AILING charter airline Eurocypria was given a new lease of life yesterday after parliament gave the nod to a €35 million government bailout.
The funds were passed by a comfortable majority, with AKEL, DIKO and EDEK voting in favour.
A last-minute amendment to the government bill – inserted by the European Party – for a €10 million cash boost instead was beaten back during debate at the plenum. The proposal for the smaller amount was supported by DISY.
The airline had been warning the cash boost was a make-or-break deal, since Eurocypria, already in the red, needs to quickly repay loans amounting to some €28 million.
The sum vouchsafed to Eurocypria will not to be given in the form of a direct state subsidy but, rather, will be provided to the company by means of the indirect mechanism of increasing the number of shares issued in the company, and then buying these shares. There is also the possibility that overseas investors may purchase some of the share issue.
Whilst direct state subsidisation of an airline is against EU competition laws, indirect mechanisms of financing are not against European regulations.
Finance Minister Charilaos Stavrakis, in a session of the House Finance Committee last week, said 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.
Yet the approval of the cash injection for state-owned Eurocypria is unlikely to be the final word. Anastasios Antoniou Ltd, a legal firm based in Limassol, released a statement yesterday stating they had filed an official complaint on February 17 with the European Commission regarding the proposed financing of Eurocypria on behalf of a client who wished to remain anonymous. “Anastasios Antoniou Advocates believes that the stated action on the part of the Republic of Cyprus is likely in violation of the applicable legislation and regulations regarding state subsidies,” they said.
PASIPY, the Cyprus Airways pilots’ union had previously filed a request with the European Commission to investigate how airlines are financed in Cyprus. Christos Achilleos, their spokesman, insisted that this was not a complaint and they were not seeking to create problems for Eurocypria or cause people to lose their jobs, but wanted to ensure that the financing was secured and provided in accordance with the relevant regulations.
Achilleos said that, though the situation was considerably more complex, the aim of PASIPY in relation to Eurocypria was, ultimately and in essence, to merge the two airlines if possible because to do so “made sense”. Both are, in effect and in practice, state owned. Eurocypria, as a charter airline, operates mainly at night, whilst Cyprus Airways as a schedule airline operates mainly during the day, and they have a prior history of sharing resources and facilities such as ground staff, mechanics and catering.
“When Lufthansa has merged with British Midland, and Air France has merged with KLM, how can we stand alone in the marketplace? There is no way,” he said. He added that Eurocypria was the only charter airline in Europe owned by the state and that, to check the feasibility of merging the airlines, or of operating them separately, an independent expert survey should be carried out by people knowledgeable in the field.
Eurocypria currently owns six aircraft although two of them are rented out to a Canadian charter operator at the moment, whilst Cyprus Airways has in total 11 aircraft.
A source within the Finance Ministry said that, had Eurocypria been allowed to collapse, it would have had negative knock-on effects within the Cypriot economy. Whilst real estate and associated interest per cent. Eurocypria is responsible for bringing 300 000 of these tourists to Cyprus annually, and has already entered into contracts with overseas tour operator.
