Cyprus & World News

AVIATION: Ryanair eyes Cyprus Airways, regional hub

22 August, 2014

Having rejected the idea a month ago, low-cost carrier Ryanair boss Michael O’Leary was back on the island on Friday to submit a comprehensive package that would include buying all or part of the troubled Cyprus Airways, as well as setting up a regional hub at both Paphos and Larnaca airports.

Ryanair and Greece’s Aegean Airlines were 15 of the potential investors shortlisted to submit non-binding offers by August 29, after which the government will enter direct negotiations to sell its 94% stake in the airline that has remained in the red for decades due to high labour costs driven by union and politicians’ abuse.
O’Leary said after meeting Transport Minister Marios Demetriades in Nicosia that with the help of the Irish low-cost airline, Cyprus Airways (CAIR) could get back on a path of rapid growth with new routes and more flights, with passenger numbers rising from the present lows of 600,000 to 3 mln in a few years.
However, Ryanair’s CEO, who had stated in late July that he did not wish for CAIR to close, but if it did, then his airline could offer alternatives to enhance the island’s air connections, has also been critical of the high rates charged by airports operator Hermes, suggesting Cyprus landing costs were “very expensive” and even double that of, say, Berlin.
“I believe … we could put Cyprus Airways and Cyprus’ tourism back on a path of a very much renewed and rapid growth, with new routes, more flights and new jobs for pilots, cabin crew and engineers here in Cyprus” O’Leary told the press.
“It’s a long proposal and the Government will have to take a careful look at it to see whether it meets our expectations and we of course have our own proposals,” the Transport Minister noted.
The main requirements attached to the potential sale is that any new investor maintain the brand name and Cyprus as the operational base. CAIR is no longer eligible for any other assistance as it has already accumulated some 100 mln euros in state grants and government guarantees, something which is being scrutinised by European Commission regulators.
Meanwhile, the Financial Times sees Ryanair’s takeover as a positive development as it would open up new routes and create more hubs in the Mediterranean.
The newspaper reported that Ryanair has not made an acquisition of a rival since it bought Buzz more than a decade ago, and O’Leary has frequently disdained the takeover approach to expansion. However, that has not stopped him from laying prolonged siege to Aer Lingus, the rival Irish airline in which Ryanair owns a stake of nearly 30%. His attempt to buy Aer Lingus has been blocked by regulators and the Irish government.
The FT further quoted analysts as saying that “any purchase of Cyprus Airways could make long-term sense as Ryanair sought to fulfil its aim of lifting passenger numbers by about half, to 1.2 mln, within five years. The Cypriot airline has just six aircraft, while Ryanair has 180 new Boeing 737 aircraft on order, the first of which are due to be delivered later this year.”
David Holohan, head of research at Merrion Capital, a Dublin brokerage, told the FT that Ryanair could use some of the new aircraft to create a hub in Cyprus if it wanted to target northern Africa and to expand around the Mediterranean.
“Cyprus Airways would be a very small addition to Ryanair, but if he can pick it up for the right price, it would make sense,” Holohan said.
Cyprus Airways carries about 600,000 passengers a year, compared to nearly 80 mln for Ryanair which “has been trying to shed its reputation for brashness and bare-bones service, with an improved online offering and more concessions for passengers. It is due in the next few weeks to unveil a strategy to attract more business travellers,” the FT concluded.
CAIR chairman Tony Antoniou said after a meeting at the Presidential Palace that by the end of next week bidders should provide the government with a non-binding proposal which will outline the framework of interest, while on September 30, the proposals will be examined and a list will be drawn. The whole procedure might be concluded before the end of the year.
The Financial Mirror has commented in past editorials that it was a mistake of the previous administration to shut down low-cost charter operator Eurocypria and keep the loss-making Cyprus Airways afloat, simply because of the voting power the airline’s staff and their families exerted on political parties in Cyprus, that are known to be spineless and very often succumb to union bullying tactics.