Court report shows Air Malta copied Alitalia’s mistakes with same consultants

The failed consultants have been retained by the Maltese government to 'aid' the transition to the new airline.

 

Air Malta, the beleaguered national airline set to fold on 31 March, followed in the footsteps of failed Italian national airline Alitalia in the run-up to its demise, taking near-identical operational decisions and employing the same consultants directly involved in the Italian airline’s demise.

Documents obtained by The Shift from an Italian court indictment of Alitalia SAI’s management detail the decisions, “unlawful conduct, manipulation of data and contracts,” and the “dominating influences” behind the Italian airline’s insolvency.

The report reveals striking similarities to decisions repeated by Air Malta and raises questions on why those involved in Alitalia’s insolvency were then hired by the Maltese national airline. These consultants were retained in the formation of the new airline.

Alitalia SAI’s management, which includes James Hogan and James Rigney, owners of Air Malta consultants Knighthood Global, was indicted in late 2022 with a raft of charges which prosecutors say had a hand in the Italian airline’s collapse between 2015 and 2018.

Hogan and Rigney were, at the time, CEO and CFO of Etihad Airways, a United Arab Emirates state airline with a 49% share in Alitalia SAI, the company set up in late 2014 to take over from the failed Alitalia CAI.

In 2016, former Tourism Minister Edward Zammit Lewis had announced Etihad (at the time still led by Hogan), through Alitalia, would also buy a 49% share in Air Malta and signed a memorandum of understanding with the Emirati carrier. The prospective deal was the first of several striking similarities in managing the two airlines.

The report compiled by Civitavecchia court experts confirmed how “Etihad [under Hogan’s leadership], despite being the minority shareholder of Alitalia SAI, had continuously and significantly exercised a strong influence on its management, determining its most relevant choices.”

Despite Alitalia SAI’s failure, Hogan and Rigney, through their consultancy Knighthood Global, were hired by the Maltese government to ‘save’ Air Malta.

After all hope for the 50-year-old national airline was lost, Knighthood Global was rehired, amid accusations of collusion, by the Maltese government to consult on the transition to a new national flag carrier, KM Malta Airlines.

Air Malta follows Alitalia’s missteps with same consultants

The 500-page report examined Alitalia’s financial and corporate documents, whether its books were properly kept, whether “extraneous” charges and costs contributed to its collapse, and investigated the main corporate transactions carried out by the failed airline between late 2014 and 2018.

The report noted how, despite Alitalia’s de jure Italian governance, Etihad “was in a position to exercise, and has exercised, considerable influence and control.”

Among other key decisions, Etihad developed the entirety of Alitalia’s business strategy, with the report noting Hogan’s “active role” in the process.

Alitalia SAI’s structure, between late 2014 and 2018

From 2015 to 2016, the airline could not keep up with Etihad’s “unrealistic” business plan. Nevertheless, under the Emirati airline’s direction, Alitalia claimed its “performance was fully in line with the objectives set by the business plan.”

In 2020, Economy Minister Silvio Schembri claimed that Air Malta, while “not out of the woods,” was “on track” to meet the restructuring plan targets.

Alitalia could claim profitability as it sold off assets to align it with projected earnings. These included selling Alitalia’s loyalty programme and London Heathrow slots to Etihad in 2015 and 2016, giving a one-time artificial boost to its earnings. Additionally, Alitalia sold off aeroplanes to Etihad equity partner AirBerlin, in a further bid to remain profitable.

In a strikingly similar move, in 2018, Air Malta sold off its Gatwick and Heathrow slots to government airline Malta Med Air. The government set up the airline solely to facilitate the creative accounting exercise, which allowed former Tourism Minister Konrad Mizzi to brag about Air Malta’s €1.2 million operating profit for the year, the first profit in 20 years.

Air Malta’s livery, name, and branding were also sold to another government company, IP Holding Ltd.

The court report details several other missteps in Alitalia SAI’s management during its part-ownership by Etihad. These included implementing a costly and underperforming new passenger booking management system by SabreSonic and questionable expenses, at times called for by Hogan himself, on accommodation and lunches, which raised suspicion considering they were incurred “at times of a severe liquidity crisis.”

From Etihad to Knighthood Global

In 2017, following the readily apparent failure of Etihad’s investments in both Air Berlin and Alitalia, Hogan was forced to resign from his chief executive position at the Emirati carrier. His resignation was joined by former Etihad CFO James Rigney.

Hogan and Rigney went on to create Knighthood Global Ltd, the UAE-based aviation consultancy that the Maltese government promptly hired ‘to save Air Malta’. Following Knighthood’s failure to save the airline, the consultancy was rehired at €200,000 per month to advise on the transition to a new airline.

While Knighthood’s latest consultancy contract has been made public, the government is delaying The Shift’s freedom of information requests to obtain all contracts between the Maltese government, Air Malta and Knighthood Global, claiming the request “necessitates a search through a large number of documents”.

The Daphne Caruana Galizia Foundation and OCCRP contributed research, data, and other assistance to this article.

                           

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James
James
1 month ago

Another set of mouths feeding from the bountiful troughs provided by the taxpayers.

Are there no limits to which the friends of friends will stoop providing they get a share of the cake?

Mark Sant (Misha)
Mark Sant (Misha)
1 month ago

So Airmalta chose as consultants the same individuals who were behind the bankruptcy of Alitalia and Berlin Air. Strike 1. Then they went on to pay exorbitant fees to these consultants to save Airmalta from bankruptcy. Airmalta unsurprisingly still went bankrupt. Strike 2. Now that the business of Malta is being transferred to KM Malta Ltd., the dying airline took the wise decision to engage the same consultants that failed to save it from bankruptcy to advise Airmalta on such transfer of business. Strike 3.

Somebody is making truckloads of money out of these transactions.

Bepi Zammit
Bepi Zammit
1 month ago

The Business Class conditions on the new airline are inferior than the current ones on Air Malta.

Joseph Ciantar
Joseph Ciantar
1 month ago

Where is the opposition?????

Breiting lill- Ministru
Breiting lill- Ministru
1 month ago

What about the generous payouts of 1.5 Million to be paid out to pilots as compensation for their early retirement schemes ?

steve
steve
1 month ago

These things only happen in countries where the majority is way too uneducated and the minority who have the mental abilities to stop this are in come!

Paul Berman
Paul Berman
1 month ago

Is there anyone with qualifications in this government. Its impressive how stupid these people running our country are.

Emmanuel
Emmanuel
1 month ago

The appointment of former Etihad advisers as consultants to the new State airline does not augur well for the airline. Maybe this is a ploy for shifting inexplicable bad debts to the local taxpayer.

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