Stavrakis clashes with deputies over Eurocypria bailout
TEMPERS flared yesterday as the House Finance Committee completed its consideration of the Finance Ministry’s request to inject €35 million into 100 per cent state-owned charter airline Eurocypria’s in the form of share capital.
Finance Minister Charilaos Stavrakis almost walked out, after DISY Vice President Averoff Neophytou appeared to accuse him of misleading the European Commission over the legality of the proposed cash-injection.
On Monday, Stavrakis had assured the Committee that the cash boost would not break EU competition rules – which prohibit direct state support of an enterprise – as it would be linked to the airline’s commitment to a strategic plan to improve its finances, and hence could be treated as an investment.
Yesterday, Commissioner on State Aid Christos Andreou told the Committee that the government should have asked for the European Commission’s prior approval.
Stavrakis responded that through “informal contact” with the European Commission, the Ministry had been assured that there would only be a possible issue over state support if another airline complained officially. He added that even if a complaint were to be made and upheld, the worst that could happen would be that in three years’ time the company would have to return the cash.
At that point, DISY Vice President Averoff Neophytou commented angrily: “We’re taking Brussels for a ride.” Clearly irritated, Stavrakis rose from his seat, apparently ready to leave the proceedings. House Finance Committee chairman Nicolas Papadopoulos intervened to calm things down, and the Finance Minister resumed his seat.
The House committee’s deliberations are the latest chapter in the Eurocypria saga. The charter airline was sold by national carrier Cyprus Airways (CY) to the Government of Cyprus in June 2006 for around CY£13.4 million (€22.9 million), mainly to provide a cash injection to CY. Since then, it has been experiencing a number of financial difficulties.
Although profitable at the time of the sale, Eurocypria declared losses of €2.5 million in 2007, €16 million in 2008, and €13 million last year, resulting in a debt burden of €30-35 million. The airline’s CEO Lefteris Ioannou told the Committee on Monday that this was in line with a global aviation trend, but that Eurocypria had already started to turn things round last year by making a number of structural and operational changes.
He added that the budgeted loss for 2010 will be just €1 million, and he was confident the airline would show a profit from 2011 onwards, which explained the interest expressed by at least one potential foreign investor.
Both Ioannou and Stavrakis had assured the committee that approving the extra €35 million share capital – to be paid in two tranches, €15 million now and €20 million later – would be the least costly option for the state. They stressed that if the company was allowed to go under, there would still be the immediate problem of paying compensation to laid-off staff and to counterparties under broken contracts, fighting or settling potential legal actions, as well as unwinding the current debt.
Stavrakis said that, taking into account the potential impact on the tourism sector and the broader economy, the cost of winding up Eurocypria would far exceed €35 million this year. He also emphasised that the European Commission had ruled out the possibility of CY simply taking back part of Eurocypria’s operations following any kind of bankruptcy.
Speaking to reporters after the committee meeting, Papadopoulos said that the committee was facing a terrible dilemma: either approve the request for €35 million, or turn it down and have to deal with the economic and other consequences for those involved with the airline.
Papadopoulos also expressed his concern at the lack of a written commitment by Eurocypria’s staff to accept cuts in their wages and benefits, especially in view of last week’s labour court decision that the imposition of wage-cuts on Cyprus Airways pilots in 2005 was illegal, which could therefore result in an extra bill for as much as €60 million.
Speaking during a demonstration by Eurocypria pilots, cabin crew and other staff outside the main entrance to the House before the Finance Committee meeting was due to start, pilots’ union head Andreas Kalos said: “Even though Eurocypria employees are not among the better-paid in the market, we have made sacrifices in the past, and if necessary we will make further sacrifices for the good of the airline, which has a future.”
Following yesterday’s session, each of the parties represented on the committee will take a formal position on the request next Tuesday, and on the Thursday of the following week the matter will be tabled in the House Plenum for a vote.
