Malta has asked Brussels for permission to pump €290 million into Air Malta in a last-ditch attempt to save the ailing airline.

In a hefty document sent to the European Commission on Monday, the government suggested a five-year state aid financing plan which it says will help turn Air Malta into a sustainable, profit-making, enterprise. 

The government would not comment officially on the proposal when contacted by Times of Malta but two senior sources said talks between government and Brussels would begin later this month.  

The airline has been suffering losses which were made exponentially worse when the COVID-19 pandemic brought most air travel to a halt. 

In February, Finance Minister Clyde Caruana confirmed that he was working on “an honest and credible” plan to allow the country to help the national airline as it was making losses of over €170,000 daily just to operate its aircraft. 

Under normal circumstances, European Union governments are forbidden to give financial support to private, or even state entities, to ensure a level playing field among all economic players.

However, this restriction has been temporarily eased by the European Commission in the wake of the devastating effect that the virus outbreak had on certain sectors like travel and aviation.

Over the past few months Brussels has given the green light for state aid to various airlines in view of the slowdown caused by COVID-19 pandemic.

They included €120 million in state aid financing by the Greek government to the Aegean Airlines, €290 million by the Belgian government to Brussels Airlines and €7 billion to Air France by the government in France.

Ryanair has said it is contesting some of the decisions in the European Court. 

Payroll costs

Air Malta, which has already cut salaries and made dozens of pilots and cabin crew redundant, will have to reduce payroll costs further to improve its balance sheet.

The current €50 million payroll is cut down once again in the proposed plan to Brussels. The airline is also preparing to drop routes from which it makes little or no profit and wants to shift its focus to core destinations such as the UK, France, Germany and Italy.

In 2010, Malta was given temporary permission to grant the airline a state loan of €52 million to stop a financial crash landing.

The loan was subject to the condition that the government submit and stick to a rigorous restructuring plan.

It is not clear how closely the airline has stuck with the restructuring plan, with government sources saying that serious shortcomings had been flagged in informal talks with Brussels in recent months.

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