The Malta Independent 20 May 2022, Friday

Air Malta's staff to be slashed by half as government goes on last ditch effort to save airline

Kevin Schembri Orland Friday, 14 January 2022, 14:34 Last update: about 5 months ago

Air Malta is going to reduce its staff complement by over 400, which amounts to around half of the personnel, Finance Minister Clyde Caruana announced on Friday.

The national airline currently has 890 employees. The government will launch voluntary transfer schemes in order to achieve this goal, offering the employees jobs in the public sector.

It will be offering voluntary transfer schemes to administrative staff and cabin crew starting from Monday, with the aim of around 110-120 being transferred out of the company to other government sectors.

Air Malta also plans to completely close its ground handling operation, and the 300 employees will be offered a similar scheme later down the line, with this planned to take place in the second quarter of this year.

These cuts will mean that the airline would save around €15 million a year, the minister said.

 

This is part of a plan that could very well be the airline's last chance for survival, the minister indicated, and comes following meetings the airline has been in with the European Commission, for the airline to be able to receive state aid funding.

The government does not yet know the amount in funding that the European Commission will allow the government to grant the airline, but Finance Minister Caruana said that these are changes that need to be done in order to save the airline, which has racked up over €258 million in operational losses since 2005.

Speaking about the changes needed, the minister said that the company must not be used by politicians and that such decisions in the past led to there being a loss in the airline which it could have done without.

Among other things, the airline wants to conclude collective agreement discussions as quickly as possible this year with the respective unions. The aim, he said, is to allow the airline more flexibility. Air Malta's Executive Chairman David Curmi said, for instance, that the airline will be exploring the possibility of flights which wouldn't land in Malta. In order to do this, the airline would need to establish a base outside of Malta and pilots and crew would need to fly out of those countries.

Curmi said that Air Malta conducted a cost comparison to Ryan Air, Easyjet, and Aegean Airlines and found that its unit cost difference was 44% higher. Some of the major reasons for this were that the airline is overstaffed and that ground handling costs were too high.

Curmi also spoke about increasing charter flights. In the space of a year, this generated €3.9 million for the company.

Minister Caruana said that a decision taken was to rationalise the company's network, with the company having already cut the number of destinations from 40 to 20. It intends to fly to 20 destinations this summer. Network issues and choices in the past led to the burning through of funds, he said.

Plans to introduce long-haul flights have been scrapped, the minister added. "There was an agreement to buy two planes capable of this, but this agreement has now been changed." He said that the company struck a deal to, instead, for 3 A320 Neos. An RFP has been issued for the airline to lease those three planes from a company that will purchase them. The lease will be cheaper than the other planes currently leased by Air Malta.

The minister had held a meeting with all unions involved in the airline about the plans ahead on Friday morning, and said that there was a sense of understanding and maturity in the meetings.

The minister stressed the need for company decisions to make financial sense in order for the airline to survive.

He described the discussions with the European Commissioner.

Caruana said that the Commission had lost its trust on the Air Malta situation when talks had started, as over the years the Commission was promised that many things would be done regarding the airline, but that these things did not happen. "The Commissioner questioned how they could authorise certain things when a number of government administrations promised things that weren't implemented. The Commissioner was right, as if action that was promised years ago was taken, I wouldn't be making this announcement."

After a meeting in November 2021, the Commissioner saw an amelioration of the company and was satisfied with the major change in the behaviour of the company, he said.

The minister mentioned a number of things which will affect the amount the airline could receive. The company had already filed a request for restructuring and was given state aid back in 2012, he said. That means that under EU regulations, 'the one-time last time' principle - that Air Malta could benefit once from state aid in ten years - was used. So, the next time it can benefit is in 2026 (as the ten years counts from the last state aid payment which was in 2015). More than that, the company was already technically in difficulty before Covid hit, he said. "The company already faced major challenges."

"Every time a plane flew to any destination, that flight resulted in a loss for the company. So, I could never pretend that the Commission would allow us to give a large sum of cash." he said, stressing that the amount does not affect the decisions being made public or if the airline will be able to continue flying.

The funds the airline will receive are for losses due to Covid, Caruana said.

He added, however, that if the airline didn't have a fighting chance, he would not be delivering this press conference.

"The Commission's preferred option was to close the company and form a new one, but I told them I didn't agree with this decision."

 

Workers who will be shed from Air Malta should be considered for secondment to private sector - Chamber

The Malta Chamber of Commerce has recommended that workers who will be shed from Air Malta will first be considered for secondment to the private sector, given the acute human resource shortages.

"This will avoid shifting the problem of excess employment to other state entities," it said in a statement.

The Chamber noted, about the announcement by the government, that "the transparency in reporting the challenges at hand and the commitment to take concreate decisions that are first and foremost in the national interest are apparent."

"Also, The Malta Chamber notes the stark contrast to the various approaches taken historically with respect to Air Malta. The maturity with which the unions have responded to this 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. Saving Air Malta will require shedding more than half of its headcount. Other state entities need to ensure that they do not find themselves in the same situation in future, by taking on more employees than what they really require. 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 in the private sector. This will avoid shifting the problem of excess employment to other state entities."

The challenges identified with respect to Air Malta highlight the importance of adopting an incoming tourism strategy that promotes Malta as a year-round destination, the Chamber said.

"The policy document issued in November by The Malta Chamber entitled: 'Rediscover: a New Vision for the Tourism Industry in Malta', advocates this approach. This is also in the interest of improving average occupancy in touristic accommodation and having a more sustainable tourism industry."

The Malta Chamber believes that the proposed actions to improve the financial performance of the airline are reasonable and credible. "They acknowledge the particular challenges related to the size of the airline and the markets in which it operates. The ambition to move forward with implementation at a quick pace is another bold move and will help Malta regaining credibility with the European Commission."

The Malta Chamber said that it is aware that the national airline is of paramount strategic importance. "It does not only ensure air connectivity to mainland Europe for business and tourism purposes, but also retains the capability to operate flights to supply essential goods in critical circumstances. All parties involved in Air Malta's transition need to be reasonable and responsible in their demands to ensure that the country succeeds in saving the national airline. The Malta Chamber hopes that this restructuring plan will ultimately guarantee a sustainable future for Air Malta."


 

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