowns who were involved in the re-structuring of Air Malta and were obviously well paid to create this mess are now being asked and paid to do exactly the same.
Air Malta needs 50 million euros in order to stay afloat however what it needs most of all is effective and competent re-structuring.
The morons who brought this airline on its last legs have no business being involved anymore.
The Maltese people ought to demand that the government ensures fresh executives with a better frame of mind and good business common sense.
Thanks but NO THANKS GEORGE.
Stick with the Presidency because when it comes to AIR MALTA and negotiated re-stucturing you struck out.
Jurgen Cachia •
The EU now dictates how an elected government runs the economy (however incompetently.) The birds are coming home to roost.
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If this really has to happen, and air malta downsizes to such a miniscule size, it follows that it will carry half the tourists it presently does. That means that 30% of hotels and restaurants, tourist attractions and all related industries (even painters and decorators) can close down.
The irony is that the associations representing these sectors (MHRA/GRTU) are the very same people who got Air Malta into this predicament in the first place; by arm-twisting the governmnet (Air Malta's owner!!) to give millions of Euros in subsidies (each year) to Air Malta's competitors, for at least the last 5 years. So much for seeing as far as your (long) noses!
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It comes as no surprise. The blue eyed boys have sucked all its juices for the past twenty years. And now, expecting the popolin to make up for their deficiencies, arrogance and selfishness? Where are the big clever boys who have mismanaged this diamond? Show up in public and admit you have all been unable to manage a national entity to the loss of a better future to all citizens. You shall sooner or later pay for all your mistakes, and with you shall suffer all those who supported you. The holiday is over. Get ready to sweat cos it's going to turn very hot for you all very soon. And Mr. Gonzi, please, save yourself from another bad record. It's going to hit the world this time... and I realise just now that the world will have difficulty distinguishing you from that Malti Laburist, what was his name? Did he have a magic ball you don't have?
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ALLA HARES jitnehhew 1000 haddiem kieku tispicca Malta!
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@Tony.
Is this Manager Still There? If you are referring to the same person which is still responsible at Heathrow airport, in my opinion you are wrong.
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@Tony.
Is this Manager Still There? If you are referring to the same person which is still responsible at Heathrow airport, in my opinion you are wrong.
Raymond Falzon •
@ Lee, You can't read ? Who mentioned the Cabin Crew ? I said the Airport Manager at Heathrow !
Double Speak : The Staff yes But not the Managers !
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@ Tony. The Air Malta groundstaff at foriegn airports have been outsourced to foreign companies for the last 6 o 7 years!
Joe Tanti •
@Tony."Air Malta brought this on to itself by its rude and arrogant staff" come on Tony ,are trying to say that 50 million Euros loss in ONE year was because of some errant cabin staff behaviour? The only arrogance is that of the Minsters,their so-called experts ,those blue eyed boys who run the vompany from lush offices whose only expertise is being one of the ministers boys.When Airmalta used to be run by more competent persons and the PN used to call the aircraft the Boeing 720 :the birds of lead (ghasafar ta comb) th e company registered profit and never took any monet grant from the goverment.PN activists and MP used to shun Air Malta and opt to fly on British Airways aand Alitalia. So what is to happen now? What is going to be done with the 1000 workers which are being said to be in excess of requirments? Are these to be absorbed in goverment employment.? Will the omiponent EU let us do that?,I have my doubts,the goverment is already top heavy with workers .Is Air Malta being set up to be sold to some private venture on ce these extra workers be disposed off?
Raymond Falzon •
I am afraid Air Malta brought this on to itself by it's rude and arrogant staff.
A couple of years ago we were really maltreated by the Airport Manager at Heathrow Airport.
Since then we have been to the UK 14 times but never with Air Malta.
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So the avarage wage of an Air Malta emplyee, stands at an avarage of Euro 34666.00 per year !!! Am I pushing the right buttons, or I'm going crazy ????
duncan abela •
To be honest I am absolutely shocked by what is happening at Air Malta. Losses of over 50 million in one year mean that it is not only a bloated workforce which is the main problem but that more serious structural problems exist based on an outdated business model. What irks me most as a taxpayer is the lack of transparency on the whole issue. Where is the due diligence expected of a board of directors who knew of such a disastrous situation with an ever increasing financial haemorrage. I also suspect political collusion between the political parties to keep the matter under wraps and out of the public eye and discussion, as both parties have a lot of their cronies within the AirMalta structures. Were it not for the financial prudence and oversight of the EU the taxpayer would already be 100 million out of pocket for a so called cash injection proposal similar to the ones which we used to be provided to the the dockyards. Let us hope that the EU keeps a watchful eye over all arrangements and that they will require the AirMalta crisis committee to consider all options before the EU gives approval to a survival package. I suspect that AirMalta like the dockyards is now in a situation where the more business they generate the bigger will be their losses. It masy be the case as happened with Swiss Air that to avoid its current liabilities it would makes sense to let AirMalta go under and start a new airline which follows modern streamlined and focussed ways of operating.
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@carmel pace - if you know of any 'deeper' issues you are free to pass them over to the media of your choice.
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I believe it is unfair to state that Air Malta problems are a legacy of Labour Governments.
1. Under Labour, Air Malta was always profitable so all this discourse that the airline was over-staffed makes little sense. The airline was never subsidised by the State.
2. It is understandable that Labour employed a good number of workers since the airline was just being established. Back then, the industry was less computerised and you needed a sufficient staff complement. You cannot set-up an airline without staff. A good number of these workers have retired by now. The problem is that over the past 25 years of PN management, the airline continued to take up new employees without any foresight.
3. The major problems emerged under successive Nationalist governments due to mismanagement and bad commercial deals such as the 'investment' in AzzurAir, purchasing of RJs, no hedging for fuel, sale of assets (hotels) and so forth. Employees have nothing to do with all this.
4. One option to maintain most of the present staff and still remain viable, is to enlarge Air Malta's operations with more routes, more planes and increased traffic. So there wont be 1,500ppl for 11 planes and 30 routes, but perhaps 1,300ppl for 15 planes and 50 routes. This would require a capital investment but it will be worthwile by time.
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I said it before and I say it again. GonziPN is won the last elections by accident.
All this mess was to be faced by MLP and rediculed by the PN to regain power after just one legislature.
But it went wrong. Very wrong. PN will suffer for the next 20 years, just like MLP did for the mess they did in the 80's.
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After 20 years of PN (mis) management, GonziPN can hardly blame anyone but itself. If the Airline is burdened with a swollen workforce, who employed these? All the CEO's and Chairmen had PN pedigree these include: Tabone who ruined the airline with RJ 70's; the second chairman-I forgot his name, who stabbed the Airline with Azzura Air for the second time, yeh, we had this buzzword -hub-, which is in Sicily not Malta.Then we leased the aircraft, then these management gurus with guidance from Castille stripped the airline of duty free shops, ramp, Holiday INN, Hal ferh, Selmun, + other benefits to the Austrian owned Airline! Crises? What crises? This is story of a planned assault to bring the Airline to its knees. NB. I am no AirMalta employee. I travel 30 times a year on business trips and if there is no Air Malta I will waste 60 days of extra travel per year.
Brandon Johnson •
Funny how everyday a new story is leaked to a different newspaper. One day it is the times, the TMI and Today never on the Nazzjon. Details are given numbers are quoted. Unfortunately few journalists add their investigative intuition into these stories to see what is behind them. Although one must admit that the crisis does exist we seem to take it for granted that the quotes of the "sources" in Brussels are real. So we have a situation in this country were we cannot give replies in the Public accounts Committee or in Parliament on sensitive issues. The EU will not publish correspondence on the power station but then these mysterious sources can talk to every Tom Dick And Harry and give juicy details of commercial companies. Come one Malta Today you of all people should be digging deeper into this story there is a lot to be revealed.
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This was Gonzipn plan all along , send Air Malta bankrupt then sell it for peanuts.Every great industry that Labour created has been destroyed.
How about the Labour party shows it really cares and call the people on the street not just for a few hours but till this incompetent government steps down.
charlene cassar •
This was long in the coming but as usual, nobody did anything until too late - which is now. Air Malta was used as a personal job centre by too many ministers over the years - now its time to bite the bullet !
Luke Camilleri •
A state-of-the-art loss of €50 million inone year by very SMART Gonzipn appointed Board and Management!
Why aren't Board Members appointed by Public Call?
What has been Air Malta's HR policies these past years and where appointments done by public call so one gets the best people for the job or just a matter of who knows who?
