By Poly Pantelides
THE COMMUNICATIONS minister has said the government will not give up on Cyprus Airways (CY), the loss-making national carrier whose latest restructuring plan is being considered by the European Commission.
Tasos Mitsopoulos said the government reaffirmed this week their commitment to work alongside the CY board to convince the European Commission that a restructuring proposal is viable.
The aim is to fight it out to “convince that for the first time there is a serious and complete restructuring plan which is being implemented with absolute consistence aiming to place the company on a recovery plan and, why not, also profit making,” Mitsopoulos said.
The European Commission is expected to decide within the next few months whether the plan is viable but also whether the government has violated EU state aid rules by previously providing millions of euros to keep the airline afloat.
Mitsopoulos said a meeting was held on the president’s request at the finance ministry with the CY chairman, legal consultants, and the ministers of finance, labour, and commerce. The government has a controlling stake in CY.
“It’s not going to be an easy fight because unfortunately we have lost our credibility many years ago,” Mitsopoulos said.
“You know very well that many a plan has been submitted to the European Commission and these people no longer know what to believe.”
CY posted losses of €55.8m for 2012, doubling its 2011 losses of €23.9m.
In March the European Commission said it was looking into whether Cyprus authorities were acting within EU law when they gave CY over €100 million, via a €73million rescue loan in December 2012, and a €31.3 million contribution to a capital increase in early 2013.
Authorities were told they could give CY no more state aid without prior approval.
The latest rescue plan provides for cutting the CY fleet from eleven aircraft to six A320 planes, one of which will be used as back-up, and calls for salary cuts and laying off 490 of the 1,040 people employed by the carrier.
Those who stay will reportedly have to accept a 10 per cent wage cut across the board followed by a wage freeze until 2018. This, and a number of other measures, might limit losses and aim to turn things about form 2015 onwards. This would reportedly cost about €54 million, half of which expected to come from private investment.
But the details are still sketchy and CY already receives millions in compensation from the government for a ban on flights over Turkish airspace. That compensation does have the approval of the European Commission, and the government has disbursed about €5 million in compensation early this year to help CY with its short-term cash needs.
In August, CY sold two properties on Gladstone Street and Byron Avenue in Nicosia for a total of €3.1 million.
In his statements to the press on Friday, Mitsopoulos said he was optimistic and claimed CY has started reining in losses.
He said the government got an extended deadline of some months to think out a plan and should the European Commission come back with a ‘no’ then they would move forward their plan B.
Plan B, recently unveiled by the CY board, sees the carrier’s wholly owned subsidiary, a tour operating company called Cyprair Tours Limited applying for an air carrier permit and effectively replacing CY by getting CY’s airport slot and absorbing CY’s staff who would be laid off and then rehired.