By Constantinos Psillides
KEEPING Cyprus Airways (CY) operational was not a legally feasible option, said Auditor General Odysseas Michaelides, following the conclusion of a probe into the shutdown of the national carrier.
The auditor general’s office was tasked by President Nicos Anastasiades to conduct a probe regarding a number of issues raised by the pilots’ union PASYPI and other CY workers on the conditions leading to the shutdown of the airline earlier this month.
Michaelides concluded that the government had no legal alternative other than to try to secure a strategic investor, which would lead to setting up a new company operating under the same name and logo.
“The procedure followed was correct and based on the advice of experienced legal councillors,” concluded the probe.
Michaelides also found that the committee consisting of Communications Minister Marios Demetriades and Finance Minister Harris Georgiades – tasked with overseeing the procedure for finding a strategic investor – did not exhibit any preference towards any of the bidders.
CY workers had claimed – in a number of instances – that the two ministers favoured Ryanair and Aegean Air both of which were in competition with CY and ignored other companies that were supposedly ready to give tens of millions to acquire CY.
“The terms set by the committee were general and inclusive enough to lead us to the conclusion that no preference was shown to any single company,” concluded the probe, adding that any decision made to sell off airline property was not harmful to the goal of securing a strategic investor.
The workers, especially the pilots’ union, blasted the state for selling the company’s three timeslots at Heathrow airport, accusing the finance ministry of stripping the company of its assets in order to sell it at a lower price to one of its competitors.
Regarding the apparent conflict of interest stemming from the fact that KPMG Cyprus acted as an advisor to the committee, despite KPMG in Ireland being employed as auditors for Ryanair, Michaelides notes that it indeed raises issues but adds that it’s a common occurrence in such cases.
“What is interesting is that in the non-binding proposal submitted by Ryanair for the acquisition of Cyprus Airways on September 3, KPMG Cyprus and KPMG Ireland are listed as its financial advisors, leading KPMG Cyprus to issue a statement on October 10 clarifying that it was never approached to provide its services. It would indeed be reprehensible if KPMG Cyprus acted as an advisor for a company submitting a bid which they oversaw. This goes to show that large companies like Ryanair look upon Cyprus as country were institutions don’t work like they are supposed to,” he said.
The government is currently in the process of setting up a new airline, in collaboration with the private sector. The new company will be privately owned.
On January 9, the European Commission ruled that a 2012-13 €65m state aid package to CY had been in breach of EU competition rules and the airline was ordered to pay back the full amount. The government revoked CY’s operating licence later on the same day.
Following a decision by the government-appointed board of directors, the company is now under voluntary liquidation.