THE STATE’S decision to inject Eurocypria with €35 million was made despite suggestions to the contrary by two technocratic reports into the viability of the state’s airlines, it emerged yesterday.
The two reports, prepared in February this year before the funds had been approved, were made public by the Finance Minister yesterday, following days of debates and rows with the island’s political parties, who felt they were misled into approving the money.
It is now clear that the government had been aware of the two reports – published in their entirety on Stockwatch.com – before requesting the €35 million boost, which was mainly used to pay off bank loans and taxes owed.
The first report, carried out by the Accountant-general on February 3, proposes a strict implementation of Eurocypria’s business plan to reinforce its profit-making abilities.
Meanwhile, it was proposed that a strategic investor be found. Failure to do so by mid 2010, it added, would lead to Eurocypria going bankrupt, in combination with some of its human and material resources being absorbed by national carrier Cyprus Airways (CY).
According to the Accountant-general, this would reduce the cost of bankruptcy from €84 million to €55 million.
The second report – carried out by technocrats at the Finance Ministry and Planning Office – contradicted Finance Minister Charilaos Stavrakis’ claims that the reports had nothing to do with the €35 million injection, as its conclusions were centred on the specific fund.
Instead of giving the total amount, the second report proposed it be given in two instalments: €15 million to start off with to cover immediate needs and the remaining €20 million to be given only when there was proof that Eurocypria’s measures to decrease its expenditures and improve its revenues had borne results.
The Chairman of the House Finance Committee, DIKO’s Nicolas Papadopoulos, yesterday said parliament would most likely have not approved the €35 million if MPs had been aware of the two reports.
Papadopoulos said a superficial read had shown that Eurocypria’s future was not viable.
“This vital opinion wasn’t made known to our committee and the plenum when the injection was approved,” said Papadopoulos. “Therefore a major political issue is arising.
Papadopoulos called on the Finance Minister to give answers.
“Deputies, but more importantly the Cypriot taxpayer, need to know the truth.”
Having earlier in the day dismissed as “lies” any suggestion that the reports on the viability of the air transport sector had been hidden from parliament, Stavrakis took the unusual step of appearing live on CyBC’s main evening TV news programme.
The Minister said that he had available to him three viability reports, “which to a large extent reached somewhat differing conclusions”. He added that the Accountant-general’s report contained seven possible scenarios, and “as the economically and politically responsible person” he had decided that the €35 million injection was the least costly option for the taxpayer.
Stavrakis said that events have proved this decision correct, as first of all the 300,000 tourists brought to Cyprus this year by Eurocypria “have more than covered the cost”, and the resulting improvement in the airline’s finances will make any potential merger “much smoother”
Meanwhile, Eurocypria yesterday issued an announcement saying its finances had improved after the boost, and cost cutting.
The airline said it was the first time its capital had been increased and deemed it ridiculous for a company with a €100 million in turnover to have a €8,500 capital. It repeated its estimate that this year could bring profits for the company.
Regarding a possible merger with CY, the announcement added: “The study that is being carried out…is considered a positive development by the company and it intends to work in this direction to reach the best possible solution.”
It added: “The company’s Board of Directors wishes to stress that possible failure to merge the activities of Eurocypria and Cyprus Airways – whether this is down to internal or external factors – in combination with stripping Eurocypria of a satisfactory fleet of aircraft, will leave the company seriously exposed, with the possibility of this year ending with serious losses.”
