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Following an in-depth investigation, the European Commission has concluded that a €130 million aid amount granted to the state-owned airline Air Malta for its restructuring is in line with EU state aid rules. The Commission found that the restructuring plan adequately addresses the financial problems of Air Malta. The restructuring measures foreseen, which include a significant capacity reduction and the sale of assets, should ensure long-term viability without continued state support, whilst avoiding undue distortions of competition.
In November 2010, the Commission authorised a loan facility of €52 million for Air Malta as rescue aid, subject to the submission by the Maltese authorities of a restructuring plan within a six-month period.
In May 2011, Malta notified the Commission a €130 million capital increase to help restructure the company, which has been in difficulty for several years.
The Commission had a number of doubts whether the notified restructuring plan complied with the requirements of the 2004 EU Rescue and Restructuring Guidelines. Therefore, the Commission opened an in-depth investigation in January 2012.
The Commission’s investigation found that the restructuring plan, covering a period of five years until November 2015, is based on realistic assumptions and should enable Air Malta to become viable within a reasonable timescale. The Commission is satisfied that the proposed capacity reduction consisting in the withdrawal from certain routes will avoid undue distortions of competition. Moreover, Air Malta will contribute to the costs of restructuring by selling land and other assets, as well as securing a private bank loan.
Finally, the Commission found that a previous capital injection of 2004 was carried out on market terms and therefore did not constitute state aid in the meaning of EU rules.
Air Malta delighted following the European Commission’s approval of its restructuring plan
Air Malta expressed its confidence following the news released by the European
Commission in which it formally said it has authorised the restructuring plan proposed by the
Maltese Government aimed to restore the viability of the island’s national carrier.
This announcement by the European Commission follows the decision announced last January that the Commission has opened an in-depth investigation to assess whether the €130 million restructuring aid is in-line with EU state aid rules. The commission has over recent months examined in particular whether the planned measures are appropriate to restore the company’s long term viability and whether they ensure sufficient compensations for the distortions of competition triggered by the state support. The process also allowed interested third parties to comment on the measures under investigation. Commenting on this announcement Louis Farrugia, Chairman of Air Malta said, “This is good news for Air Malta and should instil courage in all the airline’s stakeholders. It means that the airline can continue to trade in the knowledge that its balance sheet can be strengthened and investment in human resources and its operations can take place whilst the airline turns from its current loss making position into a profitable trading one.
Mr Farrugia added, “On behalf of the Board of Air Malta I wish to thank the three main teams that
have worked to obtain the Commission’s approval of state aid – that of the Ministry of Finance led
by Hon. Tonio Fenech, our Permanent Representations Office in Brussels led by Mr Richard Cachia Caruana and that of the senior management at Air Malta led by Peter Davies, Chief Executive of Air Malta and Ray Hart our Chief Restructuring Officer. They have all worked exceptionally hard in a meticulous way as one team.”
“I wish also to thank all employees, past and present together with all the unions for their
understanding and maturity during these difficult changes that the airline has to face”, concluded Mr Farrugia.
Peter Davies, Chief Executive of Air Malta said, “Air Malta’s management and employees are
delighted, excited and pleased following this approval. This backing confirms the methodical and
comprehensive process that the Maltese government together with Air Malta have followed in
drafting and replying to all queries and concerns shown by both the European Commission and other interested parties. This endorsement gives us the confidence that our plans and efforts have withstood the thorough scrutiny and tests of the European Commission”.
This approval is subject to the continued monitoring and review of performance by the EU
Commission in-line with the submitted plan. “The Commission expects strict adherence to the
commitments stated in the plan. We have still a lot of work to deliver to remain on the right track”,
added Mr Davies.
“Air Malta wishes to thank the Ministry of Finance and Malta’s Permanent Representation office in
Brussels who have worked very diligently and closely with us to ensure a positive response. I wish also to thank the staff and the unions representing Air Malta employees for showing faith in the process during these times. They have shared with us some of the most trying situations in our professional careers. I am positive that we can continue working together to turnaround this airline and ensure its long term survival and future, for the benefit of the country, its tourism industry, employees and customers”, concluded Mr Davies.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
