CYPRUS Airways (CY) must axe 343 jobs, almost one fifth of its staff, or face bankruptcy by the end of the year, a controversial rescue plan drawn up by foreign consultants says.
According to the report, obtained by the Cyprus Mail yesterday, CY should expect losses of £28 million for 2005. “At the current rate of cash burn it is estimated that the airline will run out of liquidity before the end of 2005,” it says.
The report, which is designed to make a case to the EU for a £58 million loan said
Cyprus Airways current financial position was weak and likened its 1,832 staff to civil servants.
It calls on the EU to approve the request for the loan to cover the £10 million cost of redundancies, £30 million to pay back a recently-acquired short-term loan, and £18 million for the cost of restructuring.
Of the 343 lay offs, recommended to save the airline £12 million in 2006, a whopping 70 people are to be axed from the 151 who work in the finance department, 80 from the 217 in catering, 57 ground jobs at the island’s two airports, 41 cabin crew and 25 people in CY offices abroad. It also calls for a reduction of seven pilots but the board has promised the pilots union there would not be any lay offs from its members.
The plan also includes across-the-board salary cuts starting with eight per cent for pilots and five per cent for the remainder of staff.
The average annual expenditure on a pilot, including salary and benefits according to the report, costs the company £78,000 a year while the average cost of a cabin crew member clocks in at £25,000 annually. Crew layovers alone cost the airline £1 million each year and by cutting he 70 jobs in the finance department, CY could save £1.24 million.
CY’s catering department costs £5 million a year to run. Once streamlined it will cost over a million less annually, according to the plan.
The airline’s engineering department, which warned on Wednesday that safety could be jeopardised in the event of lay offs, is slated to lose eight employees under the plan but it says these relate only to administrative posts within the department.
The company hopes to save a total of £20 million in 2006 between cost cutting and increasing revenue. This includes £12 million from job cuts, £3.8 million from other staff-related cost cuts and £145,000 from salary reductions. Revenue enhancement is slated to bring in £4.2 million. This is designed to be achieved by restructuring route networks and other means.
“Cyprus Airways will have to implement a tough and aggressive restructuring very rapidly,” the report says. It added this was a new situation for Cyprus Airways particularly in light of previous working conditions.
“If the required and described labour actions are not implemented without delay the restructuring will fail and the airline will not be able to survive in the competitive environment,” it adds. “Each month of delay accounts for an additional cash burden of approximately £1 million.”
It also warns that the airline could face obstacles from the unions and advises the airline to put in place a contingency plan in the event of strike action.
Forecasting results for 2005, the plan said revenue levels were expected to be the same as 2004. It is hoped that with the plan in place CY could break even by the end of 2006 and may achieve a 1.3 per cent profit margin in 2007, finally reaching a four per cent margin in 2009.
Yesterday was the first time the airline’s unions were given the complete report. They had complained on Wednesday that the company had only given them a minimum of information.
