THE BOARD of state-owned airline Eurocypria is currently in the process of hiring a consultancy firm to advise it about its available options, in view of the losses it is expected to incur this year. It would be the second year of losses for the airline, which was bought from Cyprus Airways by the state in 2006. Eurocypria last year incurred losses of €2.5 million, an amount that is certain to be higher in 2008 as a result of the soaring prices of aircraft fuel.
Press reports suggested that foreign consultants would prepare an action plan, as had happened with the national carrier, but in this case there is much less scope for cost-cutting because Eurocypria is, by all accounts, a much leaner, more efficient operation. What costs would be cut when last year there were complaints that the airline was understaffed? Would some of its routes be cut or would staff be asked to accept across the board pay cuts so that the company can survive?
Although world economic conditions – high price of crude oil, coupled with slowdown of the world economy – are to blame, to a large extent, the government’s Eurocypria experiment was a risky initiative that had not been thought through properly. The only reason it was bought was in order to justify a cash injection of state funds to Cyprus Airways as part of the rescue plan for the national carrier, because the European Commission did not allow direct financial help. Without the money from this sale Cyprus Airways could have gone under.
Now Eurocypria is facing the same problem as its former parent company, but the options of its new owner, the state, are very limited. It could scale down its operations, impose wage cuts, be closed down or be resold to Cyprus Airways at a small fraction of the cost it had been bought; the latter option would probably need Brussels’ approval. The very idea that a tiny country like Cyprus could have sustained two airlines defied belief, yet there were government policy-makers who thought that this was possible. And in their effort to save Cyprus Airways, they have now put Eurocypria jobs at risk.
The politicians have already begun making the customary statements about the need to protect jobs, without proposing how this would be done – they are all aware that Brussels would not allow the government to subsidise the airline. As for talk about finding a strategic investor, it sounds very naïve given the current state of the travel industry. We doubt the consultants would come up with a no-pain plan (one that would safeguard jobs) for saving the airline. If the government’s objective is to save as many Eurocypria jobs as possible then perhaps it should consider putting it on the market at a cut-rate price. But even then it might not find a buyer.
