CYPRUS Airways yesterday announced net losses of £20.4 million for the first half of 2005, mainly as a result of offloading its loss-making Greek-based carrier Hellas Jet.
The first-half losses were slightly lower than the same period last year, when the airline registered a net loss of £28.7 million. Operating loss for the first half also decreased from £31.1 million in 2004 to £21.9 million this year.
The airline, in which the government owns a majority 65 per cent stake, posted a record net loss of £39.4 million in 2004, hit by low-cost competition and fleet renewal costs.
A statement by the airline said this year’s first half losses were compounded by the wind-down of Hellas Jet, which ceased operations on May 10. Hellas Jet’s aircraft are currently being leased out. The winding down of the Greek-based subsidiary shifted a share of its losses on to Cyprus Airways, the company said.
“The impairment loss represents the final write down of the goodwill arising on the acquisition by the company of the shares previously held by the other shareholders of Hellas Jet,” the statement said.
Revenue for the Group, excluding Cyprus Airways (Duty-Free Shops) Ltd, for the first six months of 2005 reached £84.9 million compared to £89.3 million for the first six months of 2004, a decrease of 4.9 per cent.
The drop in revenue was a result of a reduction in the fleet size by one aircraft, the change in the mode of operation of Hellas Jet, and the discontinuing of Cyprair Tours, which took place at the end of October 2004, the airline said.
“The changes were all in accordance with the action plan prepared by Cyprus Airways during 2004 to improve the Group’s financial situation,” it added.
The airline’s operating expenditure, which includes cost of sales and administration expenses, recorded a drop of £5 million to £111.3 million in the first six months compared to 2004 when it was £116.3 million. This was a result of cost-cutting under its action plan, the airline said.
Cyprus Airways obtained a government-backed and EU-approved short-term loan of 51 million euros in May to stay afloat while it goes through the overhaul.
The draft will be submitted to the government in September and then to the European Commission, which will decide whether or nor not to approve a further long-term loan based on the viability of the restructuring plan.
The airline said yesterday it had already taken a series of measures to improve its financial situation and was currently at an advanced stage with regards to its restructuring plan. “The implementation of the said plan will aim in ensuring the viability of the Group,” it said.
The airline said it expects markedly improved results in the second half, which incorporates the peak tourist months of July and August. However, this year, it said intense competition in the marketplace as well as the continuing rise in the cost of fuel make any predictions for the second half of the year very difficult.
“Despite that, it is expected, based on current information, that the Group loss for the year will be noticeably lower than that of 2004,” it said.
