IT WAS no surprise that the study commissioned by the five Cyprus Airways (CY) unions would have advised that the state-owned, charter airline Eurocypria should be shut down. Despite the questions raised by the Eurocypria board about the objectivity of the consultants who had prepared the study – they had reportedly done consultancy work for the national carrier in the past – it is difficult to disagree with their findings.
In fact we did not need airline industry experts to tell us that Cyprus could not sustain two airlines and that competition for business could eventually lead to the bankruptcy of both. The study would be used as another weapon by the CY unions in their campaign to have Eurocypria closed down, and thus protect the jobs of their members. They fear that if the government injected €35 million into the charter airline it would compete for a bigger market share and thus jeopardise the future of the national carrier.
During recession, workers’ solidarity is not very strong, but there has been one positive effect – for once CY unions and management are on the same side, working together to secure the closure of Eurocypria. The chairman of CY was the first to express objections to the rescue package the government had prepared for Eurocypria, using the same arguments that appeared in the consultants’ report. He also suggested that Eurocypria could be absorbed by the national carrier.
While this would have been the sensible solution it is not an option given that the state bought Eurocypria from CY, at a premium price, some five years ago, in order to help the latter survive. Under EU rules it could not have given CY a subsidy, so it injected money into the airline by buying Eurocypria. If it tried to sell it back now, at a much lower price, the European Commission would block the sale, and probably fine the government for the initial transaction.
It is a terrible mess caused by the government’s effort to save CY. Now, it wants to save Eurocypria, by pumping €35 million into it, on the pretext on increasing its share capital which is not really justified; it is losing about €10 million every year. Eurocypria would then have to enter the scheduled flights market, competing with CY for business, in order to have a chance of surviving. But if there is a price war, both companies would probably go under. In short, the government could spend €35 million, assuming it is given the green light by the Commission, to protect jobs at Eurocypria for a couple of year, while threatening jobs at CY.
It really makes no sense and the government should start to consider the possibility of closing down Eurocypria.
