The government of Malta asked the European Commission permission to allocate €290 million into Air Malta and save the ailing flag carrier.
The European Commission received Malta’s request to approve its state aid financing plan dedicated to helping Air Malta turn into a profit-making and sustainable airline within the next 5 years. To lessen Air Malta losses which were exponentially worsened by the ongoing COVID-19 pandemic, when the airline has been losing more than €170,000 daily, the government aims to pump up to €290 million into the airline.
To improve its balance sheet amid the crisis, Air Malta has already laid off dozens of employees as well as cut salaries for those who saved their position in the company. In the proposed plan to the European Commission, the air carrier expects to further reduce payroll costs and drop operations on non-profitable or little-profit routes. The airline also aims to re-focus its business to more promising destinations including the UK, Germany, Italy, and France.
Air Malta had been facing financial difficulties even before the pandemic. In 2010, the European Commission gave a green light for the country to grant the air carrier a state-backed loan of €52 million to keep the company flying while it had been submitting a restructuring plan. At the time, the state support to Air Malta was considered as a crucial measure to save the airline as its sudden disappearance from the market could lead to serious disturbances in the country’s economy.
The €52 million loan was given on the condition that Malta’s government should follow a rigorous airline’s restructuring plan, but it is not clear whether Air Malta has stuck with the plan without shortcomings.
To ensure a level playing field for all players in the market, the state members of the European Union were forbidden to provide any financial support to private or state-owned companies. However, in the wake of the economic impact to the aviation industry caused by the virus, the Commission has temporarily eased the trade-policy restrictions and allowed governments to financially support its air carriers.
Currently, the European Commission has approved governmental aid for Air France, Aegean Airlines (32A), Alitalia, and Brussels Airlines.