By Hamza Hendawi
CYPRUS Airways, the island’s troubled and cash-strapped national carrier, yesterday announced pre-tax profits of £5.4 million in the second half of 1997 – reducing by almost half its projected losses for the whole of last year.
“We know that in summer we always make a profit, but we didn’t expect it to be this much,” Tassos Angelis, the airlines’s spokesman, told the Cyprus Mail. “It is due to an increase in passengers, together with new managerial and pricing policies,” he added.
News of the July 1-December 31 profits, however, failed to have any impact on the company’s shares. Reflecting the low esteem in which the company is held by investors, market traders said that not a single Cyprus Airways Group share changed hands in trading yesterday. The price of the shares, which are often dormant, is £0.37 apiece, down by £0.13 from its nominal value.
“Cyprus Airways is a company which has failed to convince investors of its viability,” said Neophytos Neophytou, managing-director of AAA United, a Nicosia-based brokerage. “It is performing unpredictably and its future is vague,” he said.
The company’s projected losses for last year are now expected to be around £4.2 million, its statement said. It registered losses of a staggering £9.6 million in the first six months. In 1996, the company made pre-tax losses of £5.2 million, a turnaround from a £5 million profit in 1995.
The Cyprus Airways Group comprises the airline, its charter arm EuroCypria, Cyprair Tours, and Duty Free Shops Ltd.
The government owns 80 per cent of the group and is obliged under Cyprus Stock Exchange regulations to relinquish at least 10 per cent of its holding by March 1999. The regulations aim to enforce a ceiling of 70 per cent on any single holding in a listed company.
Yesterday’s announcement of the July-December profits came at a time when the Cyprus Airways management is involved in what appear to be tortuous negotiations with the airline’s trade unions over a strategic plan, touted by company chairman Takis Kyriakides as the only way to nurse the national carrier back to good health.
The plan provides for cost-cutting, wage freezes for the group’s estimated 2,000 employees, and a package of measures to increase productivity.
The government has not yet made public its plans to reduce its stake in Cyprus Airways to 70 per cent or lower, but traders believe that a private placement is the most probable course of action.
Cyprus Airways shares are still a promising investment despite its poor showing, according to market traders.
“Investors know that the break-up value of the company is much greater than its book value,” said Ioannis Andronikou of Suphire Securities Ltd, another Nicosia-based brokerage. “If we consider the company’s assets value, the shares should be 70 to 75 cents apiece,” he told the Mail.
Neophytou of AAA United gives a slightly different explanation as to why investors are holding on to their Cyprus Airways shares.
“People are holding on to the shares in the hope that one day the government will sell off a chunk of its holding to a third party and the shares will pick up,” he said.
Top Cyprus Airways officials speak privately of an alliance with a major foreign airline, or the government relinquishing its majority stake in the company through a sell-off to private investors as the only hope for the company’s survival.
“Anywhere else in the world, this company would have been liquidated and its assets sold off,” said one market trader who did not want to be named. “But in Cyprus it is kept going because of its sentimental value and the prestige it holds as the national carrier and the link with the outside world.”
