Updated 6pm with Malta Chamber's reaction

The government plans to slash Air Malta's workforce by half by summer as part of a major cost-cutting plan to save the struggling airline, the finance minister announced on Friday.

Its 890-strong workforce will be cut to 420, with workers being offered alternative jobs with the government.  The job-cutting plan is forecast to save €15 million a year.

As part of a wider plan, baggage and ground handling services will be hived off, unprofitable routes will be cut and the airline will attempt to become a European carrier that could fly within other countries. 

"We have to be serious about this plan," Clyde Caruana said.

"It could very well be Air Malta's last chance."

Watch the news conference below

What happened to EU state aid?

Caruana said the four-year cost-cutting plan would take place irrespective of any state aid the European Commission would permit.

He admitted the government was "not expecting ground-breaking funds" from the European Commission, whose preference is for the struggling airline to close and another company opened. 

"We have made strong arguments with the European Commission that Air Malta has a fighting chance and we believe that our plan will save the company from bankruptcy," he told a news conference.

The government last year asked Brussels for permission to pump €290 million into the ailing airline as a last-ditch attempt to save it but was asked to come up with a smaller "more realistic figure".

Caruana, who did not confirm the amount requested, said he had met with EU Commissioner Margrethe Vestager, who told them the Commission had "lost faith in Air Malta because a lot of promises had not been kept".

Air Malta is operating at a loss of €170,000-a-day and while other countries had been given the green light for state aid due to COVID-19, this didn't apply to Air Malta, which was already in difficulty. 

Caruana said Air Malta had already requested money, which was tied to restructuring to be done by 2016. This was a one-time-in-a-decade deal, meaning we could qualify next in 2026.  

How will job cuts work?

Most of the job cuts, some 300, will come from ground handling operations, which will completely end while the remaining 110 will be administrative staff.

A Voluntary Employee Transfer Scheme will open on Monday to attempt to transfer the workers to other government departments. The first batch of 110 will be at their new place of work by March.

David Curmi, executive chairman of Air Malta, said the plan will "need more flexibility from airline employees", especially pilots and cabin crew and that work practices will need to change. 

New collective agreements are to be negotiated and will be concluded by the second quarter of this year.

Curmi said the airline carried out a cost comparison to Ryan Air, Easyjet, and other airlines and found its costs were up to 44% higher because it was "overstaffed" and "ground handling costs are far too high".

There are now 62 pilots empoyed by Air Malta, down from a previous 131. 

What routes will go?

Last year, the number of routes was already halved, from 40 to 20, saving €40 million.

Malaga, Cagliari, Casablanca and Bucharest were among the 20 routes stopped last year and any "unprofitable" ones will be cut in the future.

A plan by former minister Konrad Mizzi for Air Malta to go beyond Europe into Asia and the US will be scrapped. 

"That decision makes no sense in light of all this," Caruana said. 

He said they had renegotiated with Airbus to cancel order for long haul planes and ordered three short haul planes instead. They are negotiating the sale and lease back of these planes.

Instead Curmi plans to make Air Malta a European newtwork carrier, creating a base abroad and flying within other countries, such as intra Italy flights.

It will also focus on the charter business, with Curmi saying the airline was able to earn €3.8 million in one year alone from this activity. 

Malta Chamber: those made redundant should be seconded to private sector

The Malta Chamber of Commerce commended the action plan for the airline as "sensible and realistic".

In a statement, it said this was in "stark contrast" with the "various approaches taken historically".

"The maturity with which the unions have responded to is also commendable. Undoubtedly, gone are the days when we carry forward unsustainable operational practices in any state entity and keep pumping public funds into unviable business models, simply to safeguard jobs or for political convenience.

"The Malta Chamber hopes that Air Malta’s predicament will be an eyeopener for the management of public entities and the rationalisation of public expenditure that needs to prevail going forward."

It warned that other state entities needed to ensure they did not find themselves in the same situation by taking on more employees than what they required.

"In this spirit, the Malta Chamber recommends that workers who will be shed from Air Malta will first be considered for secondment to the private sector particularly given the acute shortages of human resources.

"This will avoid shifting the problem of excess employment to other state entities."

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