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EC won’t approve CY aid without a plan, MPs told

Uncertainty continues at Cyprus Airways as European Commission delays subsidy decision

By George Psyllides

THE viability of Cyprus Airways (CY) is key for the EU to approve the ailing airline’s restructuring plan, the state aid commissioner’s office said yesterday, but as things stand it will not be given the green light.

“As things stand, the plan will not be approved. Full stop,” Onoufrios Koula, a representative from the state aid commissioner’s office told the House Finance Committee.

Koula told MPs that to save CY additional measures must be put in place to reinforce the company’s viability and find an investor.

The European Commission was also on standby regarding some €75m given to CY by the previous administration.

The Commission apparently considers the money as state aid, something banned by EU rules.

But it has not yet issued an official decision asking the airline to return the money as that would mean its closure.

Koulas said the Commission was avoiding the decision, waiting for either the restructuring plan to be amended in a way that would make the company viable or for the airline to close by itself.

“Even if we overcome all other obstacles … we cannot overcome the obstacle that has to do with the viability of the company,” Koulas said. “The European Commission cannot approve a restructuring plan, legitimise all previous state subsidies through this procedure, and the company not being viable in the end.”

A restructuring plan has been sent to the Commission for approval, but it has not been fully implemented yet.

Full implementation would mean more job losses, around 320 from a total of 560, and further cuts in benefits.

At this point, however, additional measures would be needed to cover this year’s losses, expected to be around €16m, Koulas said. The company had pledged zero losses for 2014.

An investor must also be found to boost the company’s chances to survive, he added.

Koulas said the Commission was doing Cyprus a favour by not issuing its decision on the state aid.

“From the moment our plan failed, we must go to the European Commission and propose something else if we want to exhaust all the chances we have,” he said.
The Commission can make concessions on all other matters but it will not budge on the issue of viability, Koulas said.

“If we can satisfy the viability criterion, then concessions could be made on other matters,” he said, referring to Air Malta as an example, which had €130m approved in 2012.


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