By Jean Christou
CYPRUS Airways (CY) yesterday officially offered its employees a 22 per cent stake in the company in exchange for an annual £5 million in cost cutting concessions, an airline spokesman said.
The offer was made during a marathon meeting of management with CY’s five unions as part of an ongoing dialogue on the survival of the troubled airline.
However, initial reaction from CY’s biggest union Cynika was one of marked pessimism rather than cautious optimism.
“They are offering us a deal worth £1.2 million in exchange for £5 million, ” said Cynika chief Costas Demetriou. “Where will the £5 million come from? From the staff of course,” he told Cyprus Mail.
CY spokesman Tassos Angelis said the 22 per cent offer to its some 2,000 employees consisted of a 10 per cent share in the profits, six per cent of the airline’s shares gratis and further six per cent at a reduced rate.
He said the offer was in return for cost-cutting concessions leading to savings of £5 million per year.
Angelis said the cost cutting proposals were directly aimed at reducing the annual £40 million or so wage bill which makes up over 35 per cent of CY’s annual costs.
He was reluctant to talk about redundancies but conceded, “If you change the working practices there will be redundancies.” But he said the airline would aim at a voluntary scheme.
Other methods of saving on staff costs would be the non-replacement of retirees and the establishment of new conditions of employment, including lower wages in hiring practices.
Wage reductions for existing staff are not likely to be topping the agenda of proposals to staff, most of whom are currently seeking a 4.5 per cent increase in wages and benefits.
“The five million pounds concessions are directly aimed at staff costs,” Angelis said. “If they (the concessions) work they will save money and change the culture and attitude in the company”.
Angelis said the unions had listened to the proposals which also include ideas for cost cutting in other areas such as outsourcing of some services like catering and cleaning.
He said the unions had asked for some clarifications and would take a decision as soon they had received and considered all the information.
Cynika’s Demetriou said they first want answers on what the government’s plans for the airline ultimately were and whether it was to remain the island’s national carrier.
He said they also want specific details of the successful cost cutting plans implemented by British Airways and Dutch airline KLM.
“We want to know how they did it,” he said adding that yesterday’s share offer had been made “just to make an impression”. These were his initial thoughts, he said.
Demetriou said he is aware that some of the proposals already existed in the much-touted strategic plan, which the unions are not keen on, but that the they would not make an official statement on the whole matter until they have received all the information.
The five unions will meet management again next Friday in separate meetings, one on the airline’s survival and another relating to pay demands by three of the five unions.
Pilots and cabin crew who are not members of Cynika are not seeking a pay rise.
Cyprus Airways Group announced a profit of £5 million for 1998 after two years of losses thanks only to its successful charter firm Eurocypria and recently-established Duty Free Shops Ltd.
The group also expects a profit this year but unless CY manages to cut costs and unprofitable routes, industry experts predict it will not last the four years leading up to EU membership and full-blown air liberalisation.
In January this year, the government failed to attract any investors when it put 10 per cent of the airline’s shares up for sale as part of its obligations under the Stock Exchange regulations.
Unfortunately this first bid to reduce the government’s share from 80 per cent to 70 which must be completed by September was made at the height of a strike threat over pay which only served to remind investors of the company’s rocky relationship with its five unions.
