Air Malta restructuring

Losses registered by Air Malta in recent years have brought it to the brink of bankruptcy and the government has come up with a rescue plan that has to be executed within parameters set by the European Commission. The four trade unions representing Air Malta employees, disappointed at the failure of the company to become viable following the implementation of austerity measures, have expressed concern at the possibility of redundancies forming part of the restructuring exercise.

Financial losses

During the 2009 financial year Air Malta, a state-owned company, registered a loss of €31 million. Losses for 2010 are projected to amount to €51 million. As these accumulating losses pose a serious threat to the economic viability of the company, Prime Minister Lawrence Gonzi has started to make statements in public speeches about the precarious financial situation of the airline.

These statements alerted the General Workers’ Union (GWU) to the imminence of a restructuring exercise, which it feared would lead to redundancies.

While noting that bad investment decisions by management had contributed to the financial crisis at the company, GWU said it would not accept any impositions on the workers it represents.

GWU Secretary General Tony Zarb held a series of meetings with Air Malta employees and emphasised the fact that the workers had done their part to rescue the company. Talking to them, he referred to the previous collective agreement signed in 2004 with the three other unions, which included the implementation of austerity measures to return the company to viability (MT0407101N).

Rescue plan

As part of the rescue plan, the Maltese government proposed an injection of €100 million into the company’s share-holding capital. This grant was not approved by the European Commission.

Subsequently, the Maltese government made a request to the Commission to authorise a €52 million loan to enable the company to overcome its cash flow problem.

The Commission approved this rescue aid on condition that the Maltese government would submit a first draft of a restructuring plan by the first week of January 2011 and present a final plan within six months.

Meetings between government and unions

In the meantime, Minister of Finance Tonio Fenech announced a series of meetings with unions and with the opposition Labour Party (PL) to discuss the way forward. The government hired a team from the professional services firm Ernst & Young, with experience in restructuring exercises at other national airlines, to advise the company on the restructuring plan. GWU sought the support of the International Transport Workers’ Federation (ITF).

The Labour Party voiced its disapproval of privatisation while Minister Fenech stated that participation from other airlines or private investors would be considered.

Meetings were held between Minister Fenech and GWU and with the other three unions representing various categories of employees; the Malta Airline Pilots Association (ALPA), the Cabin Crew Union (UCC) and the Association of Airline Engineers (AAE). Ernst & Young representatives were present during these meetings. Eventually a steering committee was set up to oversee the restructuring process.

This committee, composed of representatives from government, the Labour Party, Air Malta management and the four trade unions is presided over by the Minister of Finance. Its brief is to discuss proposals made by the experts and agree with management on a first draft of the restructuring plan to be discussed with the European Commission, before the expiry of the six-month deadline set by the Commission. The government said that if the parties could not come to an agreement, it would take responsibility for all decisions taken. The first meeting of the steering committee was held on 26 November 2010.

Commentary

The reduction in the workforce, together with austerity measures introduced in the collective agreement of 2004, were not effective enough to make the company viable. Prime Minister Gonzi stated that in retrospect the government should have been ‘more aggressive’.

Because of its island status, the national airline is indispensable to the Maltese economy and vital to the tourist industry. According to the Maltese government, the causes of the financial crisis facing Air Malta are big rises in fuel prices and competition from low-cost carriers.

Saviour Rizzo, Centre for Labour Studies

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