Finance Minister Clyde Caruana said on Monday that blame for the failure of Air Malta rested on both political parties and he was determined to ensure that the new airline which will replace it will be run strictly on commercial lines and will be unable to return to the mistakes and practices of the past.
“This was a supposedly commercial company which one administration after another used and abused and rendered into a government department, or worse,” he told parliament.
Successive governments had also avoided saying the truth about the state of the airline, he said, and it was a personal shock to him when, on meeting the vice president of the European Commission for the first time, she asked why she should believe the plan he had presented her on Air Malta when so many others had not kept their word.
Problems had been accumulating for many years, under all governments, Caruana said. Suffice it to say that 15 years ago, the airline employed 1,400 people to operate nine aircraft and only losses were made in the past 20 years
Costly early retirement schemes
In 2007/2008 two collective agreements were signed burdening the company with €90 million in early retirement schemes that made pilots and crew eligible as soon as they joined, guaranteeing them payment of two-thirds of their salary until retirement age if they took early retirement The present government could not back out of such agreements without risking industrial action which would be even more costly.
David Curmi, the current Air Malta CEO was recently criticised over the level of his salary. Yet in 2003 the chairman and CEO of the time were paid a total of €500,000. That was 20 years ago and the airline was already making losses.
Unprofitable routes
Caruana said he had no issue pointing out the wrongs under all administrations. The airline lost millions when unprofitable routes were opened and it flew to 37 destinations just a few years ago.
The new agreement reached with the European Commission, he said, was the way forward. For as long as he remained minister, the airline would operate only on commercial lines and the current level of 375 workers would not be raised. The airline would be adequately capitalised and have its own assets because that was the only way it could generate profit.
A strategic partner would also be sought to avoid the possibility of the airline falling back to the wrong practices of the past.
It was unbelievable that Air Malta had been stripped of all its assets over the years, he said, and the new airline would even need to bid for its brand name and the London landing slots in the coming weeks. The government would also allocate the new airline funds to purchase and own three of its aircraft. All eight aircraft currently operated by Air Malta are leased.
Caruana stressed that the new airline had to operate on commercial lines, because that was what was required in terms of EU single market rules. People had to recognise that it was difficult to reconcile connectivity, tourism needs, and profitability but the new airline would not be able to operate routes which were unprofitable. It was for this reason that unprofitable routes, of which Frankfurt was the worst, had been discontinued. Connectivity was important but not without commercial viability.
The 17 routes which had been retained would carry as many passengers as all of Air Malta’s services in 2019 thanks to greater utilisation of aircraft and a higher load factor.
The thinking and practices of the past could not be repeated and tough decisions were needed to avoid mediocrity. It was disappointing, Caruana said, that in one of his meetings, somebody had asked him if free tickets would be retained for staff. How could an airline be profitable if hundreds of staff, who had long left the airline, continued to be handed free tickets?
He said he was holding talks with the trade unions on the way forward for the workers. Progress had been made, but the new airline would not be able to give all that was asked of it because that would mean that nothing was changed.
“We are doing something differently, changing the practices and the unintentional and intentional mistakes of the past,” the minister said.
€400 million were burned in the past 20 years and one could no longer have a bottomless pit. A sensible basis was being laid for the new airline to achieve profitability and sustainability and he hoped that during this legislature partial privatisation or a strategic partnership could also be achieved, giving him peace of mind that even if he did not remain the responsible minister, the new airline would not slip back to the mistakes of the past.
The government, he concluded, was not killing Air Malta but giving new life to the national airline that the country needed.
Grech hopes wish list is realised, but warns that nobody trusts the government
Replying, Opposition leader Bernard Grech said it was a sad day when the prime minister and Clyde Caruana admitted that they had succeeded in destroying Air Malta.
That was the only clear fact in this whole saga, The rest was a wish list, a string of promises which, he hoped, would be realised, in the national interest. The problem was that no one believed this government’s promises because it was caught in one lie after another, anything from the American University of Malta to the Metro project.
In destroying Air Malta the present so-called Labour government had even betrayed Dom Mintoff, Grech said.
At least Caruana had the decency to say that those before him used and abused the airline for various reasons. But Caruana was just as guilty, because reform had been delayed till after the last elections. Caruana, like the prime minister, was failing to reply to questions. He accused others of wasting funds, but had not explained, despite being asked last year, how €2.4 million had been spent on consultancy services by Knighthood Global Ltd the same company which advised minister Konrad Mizzi on ways to sell Air Malta.
Seriousness was needed for the new airline to succeed, and hopefully there would be no political interference if Robert Abela allowed that. It was a shame that the prime minister had only spoken for some four minutes on Monday in reply to the opposition’s questions, leaving workers and operators worried. Maybe Abela did not take the minister seriously, maybe that was why he had hit him (lagħbilu go ħalqu) Grech said.
Interjecting on a point of order Labour MP Randolph DeBattista said Grech had imputed something which had not happened. Grech said he was referring to reports of an altercation.
The government, he said, needed to explain what it wanted of the new airline. Would it be a low-cost airline or a legacy quality airline? How would it attract investment? Would the government guarantee there would not be new financial burdens? And what would happened to Med Air?
The PN, he said, wanted progress for the country and a better quality of life for the people. It therefore wanted the new airline to succeed.