Air Malta to close in March, new airline to replace it, PM says

VALLETTA, Oct 2 (Reuters) - Malta's government will shut down loss-making airline Air Malta in March next year and immediately replace it with another flag carrier after the European Union refused to allow a fresh injection of state aid, Prime Minister Robert Abela said on Monday.

The new airline will retain the Air Malta name and aircraft, Abela told a press conference.

He said the transition would be largely seamless and services would not be affected although unprofitable routes would be discontinued. Air Malta operated to 37 destinations in 2019. The new airline will operate to 17.

Booked Air Malta passengers will be offered a refund or rebooking with the new airline. Air Malta workers will be re-employed by the new airline.

The new arrangement was agreed with the European Union and is broadly similar to what the EU agreed with the Italian government a few years ago when it closed down Alitalia and started a new airline, ITA.

Abela said the Malta government had persuaded the EU that it was essential for a small island state such as Malta to have its own airline.

The key principle behind the new move was to ensure a sustainable airline that did not rely on government support beyond fresh capitalisation.

He said the airline will continue to operate Air Malta’s current mix of eight leased Airbus A320 aircraft.

Finance Minister Clyde Caruana said that while the government would remain the majority shareholder in Air Malta, it planned to issue shares or reach a strategic partnership with some other airline.

"That will be good to ensure good governance, but control will be retained by the government," he said.

He expects the airline to become more efficient and return to profit in two years.

Air Malta was formed in 1973 and started services in 1974, flying to several European and North African countries.

It faced tough competition from leaner, more efficient low-cost airlines and the European Commission authorised state aid in 2012 after losses mounted.

A stuttering recovery eventually failed and the government asked the commission to authorise a fresh injection of almost 300 million euros ($315 million) in 2021 as the airline suffered a fresh blow when air travel was severely curtailed by the COVID crisis.

While the talks with the EU were underway, Air Malta slashed its workforce by more than half to just over 400, with the airline workers offered new jobs with the government or generous golden handshakes.

A gradual process to eliminate unprofitable routes was launched and the airline also discontinued unprofitable ground services and moved to cheaper headquarters.

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