By Constantinos Psillides
A FORMER general manager at Cyprus Airways (CY) used a company plane to transport his son’s car to another country at the airline’s – and taxpayer’s expense – deputies heard yesterday during a meeting of the ad hoc committee into the national carrier’s demise.
The incident was just one of several cases of mismanagement that were related to MPs by CY’s former legal adviser and its accountants.
Mismanagement, ineptitude and too-close ties with political parties and the government, led to CY’s downfall, according to the company’s legal advisor Polys Polyviou, who appeared before the ad hoc parliamentary committee. The committee is examining company documents dating back more than 30 years.
“Cyprus Airways was a miniature version of Cypriot society, and as such had its [society’s] positive and negative traits,” he said.
Polyviou spoke of the company’s inner workings and how it was continually exploited by managers, and politicians for political gain and profit.
KPMG’s managing director Andreas Christofides was also present and gave a shocking account of what took place in the company in the 1980s.
Christofides made specific mention to the term in office of one of the company’s former managers, Evdokios Savva. KPMG was appointed as an auditing firm to look into the company’s finances following Savva’s resignation in July 1981.
Savva, deputies heard, kept a secret account in a London bank where “politically exposed persons” from the UK wired money to pay for their tickets. The money never made it to the company, according to Christofides, but was instead deposited to Savva’s account.
Once the scandal was revealed, an arrest warrant for Savva was issued but he fled the country to the United States were it is believed that he currently resides.
The KPMG managing director spoke of other incidents of corruption and gross mismanagement, including another when Savva ordered a plane to be uses to transport his son’s car. Christofides also mentioned money that disappeared from the employee welfare fund that was used to pay overtime for the manager’s secretaries. In another incident changes to a CY building at the old Larnaca airport had cost 60 per cent more than originally budgeted.
“There were truly some terrible things happening in the company,” noted Christofides.
Polyviou shed some light on the subsequent management team, when Stavros Galatariotis took over.
By that point the government at the time, given what had gone on under Savva, decided to keep a tighter rein on the airline.
Polyviou said then President Spyros Kyprianou kept a close eye on the airline and that Galatariotis routinely “knocked on Kyprianou’s door to submit his requests.”
Galatariotis however, probably to encourage oversight, upgraded political party involvement in decision making by requesting that representatives from all parties were on the board.
“The signs were there and can be seen in the very close cooperation of the state and the company. No government has ever let Cyprus Airways operate based purely on company law,” Polyviou said.
He said the company did not bring in experts to advise them on major policy decisions but instead relied on the government and the political parties.
The resulting lack of proper expertise, according to Polyviou, was the “tragic” decision to buy the 20 per cent share British Airways had in Cyprus Airways in 1983, and expanding the company fleet.
Polyviou said Galatariotis’ reasoning was that if a representative of a rival company sat on the board he would be privy to inside information. The legal advisor said such a scenario wasn’t possible, since anyone sitting at board meetings was legally bound by confidentiality.
“Driving out British Airways deprived the company of a major strategic investor,” he argued.
After buying BA out, the CY board decided to expand the company fleet by buying from Airbus, a decision Polyviou also described as tragic. He suggested to the committee that they call upon then Galatariotis advisor at the time, a man named Rigas Doganis, to shed more light into why the company decided to buy the planes.
Polyviou also suggested that they look into Eurocypria, a charter subsidiary of Cyprus Airways that went bankrupt in 2010.
Polyviou said that when the EU looked into the inner working of Eurocypria they found evidence of mismanagement, such as overcompensation for retirement schemes and bloated staff bonuses.
“You are trying to save Eurocypria when you should be concerned with the fact that in two years time you will be called upon to prevent the shutdown of Cyprus Airways,” the EU had told CY executives in 2010, according to Polyviou, when the state was requesting permission to approve a state aid package that would keep the two companies afloat.
Polyviou also talked of Hellas Jet, also set up by CY. Hellas Jet was founded in 2003 to carry out scheduled flights from Athens airport but suffered heavy losses and was forced to shut down in 2005. CY sold Hellas Jet in 2006.
The former legal advisor to the company said Hellas Jet faced numerous problems from day one. He said he had to fly to Athens on the second day of operations to prevent the company offices being auctioned off.
The EU commission wasn’t the only one who saw the end of the company coming. During a cabinet meeting in 2007, former president Tassos Papadoulos had remarked that the company was no longer viable and that the path it was on would lead to bankruptcy. The President was commenting on the 2007 restructuring plan that was submitted by the state to the EU commission. According to Polyviou, Papadopoulos had said then that the plan was CY’s last chance.
Cyprus Airways was grounded in January, after the EU Commission issued a ruling ordering the company to return some €66 million it had received in state aid in 2012.