Finance Minister Clyde Caruana’s handling of Air Malta, with an announcement of the sacking of employees, proves reports that the last audited accounts for the airline presented in 2019 were nothing more than a public relations exercise.
In March 2019, during the presentation of the company’s accounts for the year ending 2018, then Tourism Minister Konrad Mizzi had announced that, for the first time in 20 years, the airline, under his stewardship, had made a profit.
Flanked by then Air Malta chairman and former Labour minister Charles Mangion, as well as auditors from PriceWaterhouse Coopers who signed the audited accounts, Mizzi had announced an operating profit of €1.2 million for the end of the 2018 financial year.
He had also reassured Air Malta employees that now that he had “managed” to turn the page, they were going to have a bright future, with ‘big’ plans such as flying to New York and India.
Yet, the Finance Minister’s declarations last week on the axing of Air Malta employees – financed by taxpayers at some €15 million a year – confirmed press reports that the government’s declaration that the airline had made profits in 2018 was untrue.
Promotional material by the government on traditional and social media had dominated the debate, with Konrad Mizzi portrayed as Air Malta’s saviour. Yet observers had immediately indicated that the accounts presented were an exercise in creative accounting.
The big deceit
While the accounts for 2018 state that the airline made a €1.2 million operating profit, the assessment did not disclose that were it not for the one-time-sale of the Gatwick and Heathrow slots to the government, the airline would have made a €17 million loss.
In addition, expenses that should have been inserted in the 2018 accounts were reported the following year so the government could present a ‘positive’ picture for the national airline.
As an example, while the company said it was handling more flights than the previous year, the fuel bill in the 2018 accounts was less than in 2017, while using the same type of aircraft.
In 2017, Konrad Mizzi, aided by his lawyers, former president George Abela and his son Robert, now prime minister, had made a secret agreement with some 350 Air Malta ground handling workers to be hived off from the airline onto a government company.
It has now resulted that this exercise was never executed, and all the workers remained on Air Malta’s books.
Mizzi, again through the Abela lawyers, had also inserted an unheard-of clause on the collective agreement of pilots giving them a “guaranteed government job” with the same pay they had if made redundant by the airline.
In 2020, the government led by Robert Abela sacked some 60 pilots. However, after a court challenge, they had to be put back on taxpayer-funded jobs, because of the irregular clause signed-off by Mizzi and the Abelas.
More than €200 million since 2011
In 2011, the government had made an agreement with the EU to pump some €200 million over five years and save the airline from its demise.
Hundreds of workers were given generous early retirement schemes and a five-year restructuring plan was put into place.
By 2013, when Labour was returned to power, then Air Malta chairman Ray Fenech had confirmed that the airline was on track with the plan, and this was also confirmed in the accounts.
However, following the appointment of Minister Edward Zammit Lewis at the airline’s helm and the replacement of Fenech with Coca-Cola general manager Maria Micallef, the airline veered significantly from the plan’s execution, with the government shrinking the airline operations attempting to try to find a strategic partner.
Talks to sell a majority shareholding to Alitalia – now also closed – failed spectacularly, with Zammit Lewis replaced by Konrad Mizzi and chairperson Micallef showed the door.
While hundreds of additional employees were in the meantime put on the airline’s books, particularly before the 2017 elections, Mizzi embarked on a diametrically opposite direction, expanding the airline, and introducing new routes which continued to put the airline’s finances in a desperate situation.
Air Malta’s accounts for 2019, 2020 and 2021 remain outstanding despite the company’s obligation to publish them under the Companies Act. The Finance Minister has refused to disclose the accounts through a Freedom of Information request, citing “commercial sensitivity” despite every administration publishing the national airline’s annual accounts up until that point.