By Constantinos Psillides
The government has officially put Cyprus Airways (CY) up for sale with advertisements in the local press on Wednesday inviting investors to submit expressions of interest to buy the shares or any of the company’s assets.
“We welcome the government’s decision. The company’s viability has been secured up to 2015 and we now move on with a transparent process to invite interest from potential investors,” said CY chairman Tony Antoniou, who explained that the government owns 93,67 per cent of the airline’s shares, with the rest owned by private shareholders.
“This way the government proves to the EU and the taxpayer that they are willing to keep CY alive. To keep a national air carrier that will be handed over to an investor but still have Cyprus as its base of operations,” said Antoniou, explaining that the government set as a term for investors that the company keeps flying from Cyprus.
The ads stressed that the expression of interest related to the submission of a non-binding intention to investigate the possibility of submitting a binding offer.
Antoniou said after a meeting with Troika officials, that the government distinguishes between selling-off the company’s assets and its shares, admitting that there aren’t many assets left to sell. He explained that what CY is selling, essentially, is the company’s goodwill, its experienced personnel and a network operating to major European destinations.
“Not many assets left” is actually an understatement. The only asset CY has left to sell is a 23-year old aircraft – an Airbus 320 – that is not active and can only be used as a back-up. Every other asset has been sold off. The airline rents an office building in Nicosia from the Church to house its headquarters and call centre, while the building housing the Larnaca offices belongs to Hermes Airport Ltd.
CY gradually sold all of its other assets, including three timeslots at London’s Heathrow airport – the first was sold three years ago for €22m, the second in March for €6.3m to Lebanon’s Middle East Airlines and the third only last month to American Airlines for €22.9m – as well as head offices in Nicosia and Athens.
The money raised from the timeslots sale will be used to compensate employees in the event the company closes down or to fund a restructuring plan, according to Antoniou.
CY also has to deal with a more immediate threat to its viability, since the company might go under if ordered by the European Commission to pay back €103.3m received in state aid since 2012.
The Commission is now looking into whether the state violated EU competition laws and is expected to reach a decision by October.
Antoniou said that the EU’s executive body should take more time, adding that it would be inappropriate for them to take a decision “at a point where CY faces positive developments.”
Finance minister Harris Georgiades told the members of the House Finance committee on July 5 that a negative decision by the European Commission is a real possibility.
The Finance minister wasn’t optimistic on CY attracting a strategic investor, having told MPs that “nobody would be interested in a company on the verge of bankruptcy.”
The government’s initiative, though, found an ally in the most of unlikely of places, as the powerful pilots’ union (PASYPI) welcomed the sale of company shares to new investors.
PASYPI has regularly clashed with the CY board on every decision, reaching the point where the pilots sued the board protesting a cost-cutting decision to slash the employer’s contribution to their provident fund from 8.0 to 1.0 per cent for 15 months.
PASYPI was also highly critical of the decision to sell the Heathrow time slots, so to come out in favour of a decision made by the company was unexpected.
“This is a step in the right direction. It is our wish also that a strategic investor steps in and takes over the company. We want someone with proper managing skills to take the reins of CY,” PASYPI president Petros Souppouris told the Cyprus Mail, adding that he remains cautiously optimistic about CY’s future.
Souppouris also said that more than half the pilots have left the company over the last 18 months, including the head of Flight Operations.
“My colleagues left in search of better working conditions and higher salaries. There were 135 of us a year and a half ago and now only 65 are left,” he said, pointing out that other airlines – including Air Arabia, Korean Air and Qatar Airways – visited the island over the past year in search of experienced pilots.
Asked about PASYPI’s about-turn to support the CY board’s decisions, since they have been so critical in the past, Souppouris said that they differentiate between the government and the board.
“We welcomed this decision because it’s a decision made by the government. It’s a decision made by the ministers of Communications and Finance, who have been tackling this issue admirably. They forced the board into signing-off on selling the company’s shares and also requested that experts join the board and take over operations on a short-term basis. We still strongly disagree with the way the board is running CY, but we welcome the ministers’ involvement,” explained the head of PASYPI.
Asked by reporters what will happen to CY employees should a strategic investor step in, Antoniou said that the board has proven time and time again that it respects its employees and will do its best to secure their future.
“If it is something that is often hurled at us is that we maintain more employees than necessary. We do so because we realise that people need to keep their jobs. Despite the company’s dire financial situation, we haven’t touched the collective agreements and we are working towards keeping as many jobs as possible,” said Antoniou.
The head of the CY board noted that in the event that a strategic investor is found, the company will probably grow and more jobs will be created.
The deadline for the submission is July 23.