Cyprus Airways grounded

The government reiterated on Friday that it had alternatives, whether the EU’s ruling on state aid for Cyprus Airways was negative or positive as the decision that could close the airline after 65 years of operation was awaited later in this afternoon.

Speaking on CyBC radio, government spokesman Nicos Christodoulides said: “There is a plan for both scenarios”.
The European Commission is expected to issue its ruling around 6pm on whether €102m in government support given to Cyprus Airways (CY) in 2012 and 2013 constituted illegal state aid. A negative ruling would herald the end of the national carrier as it cannot afford to return the money.
Other reports suggested the ruling might not be issued today.
Christodoulides, who said indications were that the news was not going to be good whenever the ruling came out, said there was a plan to work with the private sector to fill the gap. The government has already bought the Cyprus Airways logo and branding.
The EU’s Competition commission opened an investigation into restructuring aid for CY. Its aim was to determine whether Cyprus’ plans to support the airline’s restructuring of €102m were in line with EU state aid rules.
The restructuring plan submitted to the EU ran from 2012 to 2017. It included a €31.3m capital injection granted in 2012, a conversion of debts into equity amounting to €63m and €8.6m to cover the deficit of the company’s provident fund, a benefit scheme for the Cyprus-based employees (excluding pilots), financed through contributions from the employees and CY.
According to EU rules, restructuring aid may be granted only once over a period of ten years to prevent inefficient companies from being kept artificially alive with repeated subsidies. The Commission had earlier approved restructuring aid for CY in 2007, but there followed additional public interventions, including the 2012 capital injection and a €34.5m rescue aid loan in 2013.
In a press release in February last year, the Commission said it had “doubts whether the restructuring plan is suitable to ensure Cyprus Airways’ long-term viability and whether the airline is capable of withstanding likely challenges in the air transport market during the next years.”
The EU body said also it was “uncertain” whether a proposed capacity reduction through the cancellation of routes was sufficient to compensate for the distortions of competition created by the state support.
Tourism Minister Giorgos Lakkotrypis said on Friday the government had been preparing for months for the possible closure of Cyprus Airways.
He said British Airways had already made plans to operate five additional flights as of March.
“It’s been several months since we began planning in case there is the potential to fill this [Cyprus Airways] gap,” said Lakkotrypis, adding that adequate transport for the public and business would be available.
Former President Demetris Christofias, under whose watch the handouts were given, said on Friday the airline’s problems stemmed from the loss of millions through reckless decisions taken by successive boards. “It was not we who recruited tens and hundreds of people before elections,” he said.


Courtesy of Cyprus Mail



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