By George Psyllides
A FORMER Cyprus Airways executive said unions and the airline’s workers contributed to its downfall by opposing a restructuring plan in the late 1990s that would have put the airline on a viable path.
Testifying before the House ad hoc committee probing the demise of the national carrier in January this year, Takis Kyriakides, chairman between 1997 and 1999, said the board had drafted a strategic plan that would have made the company viable.
It was the time when the EU implemented its ‘open skies’ policy, which allowed low-cost airlines to enter the market and force state companies to restructure in a bid to become viable.
Dubbed ‘Takeoff 2000’, the scheme included drastic cost-cutting and revenue raising measures.
Its objective was to increase revenues by £22m (around €37m) and cut expenditure by £17m by 2001.
The plan worked as regards revenues but not so on the cost-cutting side. The company had recorded record profits in the two years 1998 and 1999.
Kyriakides said that even if they had achieved 100 per cent success as regards revenues, the company would still be in the red, even if half the cost-cutting measures were implemented.
He blamed this on the reluctance to implement the austerity measures prescribed by the plan.
“It was clear that there was surplus staff but there was protection from the unions,” he said.
It provided for laying off up to 700 staff, renegotiating collective agreements, freezing the payroll for three years, and cutting pilot salaries by 10 per cent.
Kyriakides said his management was the first to freeze recruitment but could not rein in labour costs, which rose by £10m (€17m), to around a third of the company’s total expenditure.
And this while other companies like British Airways and Lufthansa had cut labour costs by 23 per cent and 19 per cent, respectively.
Kyriakides conceded that they had failed to convince unions on the need to implement the plan. Unions went to meetings to discuss cutting costs demanding raises instead.
This was in line with the mentality at the time, with the airline’s staff considering themselves to be at par with civil servants who got pay rises.
There were also the collective agreements and perks that could not be revoked. Those included overnight stays in certain destinations, additional allowances, and even certain technical checks, which were carried out by pilots in other companies and not the engineers like in CY.
“The mentality was that CY would never be left to close down,” he said.
On the matter of free tickets and their cost, Kyriakides said it was not too high. All companies gave their employees free tickets, he added, but the problem at CY were the easy upgrades to officials and others.
