CY signs on the dotted line for lifeline loan

STATE-OWNED Cyprus Airways (CY) yesterday signed a loan agreement with Hellenic Bank for 78 million euros signalling a new start for the airline after years of losses and bad management.

“This is the beginning of a long effort to improve the economic results of the airline,” said Finance Minister Michalis Sarris who said the government had high expectations of the current CY board.

Others see it as a last chance for CY to pull itself out of the red.

The deal was signed by new CY chairman Kikis Lazarides and Hellenic Chief Executive Makis Keravnos, himself a former Finance Minister.

The EU recently gave the green light for the government to guarantee the 78-million loan, 51-million of which will go to paying back an earlier short term loan obtained by the airline. To further boost cash flow CY also plans to issue new share capital to the tune of £14 million.
The airline posted a net loss of £4.3 million in 2006, although the situation has improved on 2005, when net losses were £22.6 million. However it needs the loan to help complete a restructuring plan started last year, which cost the company £10 million in redundancy payments.

Keravnos said the ten-year loan would carry interest of Euribor+0.04 per cent and 20 six-monthly repayments, a deal Sarris described as extremely favourable.

“This loan will substantially help Cyprus Airways, which has suffered heavy losses and damages in recent years,” said Lazarides who was recently appointed chairman of the airline for the second time in his career. “The company’s course must be profitable in 2008,” he added.

Sarris said under the terms of EU approval, Brussels wants to be continuously informed on progress with regards to the rescue plan. He called on the board and employees of the airline to be focused and intensify their efforts to turn the airline around.

Lazarides said with the collaboration of all those involved he was confident that in 2008 the sacrifices made by staff would bear fruit.

“The capital base of the company, with the damage it sustained in recent years, has been considerably affected and the company could not continue as a viable enterprise on that basis,” he said.

He said the company had reduced costs considerably and was now working on increasing revenue and market share.

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