Updated 11.50am with comments by the finance minister below. 

The government is planning to offer Air Malta pilots a golden handshake of between €750,000 and €1 million each as part of its plans to save the airline from a financial crash landing.

Details of the buyout plan were presented to unions and constituted bodies on Friday afternoon by Finance Minister Clyde Caruana.

He is understood to have told the Malta Council for Economic and Social Development that some 80 pilots current enjoy a lucrative early retirement scheme, which will see them receive two-thirds of their salary over 10 years.

The minister said he plans to “stop this madness” and that he planned to offer pilots a one-time payment to terminate this controversial clause from their collective agreement, the sources said. The government will be forking out substantially more to buy out this clause.

Those pilots who take up the offer will automatically forfeit the possibility of ever working in the public sector again.

Sources said a similar package is to be offered to cabin crew which sources said is expected to cost around €200,000 each. This will be offered to around 100 members of cabin crew. Those who take the offer will be bound to forfeit working within the public sector for six years.

The government had embarked on an aggressive restructuring plan in a bid to save the struggling airline. As part of this major cost-cutting plan, Air Malta’s workforce is to be slashed by half. The job-cutting plan, first announced in January, is for workers, excluding pilots, to be redeployed into new jobs.

However, the relatively high salaries of many Air Malta staff is making it difficult for the government to redeploy them elsewhere.

Malta’s business lobby said the salary expectations of hundreds of Air Malta employees are not commensurate with their competence and willingness to be productive.

They therefore could not be absorbed by the public sector and would not fit in the private sector either.

The government then extended the redeployment deadline and also introduced a round of golden handshakes.

Workers who opt for a golden handshake are being offered anything between €40,000 and €300,000.

The government is offering €40,000 to those who have served up to five years; €80,000 to those serving five to 10 years; €120,000 for 10-15 years of service; €150,000 for 15-20 years of service; €180,000 for 20-25 years; €210,000 for 25-30; and €240,000 for those of over 30 years of service.

Air Malta staff aged 50 and over are eligible for an early retirement scheme if they have served 20 years and over, to be paid twothirds of their total take-home pay, capped at a maximum €300,000.

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”. Sources say negotiations with the European Commission are ongoing, but they are not optimistic that they will secure the figure needed.

Minister: Correcting past mistakes to cost €200m

Speaking on One TV on Sunday morning in relation to the Sunday Times of Malta story, Finance Minister Clyde Caruana said the pilots had a right in terms of their collective agreement to retire at 55. The company was then obliged to continue to pay them two-thirds of their salary until they turned 65.  This was madness and he had made it clear to the pilots that he would never accept such a clause in any future collective agreement.

But once the clause already existed, and it was legally valid, he could not remove it there and then. The choice was therefore between two costs for the country - what he was trying to introduce and what was in the collective agreement - even though the numbers were large in both cases.

He said the airline was being streamlined, with the workforce being reduced to a third of the original 1,000, just to operate eight aircraft.

He said the cost of correcting the past mistakes and removing clauses such as this would cost the country some €200 million. 

Asked who was responsible for the clause that benefits the pilots, the minister said both (political) sides were responsible for the current state of the airline. Every collective agreement built on the previous one, he said.