CYPRUS Airways’ (CY) biggest union CYNIKA yesterday warned that at first glance there was not likely to be a quick agreement on the rescue package to return the ailing national carrier to the black.
“As far as the finances of this plan is concerned, it looks like they want our head on a platter,” CYNIKA chief Costas Demetriou said, referring to the many cuts in staff benefits foreseen by the plan. “The philosophy of this plan will not lead to a solution of Cyprus Airways problems.”
CY must axe 343 jobs – almost one fifth of its staff – or go bust by the end of the year, the controversial rescue plan drawn up by foreign consultants says.
“At the current rate of cash burn, it is estimated that the airline will run out of liquidity before the end of 2005,” the rescue plan says.
The plan also includes across-the-board salary cuts starting with eight per cent for pilots and five per cent for the remainder of staff, plus other cuts in benefits, most notably to provident funds, which are sacrosanct to the unions.
CY’s board hopes the unions will agree quickly to the blueprint, which it must submit to the EU on November 2 to gain approval for a £58 million loan to cover the £10 million cost of redundancies, £30 million to pay back a recently-acquired short-term loan and £18 million for the cost of restructuring.
Management says as long as the unions agree in principle to the contents of the plan by then, the two sides will have until the end of the year to iron out the details.
However it appears they will have their work cut out to achieve any kind of deal in the next two weeks. Unions only received the full details of the plan on Thursday although it has been ready since late September.
Demetriou said at first glance his union was not enamoured of the package, particularly the way in which the proposed redundancies were spread out. “The redundancies are not equally shared amongst all categories of staff and the whole thing is anathema to the governing of our provident funds,” he said. “They are reducing it to a minimum of a minimum”.
Demetriou said his union was asking for the two studies that went in to the drawing up of the final plan. “We are also planning a series of meetings with the Minister of Communications and Works and others,” he said. “The (CY) chairman said we have until the end of the year to agree.”
Demetriou said it was notable in the plan that most of the £20 million savings would come through staff measures while revenue increases were slated at much lower levels. This, he said, was a problem.
“Between the year 2004 and 2005 there was an increase in fuel costs of £5 million. They show a possible revenue increase of £4 million. If the revenue does not cover the cost, at the end of the day this will lead to a deadlock,” he said. “It is reasons like this that this plan is will not solve the problems of the company.”
Pilots union PASIPY was less pessimistic after perusing the blueprint but declined to make any judgements.
“It is a very complicated document and we will need some days before we make up our minds,” said a PASIPY spokesman. “We have given it to our lawyers and accountants and we will study it ourselves.”
According to the report, Cyprus Airways will have to implement a tough and aggressive restructuring very rapidly and if the required and described labour actions were not implemented without delay the restructuring will fail and the airline will not be able to survive in the competitive environment.
“Each month of delay accounts for an additional cash burden of approximately £1 million,” it said.
It also warns that the airline could face obstacles from the unions and advises the airline to put in place a contingency plan in the event of strike action.
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