House approves airport property transfer

The House of Representatives yesterday approved a motion providing that the title of land held by Malta International Airport (MIA) would be converted from freehold to a 65-year emphyteusis.

The company will pay an annual Lm300,000 groundrent which will be revised by 15 per cent every five years. The runways are excluded from the grant and will be used by the company in terms of a management agreement.

Labour MP Noel Farrugia, resuming his speech from Monday's sitting, asked if airport tax would rise after the privatisation of MIA.

Economic Services Minister Josef Bonnici said opposition speakers seemed to be forgetting that it was the former Labour government which had started the process for the privatisation of MIA. The Labour government had projected a revenue of Lm12 million from the sale of 40 per cent of the airport shares, compared to Lm40 million which the present government would make from the sale of an equal sized stake.

The minister said that soon after its election in 1987 the Nationalist government recognised that the old airport terminal was hindering the growth of the tourism industry. It therefore revamped the old terminal until the new terminal was built and commissioned 10 years ago. He said loans for the building of the terminal had been settled and MIA paid the government dividends last year and over the past 10 years it invested some Lm9 million on its facilities.

The modernisation of the airport terminal and the airport facilities was also beneficial to Air Malta, enabling it to expand its operations to new markets such as hubbing and the ferrying of cruise liner passengers.

Prof. Bonnici observed that the opposition had complained that the company would not pay the government anything for the use of the runways. But they were forgetting that the company would be obliged to maintain the runways, an obligation which cost millions of liri for the maintenance of the runway surfaces and related services such as lighting.

A question which an opposition speaker had asked was who would benefit from privatisation. The minister said privatisation and the link-up with strategic partners would lead to development of the airport as a passenger and cargo hub and for other services. An example of these services was the recently set up joint venture between Lufthansa and Air Malta to carry out aircraft maintenance.

Prof. Bonnici said that while opposition speakers claimed the property deal made no consideration for Air Malta's needs, Air Malta would retain the use of the sites it currently occupied within the airport.

Referring to tariffs, Prof. Bonnici said there was to be an airport users board, in which MIA would be in a minority, to decide on tariffs and charges. All airport users including airlines would be represented on the board.

He said the way to prevent abuses was not for the government to be in charge of everything but to have the mechanism which would regulate how a company, such as MIA, would operate on a level playing field. It was preferable to have such structures which would also control government operations.

Opposition transport spokesman Joe Debono Grech said the opposition was not against privatisation when this was conducted in a serious manner. In the MIA case a company interested in submitting a bid had not been given information it requested before it could submit its bid. Questions had also been raised about the offer by one of the bidding companies being leaked to a competitor.

There was no doubt that Malta needed an airport that was as efficient as possible. But did anybody think that Vienna Airport, as a strategic partner with MIA, would do anything for the Malta airport which would make it better than Vienna airport itself?

All this showed that the government, as the majority shareholder in MIA, should continue to show it was in charge and it should ensure that all decisions were in the national interest. Indeed it should be ensured that the government retained its controlling interest in essential companies such as this.

Mr Debono Grech asked what was to become of the lease agreements of airport shops which were about to expire.

He asked whose idea it was for new offices at the air terminal to be built within an iron structure and why Polish workers were engaged for the job. Couldn't dockyard and shipbuilding workers have been used?

Mr Debono Grech also asked what was to become of the workers at MIA following the privatisation process. When Maltapost was partially privatised it was said that workers' jobs were safe, yet now it had resulted from correspondence between New Zealand Post and the New Zealand postal minister that the workforce at Maltapost would be reduced.

Labour MP Evarist Bartolo said the Labour Party was not against privatisations but it was wrong to blindly think that privatisation was the solution to all problems. Having a private owner did not in itself guarantee that a company would operate well.

Neither could one have blind faith in the regulatory authorities. The people in these organisations were as much flesh and blood as those in public organisations, he said.

In a contract such as this involving Malta's sole airport, it needed to be ensured that the national interest was always protected and the government had a controlling interest.

Furthermore, while the airport was important for Malta's tourism, tourists would not judge Malta on the basis of the island alone and it was the whole tourism product which needed to be improved.

There was no doubt, Mr Bartolo said, that one of the reasons behind the government's privatisation drive was to pay off some of the national debt after spending beyond its means. What the government needed to do, however, was to reduce the structural deficit if it ever hoped to solve the debt problem. It also needed to streamline the public sector and as a result reduce pubic spending and the tax burden on the productive private sector.

Mr Silvio Parnis (MLP) said that in its privatisation programme, the government needed to take a long-term view of Malta's needs. Previous governments had worked hard to set up the companies which the present government was now privatising in a bid to improve its financial position. But there was a limit to how many companies could be sold, and what would happen then?

Would the privatisation of MIA mean increased costs for airport users as was the case when Mid-Med Bank was privatised?

Mr Joe Mizzi (MLP) said the airport was a sensitive area. What security safeguards would be provided during the privatisation process? It needed to be ensured that all those working at the airport received proper security vetting.

The Labour government had introduced tough security arrangements and removed security passes for several people.

It had also been ensured that no abuses were made in the use of the VIP lounge, especially after court testimony that minister's relatives or friends having brought in drugs into Malta this way.

Within 10 minutes of the hijack of the Air Malta flight to Turkey and its deviation to Frankfurt the airport authorities knew that no explosives had been taken on board. This information was relayed to the crew and the German authorities who then allowed the plane to land. A subsequent inquiry confirmed no wrongdoing in Malta.

Unfortunately all this security work was reversed upon the election of the present government.

Mr Mizzi said that in the Queiroz case it was clear that threats had been made. Two requests had been made for an amnesty to be given to him. The first was rejected and the police had strongly resisted the second as well. It was strange, however, how President Ugo Mifsud Bonnici in August 1994 wrote to the Minister of Home Affairs that Mr Queiroz was suffering from Hepatitis and he (the President) "wished for many reasons" for this case to be reconsidered. Mr Queiroz was subsequently granted a pardon in September.

What were these "many reasons" Mr Mizzi asked. The answer, he added, could be seen in the court evidence which showed the many connections which this case had.

Mr Mizzi also insisted that the House should be fully informed of the social and environment impact of the transfer of state property. It should also be ensured that government property was not used for speculation. This had not been the case in the Chambray or Cottonera projects, among others.

He said the government had not said whether it favoured plans for a golf course in Rabat and whether it would give up state, former Church property, for the purpose. The opposition had already declared that agricultural land should not be used for this purpose.

The Labour MP criticised the government over its handling of the Solemar Hotel case, saying the owner had been allowed to get off lightly after having occupied government land. In contrast beach rooms on government land at Armier were removed.

He said that at Siggiewi, agricultural land at Gebel Ciantar was being abusively converted into a quarry.

Winding up, Finance Minister John Dalli complained that several members of the opposition had deviated from the subject before the House.

He said security had nothing to do with the property transfer deal or the actual privatisation of MIA. Airport security arrangements would remain unchanged. Furthermore, air traffic control and the fire fighting unit had been taken out of MIA before the privatisation process was taken in hand by the present government, in contrast to what the former government intended.

Referring to opposition questions on the involvement of the new shareholders of MIA in the property deal, Mr Dalli said the deal was being made with MIA as currently constituted. The deal was being made to regularise the use of property held by MIA, some of which was even held without title.

How could the opposition ask how the deal was not made after the partial privatisation, when this deal involved the conversion of the title of property from freehold to temporary emphyteusis? Could anyone imagine what problems would have arisen if private shareholders had also been involved?

In terms of this deal, the ownership of all of the airport property would be the government's but MIA was being granted a 65-year emphyteusis of the air terminal and the car park and it would manage the runways in terms of a management agreement.

The government was buying back all the property for Lm36 million but MIA would pay back the government Lm36 million for the grant of the emphyteusis. The company would also pay the government Lm8.4 million in taxes on the contract. Questions had been asked over whether the new shareholders would shoulder some of this outlay. But, Mr Dalli said, the land was being transferred to MIA, not the shareholders. The foreign shareholders would be minority shareholders. The Lm8.4 million would be part of MIA financing which the new shareholders would also shoulder.

Referring to questions over whether airport charges would rise, Mr Dalli said the Director of Civil Aviation would remain the regulator of airport activities and the operation of the airport would remain subject to his licence.

Turning to questions on Maltapost, Mr Dalli said the property deal included a provision for Maltapost to use a site at the airport should it need one in the future.

Mr Dalli said the Lands Department staff could not be expected to have expertise on the valuation of the airport, which was why the Privatisation Unit had engaged foreign experts for this purpose.

Replying to questions on government guarantees on borrowing by MIA, Mr Dalli said the company would make investments on government property with approval by the government. Therefore, if something happened to the company, the government would take over the property with all the investment made on it. The government was therefore telling the banks it did not intend to make windfall profits and it would guarantee up to the value of the investments made capped with a number of years of profits made by the company. If the government ordered the company to introduce measures at the airport which were not required internationally, and this would reduce its competitiveness, the government would be bound to meet the costs. But should such changes be required internationally, there would be no loss of competitiveness and therefore no outlay by the government.

The motion was then approved after a division, with 30 government votes in favour and 23 opposition votes against.