Cyprus Airways (CAIR), the troubled national airline restated its net losses for 2004 sharply higher, with net losses following the audit now reported at CYP 39.35 mln compared to the preliminary loss of CYP 33.5 mln announced previously and net losses of CYP 20.87 mln reported in 2003.
The addition in losses was blamed on the further impairment in the value of the investment in subsidiary company Hellas Jet for an amount of CYP 3.6 mln as well as the reversal of a deferred tax asset, the recoverability of which was considered doubtful.
Based on the new net loss, the losses per share amounted to 35.44 cent from 18.8 cent in 2003.
Total turnover during 2004 amounted to CYP 204.97 mln from CYP 187.8 mln, while gross losses were CYP 15.2 mln compared to CYP 18.42 mln in 2003.
Administrative costs surged to CYP 20.41 mln from CYP 17.68 mln while the total impairment in investment charge for the whole group amounted to CYP 7.64 mln.
Operating losses thus surged to CYP 43.27 mln from CYP 36.1 mln in 2003. Sharply reduced share of profit from the Duty Free shops to CYP 1.88 mln from CYP 7 mln in 2003 only managed to reduce the overall losses marginally, with the net figure receiving additional help from the reversal of the share of minority interest referring to Hellas Jet amounting to CYP 2.2 mln.
Following the new record losses, the shareholders funds fell to CYP 14.41 mln with the book value per share tumbling from 24 cent per share to 13 cent, according to Financial Mirror estimates.
Amid general expectations that CAIR will report another huge loss for this year, the Financial Mirror estimates that shareholders equity will turn to negative, with all the original CYP 55 mln in capital and previous year reserves wiped off.
HEAVY DEBT
As at December 2004, CAIR had a total of CYP 61.28 mln in short & long term and lease debt, which were added by another CYP 30 mln taken in May from Deutsche Bank to help cover staff redundancies and meet the day to day expenses as well as the cost of closing down of Hellas Jet.
The combined CYP 91 mln in debt are for the first time more than the fixed assets of the group amounting to CYP 89 mln, while creditor balances of CYP 45 mln are double the debtor balances of CYP 22 mln.
Although the company showed CYP 27 mln in cash balances end of 2004, down sharply from CYP 45 mln end of 2003, this has most probably evaporated since then, since the CAIR group has a negative cash flow and is not in a position to sustain its operations from own resources.
Management has tabled a radical plan to cut costs, aiming to reduce the CYP 68 mln total staff costs for 2004 and has won union backing to layoff 123 staff at a total cost of CYP 2.5 mln out of total 2499 staff employed at the group.
According to international standards, the Group need to cut half of its payroll costs.
The Board has also taken a decision to terminate the operations of Hellas Jet, effective from May 10, in order to limit its losses. The termination is forecast to cost the company at least CYP 10 mln in additional losses for 2005.
Fuel costs are another worry. Total fuel costs in 2004 were sharply higher at CYP 38.39 mln compared to CYP 26.7 mln in 2003. With most international airlines budgeting their fuel costs at $50 per barrel for the year, CAIR will most probably incur additional costs associated with higher fuel costs.
One area where the airline is cutting expenses are promotions and advertisements, which for 2004 cost the airline CYP 5.2 mln compared to CYP 7 mln in 2003, while other costs that in 2004 amounted to CYP 15.99 mln compared to CYP 17.5 mln in 2003 are also being cut.
