Cyprus Mail

‘No more money for ailing airline’

By Constantinos Psillides

THE government is doing everything in its power to save Cyprus Airways (CY) but it won’t give the ailing carrier any more money, Finance Minister Harris Georgiades said yesterday.

Speaking at a news conference, the minister was responding to accusations by CY employees who have blamed the government for driving the company to the ground.

“We will not spend more money in supporting Cyprus Airways. The era of thoughtlessly throwing money at the carrier has passed,” said the minister, shifting the blame to the previous administration and saying it had behaved “recklessly and irresponsibly”.

Georgiades pointed out that almost all state aid given to CY- for which the company is now under scrutiny by the European Commission’s Directorate General for Competition – took place under the two previous administrations.

According to finance ministry data around €16 million was given to CY in 2007, which the European Commission green-lighted under the provision that this was a one-off and on condition the company come up with a viable restructuring plan.

Following that, between 2011 and 2013, a total of €118 million was dished out to the ailing carrier. “The previous administration continued the policy of handing money out without a specific plan in mind, which led to this situation,” said Georgiades. Tens of millions were handed over and now the current government has been left to carry the can in front of the Commission, he said.

“It beggars belief that the people who made these decisions are now blaming others for their mistakes,” said Georgiades.

The European Commission is looking into whether Cyprus violated trade rules by helping the ailing carrier. If found guilty, the company will be forced to return an estimated €100 million to the state, which will lead CY to bankruptcy. The minister said the EC decision would be key to the future of the airline and added that the situation was “difficult”.

Georgiades also responded to comments by PEO, the union branch of opposition AKEL. A union representative told the press on Wednesday that the government was moving at a snail’s pace when it came to saving CY so that the EC could shut down the company and the government would not have to bear the political cost of doing so itself.

The minister said the time to save CY was back in 2004, when the company reported a €110 million surplus. “That would have been an ideal time to look for a strategic investor but instead the previous administration failed to do so,” he said.

Georgiades also responded to criticism that the current government sold off the company bit by bit to lay the ground for its eventual sale to a strategic investor. The criticism mainly centres on the selling of the company’s timeslots at London Heathrow.

“The previous administration was the one who sold the company’s assets,” responded Georgiades. “The company sold almost €90 million worth of assets from 2010 to 2013, including four of the five aircraft it owned outright. That is nothing compared to the sale of the timeslots, which by the way, the company stood to lose anyway if it went bankrupt,” he added. The timeslots were sold for around €30 million.

The state is currently in the process of finding a strategic investor for CY. Reports suggested that out of the nine companies that expressed interest in CY, the state decided to invite only two to submit a business plan; low-cost carrier Ryanair and Greece’s scheduled carrier Aegean Airlines. The government is due to meet representatives of both airlines today.

Employees at CY consider these companies “hostile” maintaining that they are only interested in acquiring the Cyprus Airways brand name and in taking advantage of the bilateral agreements that Cyprus has signed with countries in the Middle East, which stipulate that only a single airline based on the island can fly to those destinations. The employees fear that once these companies take over CY they will let the majority of the staff go or proceed with major pay cuts.

Georgiades assured the public that the government would do everything in its power to save Cyprus Airways, provide job security for the staff and maintain the island’s connection to the rest of the world.

The minister also responded to the accusations laid against him by the pilots union PASYPI, saying that pilots in CY have much higher wages than any of the pilots working for rival airlines, and on top of that, they had taken legal measures to have those pay cuts returned to them, he added.

While Georgiades was critical of the previous administration and high-paid employees, not everyone in the government camp shared his views.

Aviation adviser to President Nicos Anastasiades, Christos Petrou, speaking on CyBC radio yesterday morning, heavily criticised the current government.

Petrou said its attempt at securing a strategic investor was both “highly unorthodox and amateurish.”

The presidential adviser pointed said there was nothing left of CY to sell, other than its bilateral agreements with other countries. He said the political parties were to blame for running the company to the ground by appointing managers and board members who didn’t have a clue what they were doing. “CY has had the same management for ten years straight. Ten years of financial ruin and yet no one is suggesting that they be fired for doing a bad job,” said Petrou.

Petrou was also critical of the way the government dealt with the European Commission. “We paid a logistics firm with no background in aviation half a million euros for a restructuring plan that was immediately rejected by the Commission. Then we paid law firm in Brussels €180,000 to represent the company’s interests to the Commission but at the end they proved to be useless,” he added.

Petrou argued that the government must first decide that it needs a national carrier and then do it’s best to secure a positive outcome from the EC and restructure the company. “In eight months, when the company starts making profit again we would be in a far better bargaining position in our efforts to secure an investor,” he said.

He also said Cyprus needed a national airline, adding that one of the companies interested in CY was in talks last year with Turkish Airlines to sell 45 per cent of the company’s shares. “The talks came to a dead end but who is to say that they won’t recommence in the future? Can you imagine Turkish Airlines owning Cyprus Airways? We shouldn’t put our trust in companies that are strictly for profit. People who came with plans to save Cyprus Airways are accountants, and accountants only understand numbers. Aviation is far more than numbers,” said Petrou.

CY employees have also argued that maintaining a national airline was an issue of national interest. In a resolution they gave to the President on Wednesday, they said closing down CY would have dire consequences on the country’s tourism and economy in general.

Georgiades however dismissed the nightmare scenarios, pointing out that CY only has a 10 per cent share in the Cyprus aviation market. According to statistics handed out by the ministry, the company with the largest market share for 2014 in Cyprus was Russian-based Transaero with 10.9 per cent market share, followed by Cyprus Airways, which has fallen from 13.1 per cent in 2013 to 10 per cent today. Easyjet has an 8.5 per cent market share, Ryanair 7.9 per cent and Aegean 6.5 per cent.

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