The Maltese government is set to announce the closure of national airline Air Malta on Monday, following years of cost-cutting measures, claims of mismanagement, and corruption, but is set to launch a budget airline in its place, according to Euractiv.

In 2022, The Shift revealed plans to dissolve Air Malta and transfer its remaining profitable assets to a new airline, similar to what Italy did with Alitalia. The plan includes the redundancy of all Air Malta employees, from pilots to ground handlers and new contracts based on current market conditions, i.e. lower salaries and fewer perks.

In 2012, following two years of talks, Brussels had allowed the government to pump some €130 million of state aid into Air Malta on the condition that a restructuring exercise would be concluded by 2015 and no more government intervention would be necessary.

Despite some restructuring, the company continued to register massive losses, putting it in an unavoidable bankruptcy scenario if no state intervention is granted soon.

Malta had been in negotiations with the EU to save the airline once again, asking for more than €290 million in funds to stop it from going bankrupt.

According to strict EU rules to safeguard competition among European airlines, companies can only provide state aid once every ten years, on a ‘one-time, last-time, principle’.

So, considering the years of mismanagement and changing market conditions, Brussels struck down the deal, and the plan first revealed in 2022 will now go ahead.

In preparation for Monday’s announcement, staff have already been laid off, and restructuring has taken place to reduce further losses. Hundreds of millions of euros of taxpayer funds were used for severance packages, voluntary retirement schemes, and new permanent jobs in other government institutions. The ground handling operations were also sold off.

In a bid to keep the scope of the situation under wraps, the government have not published the state airlines’ accounts since 2018.

Furthermore, in 2023, it was revealed that the former Chairman of Air Malta, David Curmi, was being paid some €774,000 by the government, rather than the company, over three years, when Air Malta was already in dire straits.

This led to scrutiny from Brussels over his contract and its legality due to fears of violating state aid rules. Sources told The Shift that the chairman should be paid by the company, not the government, as such a sum could be considered state aid.

The dissolution of Air Malta and the creation of a new entity is set to cost taxpayers at least €300 million. This comes at a time when national debt is at an all-time high and is also being scrutinised by Brussels over its deficit.

Customers with bookings made for Air Malta flights beyond the day of dissolution will either get a refund for their tickets or be offered the possibility of travelling with the new airline. But not all current routes will be served by the new airline as to get EU approval, the replacement company will have to show it is a separate economic operator and not simply a successor of Air Malta.