Cyprus Mail
Cyprus

CY plan sent to Brussels for approval

By Stefanos Evripidou

NATIONAL CARRIER Cyprus Airways (CY) submitted its revised restructuring plan to the European Commission yesterday, in hope that Brussels would give the thumbs up to a rescue plan that requires further state assistance to keep the ailing airline afloat.

CY board chairman Antonis Antoniou said yesterday that the Commission would examine the viability of the plan, request some clarifications from the airline and probably give its response by the end of October.

“The first thing they’ll examine is whether the plan is viable, if its content can make the airline viable for the next five years.

“Second, they will look at the allegation of state aid,” he said, in reference to the Commission launching an investigation into the charge that the government unlawfully provided state aid to the airline.

“We will try to convince the EU with many arguments that this aid was rescue assistance, not state aid, which is permitted in certain circumstances…We have to be ready for every outcome, because Cyprus cannot be deprived of its national carrier,” said Antoniou.

The CY chairman also highlighted the “huge cuts and savings” undertaken by the airline following a period of wasteful spending.

“Unfortunately, I must say, there was a lot of waste and we can save a lot of money.”

If Brussels gives the go-ahead, CY will be ready to implement the restructuring plan in 2014, which according to Antoniou, would guarantee the airline’s survival.

In the meantime, CY has already begun implementation of its redundancy scheme which will see 490 staff made redundant, from the over 1,000 employees on the payroll at the start of the year.

Earlier this month, the government agreed to provide an injection of much-needed liquidity to the airline, agreeing to pay €5.6m to the national carrier over the course of the year.
The sum represents the amount that CY is expected to lose in 2013 from extra fuel costs as a result of the ban on Cypriot traffic over Turkish airspace.

The practice of compensating the state-owned airline for the Turkish airspace ban was started in 2011 by the previous government which secured EU approval first to ensure there was no violation of the EU’s state aid rules.

However, compensation is usually given after calculating the losses for the previous year. This time, the government and airline are estimating the cost of the ban for 2013 and distributing the money in the same year.

Meanwhile, in an article published this month in the Cyprus Mail, EU Commission Vice-president responsible for Competition Joaquin Almunia argued that the liberalisation of air transport by the EU was “one of the success stories of European integration”, resulting in the expansion of the industry, with 822 million passengers transported each year and a network of over 460 airports throughout Europe.

Through the EU’s competition policy, the Commission has been able to ensure that state aid granted to smaller flag carriers in serious financial difficulty is linked to the necessary restructuring to make them return to viability without need for further taxpayer money.

“Such aid is only possible once every ten years, to avoid that companies are kept indefinitely on subsidies,” he said.

Examples of approved restructuring plans are those prepared for Czech Airlines and Air Malta.

“By contrast the Hungarian carrier Malév, whose viability could not be restored, eventually had to exit the market. Currently, we are looking at the situation of Cyprus Airways, as well as others such as the Polish airline LOT, the Scandinavian SAS, Air Baltic (of Latvia) and Adria Airways (of Slovenia),” said Almunia.

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