BOTH Cyprus Airways (CY), and Eurocypria staff will be offered separate voluntary redundancy and compensation packages before the two airlines are merged, the government said yesterday.
“Everyone is in agreement that Cyprus cannot sustain two national carriers in the present circumstances of very strong competition in the airline industry,” spokesman Stefanos Stefanou said. He added that the plans would be announced next week.
As Eurocypria staff continued their strike yesterday, and CY struggled to carry out the smaller airline’s flights in an attempt to move thousands of stranded tourists, Finance Minister Charilaos Stavrakis said Eurocypria would be wound down.
“In all likelihood, the solution being promoted is the voluntary or compulsory liquidation of Eurocypria,” Stavrakis told newsmen following a meeting with airline union representatives.
Eurocypria suspends its flight operations on November 13, although the exact method of shutting it down and fusing with Cyprus Airways has to be determined under EU state aid rules.
Eurocypria unions remain sceptical of the government’s intentions.
Andreas Kalos, head of the Eurocypria pilots union, said only a month ago the government was pledging that no one would lose their job. Now, he said, they weren’t so sure.
Another union rep, who preferred to remain anonymous, complained that the Finance Ministry had ‘got it backwards’:
“First they should have announced the compensation measures and then decided on what to do with the company, not the other way around. It’s a mess.”
Initial talk of a merger between Eurocypria and Cyprus Airways has now given way to talk of ‘transferring’ the former’s operations to the latter.
Since Eurocypria is a state enterprise, merging it with another company could well be construed as a form of state aid. But under EU rules, state airlines cannot receive any assistance that would help them compete with the private sector.
Today a high-level delegation of the Finance Ministry travels to Brussels to meet the European Commission’s Directorate General for Competition, to whom the government must ‘sell’ its plan for Eurocypria.
The government has unveiled a plan for Eurocypria offering staff a compensation package ahead of liquidation, and voluntary redundancy to CY employees. The announcement of the two separate packages is expected sometime next week
Stavrakis forecast that a ‘large number’ of Eurocypria staff would take up the voluntary package. He said the CY scheme would focus on early retirement for high-paid staff.
If the response to the plan is positive, it would allow for more Eurocypria employees to be absorbed into CY, he said.
Asked whether the EU would say no to the compensation scheme, Stavrakis said: “No doubt the Republic’s credibility with the EU in the matter of state carriers is not so high, due to past mistakes and commitments made by previous administrations.
“But I am by nature an optimist,” he added. “The European Union must understand that they were in the midst of an economic crisis, that we are an island, a tourist destination, that we have problems with Turkish airspace…so we’ve got many arguments to make.”
Economist Dr. Stelios Platis said it was high time everyone stopped using the term ‘merger’ and “call a spade a spade.
“It’s a winding down of Eurocypria. A precondition for a merger is that both companies are profitable and there is a high degree of synergies between them. This is simply not the case here.
“The two airlines don’t even have the same type of aircraft, which also means have different expertises for their respective employees. How, for example, the Eurocypria engineers can be absorbed into Cyprus Airways is a good question.”
A merger was never really an option, Platis went on to say, adding that such statements were “more than anything, politically motivated, to placate both public opinion and Eurocypria.”
Eurocypria, 100 per cent government-owned, employs 265 and operates four 737-800 Boeings. Majority state-controlled Cyprus Airways has 1,300 staff and runs a scheduled flight service.
Back in February the government secured a €35 million euro cash injection for Eurocypria in February, used mostly to repay bank debts. The move came just months before the administration said the airline was heading for closure. The government got the cash on condition that the airline would bounce back.
Cyprus Airways underwent extensive restructuring in 2007, involving the selling of Eurocypria to the government which set it up it as an independent entity. That move was at the time dubbed as a bid to salvage a bloated Cyprus Airways.
