Updated 2.25pm with PN reaction
Brussels has sent Malta’s request to pump €290 million of state aid into the national airline back to the drawing board, with the government asked to come up with a smaller, “more realistic” figure.
Government sources said Finance Minister Clyde Caruana and a technical team from the European Commission have been hashing out the details of a proposed state aid cash injection into the ailing airline.
In April, Times of Malta reported how the government had submitted a five-year state aid financing plan which it says will help turn Air Malta into a sustainable and profit-making enterprise.
That proposal had sought to inject more than a quarter of a billion euros into Air Malta. However, the sources said the commission has indicated it was not willing to approve that much public financing.
They said it was likely the final approved figure would be closer to €190 million but added that discussions were ongoing.
“The talks are of a very technical nature but the global figure was deemed too high and we will have to come up with a more realistic funding plan,” one insider said, adding that Malta was being made to agree to a number of onerous conditions in order to secure the funding.
The government has not commented officially on the proposal.
The airline has been suffering losses which were made exponentially worse when the COVID-19 pandemic brought most of the air travel to a halt. During the height of the outbreak the airline was making losses of over €170,000 daily.
Past bailouts
This is not the first time Malta has tried to bail out the carrier.
In 2010, the government was given temporary permission to grant the airline a state loan of €52 million to stop a financial crash landing, followed by EU approval of €130 million bailout plan in 2012.
It is not clear how close the airline has stuck with the restructuring plan it had agreed to, with the sources saying that serious shortcomings had been flagged in informal talks with Brussels in recent months.
PN: Publish state aid plan
Nationalist Party finance spokesman Mario de Marco reacted to news of the EU's feedback by urging the government to publish its proposals immediately and accused it of "incompetence" in the aviation sector.
State aid plans drafted by Economy Minister Silvio Schembri had been scrapped and redrafted by Finance Minister Clyde Caruana, the PN MP said.
But this new plan, which Caruana had said would be "honest and credible", appeared to have also fallen short.
"This government's incompetence in this sector means we are losing crucial time to ensure Air Malta is on a sound financial footing," he said.
State aid for EU carriers
Under normal circumstances, EU member state governments are forbidden from giving 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 Brussels 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 pandemic.
These included €120 million in state aid financing by the Greek government to Aegean Airlines, €290 million by the Belgian government to Brussels Airlines, and €7 billion to Air France by the government in France.
One such state aid plan - €190 million in support which Romania has given to flag carrier TAROM - is currently being investigated by the European Commission.