THE government has agreed to inject around €20 million into ailing national carrier Cyprus Airways (CY) in the form of compensation for damages incurred due to the Turkish ban on the airline using its airspace.
The airline said this time last year that Turkey’s ban, which violates the Ankara protocol with the EU by shutting out Greek Cypriot air and sea traffic, was costing CY some €3 million a year.
The prohibition of CY flights over Turkish airspace means longer more expensive flights and a reduction in competitiveness, especially on flights to Russia, a huge market for Cyprus.
CY has been calling for compensation from the government the past 12 months and the state has now agreed, on condition the company restructures itself in order to become profitable.
“We have been informed today that the state has agreed to pay damages incurred by the company because we do not use Turkey’s airspace,” said Nicos Tampas, representative of the SEK trade union.
The €20 million represents six years worth of damages, according to financial news portal Stockwatch, which quoted Finance Ministry permanent secretary Christos Patsalides.
However the EU bans state assistance because of its anti-competitive effects, but Finance Minister Charilaos Stavrakis appeared cautiously optimistic yesterday that they would receive approval from the bloc for the €20 million injection.
“Indications are that Europe would view it positively but they are just indications,” he told the Cyprus Mail.
The minister added that when the issue was raised in the past it was viewed positively.
The airline’s unions were yesterday briefed on the intentions of the government and the decisions of the board regarding the company’s future, which would be in jeopardy without immediate measures to save the ailing carrier.
The company posted a loss of around €25 million for the first half of 2010 and expected to close the year with a €30 million shortfall.
The government has asked the company’s management to come up with a cost-cutting plan to save the airline.
Patsalides said Stavrakis on Tuesday briefed President Demetris Christofias on a study conducted by CY’s management to save some €30 million.
CY has already announced it was terminating several loss-making flights while workers are also expected to make sacrifices as part of the rescue effort.
“They are asking around €12 million from us; some €5.0 million will be secured through redundancies … and €7.0 million will be saved through pay cuts,” Tampas said.
The representative of PEO Antonis Neofytou said the company was expected to shed around 150 of its 1,400-strong staff.
Meanwhile, InBusiness news portal reported that the liquidator for Eurocypria (ECA), which went bust last November, would also ask for compensation for the Turkish ban, if the government gave CY the money.
Chris Iakovides said he would ask for €13 million, adding that it did not make any difference that ECA was in voluntary liquidation.
