CYPRUS Airways (CY) made a profit for the second successive year in 2008, despite a huge increase in fuel costs and the added financial burden caused by a “tired out” fleet of aircraft, Executive Chairman Kikis Lazarides said yesterday.
CY made a net profit after tax of €1.7 million in 2008, up from €1.2 million the previous year. The relative financial health of the airline follows four years of carrying losses of around €150 million on its balance-sheet, which at times threatened to put it out of business altogether.
“In a period when dozens of airlines around the world shut up shop, and just as many almost went bust – recording enormous losses, reducing their fleet and carrying out mass lay-offs – our company managed to stay on its feet and end a difficult year in profit,” said Lazarides.
In the course of the year, CY had to pay an extra €29 million in fuel costs compared to 2007, and the poor state of its fleet resulted in a further cost of €8 million to hire replacement aircraft when its own were being repaired. Another €2 million was paid out in compensation to passengers for cancelled flights.
CY is now going ahead with gradually replacing its ailing fleet. It recently purchased a new Airbus 319 to replace an Airbus 320, retaining the option of selling a further two A320s to the same buyer at the same price. Lazarides said that the sale of each old plane would realise a profit of €1.8 million, and acquiring new replacements would mean significant future savings in fuel, spare parts and maintenance costs. CY has also signed a Letter of Intent with an Irish company covering the leasing of two A320s for six years, with an option to extend the lease for a further 12 or 24 months.
Lazarides ascribed the airline’s new-found health to increased productivity and efficiency following an extensive management reorganisation and the ongoing elimination of inflexible and outmoded bureaucratic procedures. Another important factor is the first-ever comprehensive agreement with almost all the trade unions, the only exception being the pilots union PASIPY, which intends to pursue an increase in wages and benefits in 2009 and 2010, he said.
Other measures under CY’s productivity and efficiency drive in 2008 included a new partnership with ground services provider Swissport, which had a slow start but eventually made the necessary improvements in standards. CY now owns a 25 per cent stake in Swissport Cyprus Ltd, which should guarantee it a high level of service and a share of the profits.
Current objectives include improving timeliness and overall service quality, providing the whole range of CY services (including ticket purchase and information) via a 24-hour call centre, improving e-ticketing and other services available through the CY website, controlling costs and restructuring the flight schedule based on the new conditions of global crisis.
This last objective is the reason why CY cut its Bucharest flights and two of its flights from Paphos. When a low-cost airline started operating the Bucharest route, it stopped being profitable for CY, so it chose the solution of reaching a code-sharing agreement with Tarom. Similarly, the stopover in Paphos on the Larnaca-Athens route was costing an extra €500,000 annually, seriously affecting the route’s profitability.
Prospects for 2009 depend on what happens in the international economy, Lazarides said, especially in the UK. Arrivals will most likely be down overall and possibly by as much as 30 or 40 percent from the UK alone. “We might be looking at a loss of €5-15 million, or we might break even. It’s as wide open as that”, said Lazarides. “There are many factors in play. Exchange rates may move – most of our revenues are in sterling, and we pay for our fuel in US dollars. Besides that, nobody knows which way the price of oil will go this year.”
