It appears that Malta's state-owned, financially troubled airline is running on borrowed time. Various sources are reporting plans have already been drawn up and approved that will see Air Malta dissolved and re-birthed in the fashion of Italy's ITA Airways.

Are the plans in place to end Air Malta?

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Without a bailout, it looks like Air Malta is about to take its flight. Photo: Air Malta

Currently, the government is awaiting a decision from the European Commission (EC) on a proposed bailout of Air Malta. To safeguard competition among airlines, EC rules strictly limit state aid to once every ten years. Last year the government asked for permission to inject €290 million ($297 million) into Air Malta, but that was refused, with the EC asking for a "more realistic figure." In 2012 the EC had allowed the government to grant Air Malta €130 million ($133 million) on the condition no more government intervention would be necessary. Apparently, negotiations between the two are ongoing, but reports suggest they will fail.

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Based in Malta, online investigative news platform, The Shift reported further developments on Thursday. The Shift said that the government had established advanced plans to dissolve Air Malta later this year and transfer its few remaining assets to a new airline. Under this plan, all of the airline's employees would be made redundant, and heavily-reduced contracts drawn up for those offered jobs by the new airline. The Shift adds that Malta's prime minister Robert Abela and finance minister Clyde Caruana have already approved the plan, aiming to set up the new airline by the end of October.

Air Malta has a fleet of three Airbus A320-200 and four A320neos, which it operates from Luqa Malta International Airport (MLA). It services around 20 European destinations in 11 countries, including London, Berlin, Rome, Paris, Madrid, Amsterdam and Zurich. Reports say that the government is considering using its other airline, Malta MedAir, as the vehicle for the transition. Malta MedAir, which offers wet lease and charter services, already has an Air Operator Certificate and three Airbus A32-200 aircraft.

A320neo Air Malta on lease from Gecas - MSN10106 - Delivery (1)
Air Malta A320s might be sporting a new livery within months if plans to dissolve the airline go ahead. Photo: Airbus

Employees that are too expensive to redeploy

In January, the Maltese government announced a scheme to cut the airline's workforce in half through a voluntary employment transfer scheme. That scheme involved transferring eligible employees to other government departments as part of restructuring the airline. That plan failed because there were no positions that matched their guaranteed salaries. Workers who have applied for the severance package have been offered between €40,000 ($41,200) and €300,000 ($309,000), which could cost the country around €50 million ($515 million). MaltaToday reports that in a stinging rebuke, Malta's Chamber of Commerce 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."

Additional complications

The employment situation is further complicated by a pre-election promise of a guaranteed job for life for the airline workers, which the government reneged on last week. The Shift says the government aims to achieve a smooth transfer from Air Malta to the new airline, with much less personnel and debts. Staff will be given redundancy notices, with some offered positions at the new airline "based on the same conditions as those of low-cost carriers."

Customers will either get a refund for their tickets or be offered travel with the new airline, although not all of the current Air Malta routes will be operated. To obtain EC approval, the new airline must be a completely different identity to Air Malta, not a successor.

Is this the way to run an airline?

Sources: MaltaToday, The Shift