Greek Cypriot national carrier Cyprus Airways (CY) still faces bankruptcy if the European Commission does not approve the airline’s restructuring plan, Finance minister Harris Georgiades told MPs yesterday, ‘Cyprus Mail’ reports.
This is despite the fact that taxpayers have forked out almost 250 million euros in recent years to keep the ailing carrier afloat.
Speaking before a joint session of the House Finance and Watchdog committees, the minister painted a gloomy picture.
“The company has sold all of its assets, its operational cost is still high, employees have to be let go, wages have to be cut and the rescue plan is yet to be fully implemented. And all that could be in vain if the EU Commission rejects the proposed restructuring plan. In that case, the company will close down,” he said, adding that CY should expect a response from the EU Commission by October.
The EU commission is currently investigating whether or not the South violated EU competition laws when it injected a 73 million euro rescue loan in December 2012 and a 31.3 million euro contribution to its capital in early 2013 into the airline.
If the funding is deemed illegal, CY will be obliged to return the money, which will inevitably lead to its bankruptcy, MPs were told.
Apart from the 104m euro in government-secured loans in the past two years, the company has also sold all of its assets worth 111m euro, which included three timeslots at London’ Heathrow – the first was sold three years ago for 22m euro the second in March for 6.3m euro and the third only last month for 22.9m euro– as well as closing down head offices in Nicosia and Athens.
But the South has been on this journey before, the paper says. In February 2010, the House approved a 35m euro capital injection for charter airline Eurocypria – the then-daughter company of CY – to continue its operations. The company finally closed down months later, in November, under heavy pressure from CY unions to keep the state carrier afloat and sacrifice the charter airline.
But even if CY survives and gets the go-ahead from the EU Commission, it still won’t be viable, according to the Finance minister, who argued that finding a strategic investor is the only way forward.
However, Georgiades was not optimistic on that front either.
“We have been told that it would be hard to find an investor in the current climate. Of course it is. Why would someone want to invest in a company that is on the verge of bankruptcy?” he asked, pointing out that corrective action was required ten years ago, when CY was still viable.
“In 2004, CY’s operational costs were fully covered and had 110m euro in the bank. That was when we should have been looking for strategic investors.”
The Finance minister put the blame onto previous administrations, blaming them for chronic mismanagement. “Those who are responsible for this mess should at least keep quiet,” he said, after AKEL MPs Stavros Evagorou and Irene Charalambidou accused the government of asset-stripping the company.
The deputies’ main concern was the sale of the Heathrow timeslots, which they argued were very valuable assets. Georgiades explained that timeslots in airports are not considered assets, since the company cannot liquidate them in the event of bankruptcy.
“We’d rather pay for the right to use them. We merely sold that right to other airlines. If the company closes down then we automatically forfeit that right. Selling the timeslots at a market price while the company is still in operation was the responsible thing to do.”
The airline has already said it plans to move its business to London’s smaller and cheaper airport, Stansted.
Georgiades clarified that the money will be spent towards restructuring the company, if the EU approves the restructure plan, or to compensate employees if it closes down.
Constantinos Holevas, from the Office of the Commissioner for State Aid Control, told MPs that he repeatedly warned past administrations that approving a government loan for CY was not a good idea.
“We wrote letters, we appeared before House Committees and we repeatedly warned the administration that the decision to approve a loan was dangerous and legally questionable from an EU Commission standpoint,” he said.
Highlighting CY’s dire financial situation, board chairman Tony Antoniou told MPs that although the company hasn’t received state aid since he took over, a strategic investor must still be found to ensure viability.
His comments provoked a reaction from AKEL MP Irene Charalambidou who accused Antoniou of incompetent management and misappropriation of funds. The AKEL MP accused the board of hiring the services of an advisory firm without inviting a tender and that Giorgos Kallis, a private shareholder and board member, “visits the company’s offices daily and receives payment.”
Head of the pilots’ union (PASYPI) Petros Souppouris asked the minister to set up a committee to oversee the implementation of the restructure plan.
“This is the only condition we haven’t met based on what was asked by the EU Commission. If we prove that the company is viable in the long run then they will approve our plan,” said Souppouris.
Asked if PASYPI will back a plan for the redundancy of 300 of the airline’s 600 workforce, Souppouris explained that both the catering and engineering departments can be privatised and take on CY, and other airlines, as clients.
Asked to comment on a statement by the Finance minister that the pilots’ average annual pay of 125,000 euro is too high, Souppouris said that the public knows why pilots, surgeons and university professors are paid high wages. “We hope that this is not an attempt by the ministry to distract public opinion from who really is to blame for the current state of affairs,” he said.
House Finance committee chair and DIKO leader Nicolas Papadopoulos asked the board to produce financial statements and to inform them of long-term plans. He also likened the selling of assets to “financial cannibalism, aimed only at keeping the company barely alive.”
Papadopoulos noted that if the board doesn’t have a long-term plan, “then we should take steps to protect the taxpayer”.
