The Maltese government has advanced backup plans to dissolve Air Malta (KM, Malta Int'l) at the end of October 2022 and to transfer its few remaining profitable assets to a new, as yet unnamed, state-owned airline, reports The Shift independent news platform.

Air Malta declined to comment on the report. "I suggest that you only follow official communications issued by either the company or its shareholder, " Air Malta Executive Chairman David G. Curmi informed ch-aviation on inquiry.

This comes amidst reported doubts in government that the European Commission will approve Malta’s request for a EUR290 million euros (USD297 million) state-funded rescue package for Air Malta. The backup plan would be actioned should Brussels not greenlight the state aid, resulting in the redundancy of the entire Air Malta workforce. New contracts would be drawn up based on current market conditions for all those re-hired by the new state-owned airline.

The plan - reportedly already approved by Prime Minster Robert Abela and Finance Minister Clyde Caruana – aims to achieve a smooth transition from Air Malta to a new airline, less burdened by staff and debts.

Suggestions are made that sister carrier Malta MedAir (MT, Malta Int'l) may be used as a vehicle for the transition, but this has not yet been finalised. The wholly-owned government company currently has a fleet of three A320-200Ns, and lucrative London Gatwick and London Heathrow slots, which it acquired from Air Malta.

Passengers with bookings on Air Malta would be offered refunds or tickets on the new airline. The report said that not all current routes would be served by the new entity, as the new airline would need to be a separate economic operator and not a successor of Air Malta, to get EC approval.

The government is currently seeking the go-ahead from unions so it can postpone a pre-electoral promise to almost 600 Air Malta employees of a guaranteed government job. Malta Today reported the Air Malta employees were due to transfer to other public sector jobs on August 12 but would now be kept on until the end of December 2022 to assist with the increased travel demand.

Malta has been negotiating with the EC since April 2021 for EUR290 million state aid for Air Malta as part of a five-year financing plan to turn around the national carrier, but Brussels has asked for a more realistic amount.

In January 2022, Finance Minister Clyde Caruana announced a restructuring plan that would see more than half of the workforce transferred into other government jobs, the closure of ground handling and cargo operations, and abandoning its long-haul ambitions.

The EC last granted EUR130 million (USD133 million) in state aid to Air Malta in January 2012.

The state carrier has reported operating losses of EUR258 million (USD264 million) since 2005, with a worsening financial situation since COVID-19. In January 2022, it reportedly racked up losses of EUR170,000 (USD193,000) daily.