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Maltese flag carrier Air Malta folds, to be replaced by new airline

VALLETTA (Reuters) - Air Malta was set to cease operations on Saturday to make way for another government-owned airline after European Union regulators blocked another public bailout for the national flag carrier, the airline and the Maltese government said.

Air Malta will fold 50 years after its first flight.

It is set to be succeeded on Sunday by a new state-owned carrier, called KM Malta Airlines, which will take over eight Airbus A320 aircraft which Air Malta had operated on lease.

Air Malta operated a network of flights to Europe, North Africa and the Middle East, but wilted under government interference which yielded a bloated workforce and an unsustainable wage bill.

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Finance Minister Clyde Caruana said in October that Air Malta made losses for 20 years and at one time employed 1,400 people to operate nine aircraft. The new airline will operate eight aircraft with fewer than 400 staffers, he added.

(Reporting by Christopher Scicluna, editing by Alvise Armellini and Giles Elgood)