By Charlie Charalambous
CYPRUS Airways will collapse in financial ruin if it continues on a crash course of rising labour costs and disruptive strikes, the Cabinet warned yesterday.
Still smarting from its failure to sell 10 per cent of its controlling share in the company and from recent strike action, the government told the airline to tighten its belt or face bankruptcy.
“We express our strong concern about the long-term survival of the company because of its various problems and the continuing increase in labour costs, ” said yesterday’s Cabinet announcement.
The future of CY was top of the agenda at the Cabinet meeting, which spelt out the bleak forecast in the clearest terms possible.
“If unions and management do not enter into a constructive dialogue based on the renewal of the collective agreement and the strategic plan the company will be driven to financial ruin.”
Among the dire warnings was a references to job losses if the situation continued unchecked.
“We welcome the announcement and we are ready to talk at any time. We are willing to put everything on the table and listen to the union demands,” CY spokesman Tassos Angelis told the Cyprus Mail yesterday.
Industry experts say CY will not last four years if the present regime continues.
The government’s pessimistic view of the national carrier’s survival follows last week’s four-hour strike by CY unions over pay demands.
At present, there is no mediation process and unions have been warned against taking any further action which would irreparably damage the company.
Delays in restructuring the company – essential to make it more competitive at all levels – are also a sore point with the government.
And the much-trumpeted strategic plan has yet to be even discussed by the management and unions.
“There are issues which need to be discussed, which will make the company viable and competitive. We don’t want to impose anything,” said Angelis.
Communications Minister Leontios Ierodiaconou has been given the unenviable task of getting both sides round the table to thrash out the painful cost- cutting decisions that need to be made.
“The aim is to go forward with changes that will enable the company to survive,” said government spokesman Christos Stylianides.
A wage freeze, voluntary redundancy scheme, management streamlining and disbanding unprofitable routes are all issues which must be resolved.
Although CY announced profits of £5 million for 1998, following two years of successive losses, the government insists there is much that remains to be done.
Unions are demanding pay increases as part of the new collective agreement, but the company is reluctant to bloat a wage bill which already accounts for 35 per cent of total expenditure.
Moreover, the government is no mood to throw more money at the ailing carrier, whose only profit-making routes – London and Athens – are protected, but could soon face competition in the preparation for EU membership.
Sister company Eurocypria and Duty Free sales are the major reasons for CY’s healthy balance last year. And a government itching to sell its unwanted shares is aware that the airline is way behind the competition.
Last Friday, the government conceded that it could not offload 10 per cent of its 80 per cent shareholding because of what it called “limited interest”.
Despite the nominal value of the shares, set at 50 cents, institutional investors stayed away, leaving the five million available shares mostly unsold.
Before the share fiasco, Finance Minister Christodoulos Christodoulou said the government would eventually be happy to sell 50 per cent of its shareholding.
