CY needs to look at every option

CYPRUS Airways (CY) chairman Lazaros Savvides laid his cards on the table to shareholders last night, stressing there was an obligation to look at all options to save the national carrier, including the viability of running two separate airlines.

He said it was vital that by September the company comes up with a new strategic plan that will be acceptable to the European Commission, which CY needs to approve a new £60 million loan guarantee. The new plan must be submitted to Brussels by the beginning of November.

The £60 million will be used to pay off the £30 million loan approved in May and the remainder to change and strengthen the structure of the airline.

“It depends to a large degree on whether the Commission is convinced that that each department and service within the group functions in a viable way,” Savvides said. “It is for this reason the board is obliged to examine all the options that exist, and specifically the operation of two separate airlines and the possibility of outsourcing work to third parties that cannot be viably executed by the company.”

Savvides was referring to CY’s low-cost charter firm Eurocypria, but made no suggestion of a merger of the two airlines.

CY lost close to £40 million in 2004 due, Savvides said, to liberalisation as a result of EU accession and the failure of its Greek-based carrier Hellas Jet, which has now been offloaded.

The airline has spent the greater part of the past 12 months trying to come up with and implement a strategic plan to save some £20 million.

It included layoffs, route changes, fleet reduction, cost cutting and outsourcing.

The plan never really got off the ground as months of negotiations with unions and the Labour Ministry resulted in a watered down version that was not drastic enough to save the airline.

Savvides said a completely new plan was being formulated that would need to go to the Cabinet by the end of September or beginning of October at the latest. The government is the main shareholder in CY.
The new plan will include, in addition to structural changes, an entire review of CY’s corporate culture and labour practices, and improvement in morale by promoting team effort instead of condoning personal interest, Savvides said. He said a dialogue would begin with the unions within days.

“We have a lot of work in front of us and it will be difficult,” said Savvides. “Time is pressing and we need to act immediately without delay or obstruction. Unfortunately the problems have been left in such a serious way that they cannot be solved with half measures and patchwork. They need radical approaches and drastic solutions to the degree that the structure and operation of the company will be perceptibly altered and if we don’t achieve this in the coming months the chance will be lost permanently.”