Local
articles | 24 July 2013

EC opinion on Cyprus Airways restructuring plan expected end of October

The European Commission is expected to issue its opinion on a restructuring plan of Cyprus’ national air carrier, Cyprus Airways, by the end of October, says Cyprus Airways Board of Directors Chairman Tony Antoniou.

Cyprus Airways Board of Directors Chairman Tony Antoniou said that the Commission will, through the EU Competition Committee, examine the plan, submitted Monday, and is expected to ask the company for clarifications and additional information and invite company and government officials to Brussels “to defend our case.” Antoniou noted that the company is already implementing the plan and will continue to do so, adding that “the Commission will take seriously into consideration the Board of Directors effectiveness in implementing plans and this is what we are doing during the past two months.” Asked about redundancies, he recalled that there is in effect an agreement for 390 staff to leave, and this will be fully implemented in September.

He said that with the reduction of the fleet provided by the plan there will be additional redundancies in 2014 of approximately 117 people. He noted however that their number will depend on the flight routes as well as the policies to be followed in the framework of the restructuring. He said the plan presents the economic model and the way in which restructuring will take place, and concerns the next five years, noting that in 2014 there will be minor damage while in 2015 there mustbe a balanced budget. Antoniou pointed out that the EU must be convinced of the political will of the government and the company to implement the plan, noting that both are already doing that plan.

The Commission, he explained, will also examine a complaint against the government of Cyprus for providing state subsidy to the company and noted that this was not a state subsidy but funds allocated to save the company under the current extraordinary circumstances. He outlined a series of arguments to put to the Commission about the need to support the company, including the operation of an illegal airport in Cyprus’ northern Turkish occupied areas which competes against Cyprus Airways and other European airlines, pointing out that while the EU is obliged to intervene and stop its operation it has not done this so far.

Furthermore he noted that Turkey, which does not recognize the Republic of Cyprus, bans flights by Cyprus Airways aircraft in its airspace, something which has additional costs for the company. Cyprus, he said, is an island affected by frequent strikes in Greece and developments in the region such as the closing of the Syrian airspace and the political situation in Egypt, which does not allow its aircrafts to fly to Cairo. Antiniou said he was optimistic that the plan would be endorsed by the Commission, noting however that nothing can be ruled out.

Turkey, whose troops occupy Cyprus’ northern areas since they invaded in 1974, does not recognise the Republic of Cyprus, an EU member. In April 1987 it imposed restrictions on Cypriot flagged vessels and in May 1997 Ankara issued new orders to extend the restrictions to include ships under a foreign flag which had any relation with the Republic of Cyprus. These restrictions disrupt shipping and air traffic, in addition to causing huge financial and other problems. Annual losses for Cyprus’ economy because of the restrictions amounted to €138,5 million in 2008, accounting for 1.3% of the GDP.

Several official EU documents outline Turkey’s legal obligation to lift its embargo on Cypriot and EU shipping but so far Ankara has refused to meet its EU commitments.

Source: Financial Mirror

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