Cyprus Airways, the troubled national airline is operating on a going concern basis, since the cumulative losses piled up over recent years, including the first half of 2005 have forced the Group’s total liabilities to exceed its total assets by CYP 3.9 mln.
In other words, the book value per share is minus 3.5 cent per share as the cumulative CYP 65.5 mln in losses more than outstrip the original capital and reserves.
The Group has already taken a series of measures to improve its financial position such as the ceasing of scheduled operations of Hellas Jet and the subsequent agreement with Air Miles, the discontinuation of operations of Cyprair Tours Ltd, the reduction in its fleet size by one aircraft and many others.
Cyprus Airways is now in the final stages of formulating a detailed Restructuring Plan, which will be more extensive and far reaching than the Action Plan previously implemented, according to the Board. This will be submitted to the European Union and will form the basis for approval of restructuring aid. The Plan will be such as to ensure the long-term survival of the Group.
For the purposes of securing the Group’s cash-flow during the period of preparation of the Restructuring Plan the Company has entered, with European Union approval, into a Government Guaranteed short-term loan agreement.
The Board of Directors of the Company believe that the Group will be able to continue to operate as a going concern provided the Restructuring Plan is successfully implemented and the necessary restructuring aid is secured.
HUGE LOSSES
During the first half, CAIR reported that total revenue fell 5% to CYP 84.9 mln compared to CYP 89.28 mln a year ago in the same period and CYP 204.9 mln for the whole of 2004.
The gross loss amounted to CYP 18.5 mln from CYP 18.07 mln losses a year ago. The results were improved to the tune of CYP 4.5 mln from the profit on disposal of one spare A320 engine in January 2005 and one A320 aircraft in March 2005.
The Group’s cost cutting measures helped reduce administration expenses to CYP 7.7 mln from CYP 8.8 mln a year ago, while the impairment charge of CYP 135.000 was reported to represent the final write-down of the goodwill arising from the acquisition by the Company of the shares previously held by other shareholders of Hellas Jet. A year ago, CAIR had booked an impairment charge of CYP 4 mln.
The operating loss was reduced to CYP 21.94 mln from CYP 31.09 mln a year ago. Included in the operating loss for the period is an amount of CYP 2.9 mln relating to redundancy compensation paid to employees who left the Company’s employment during the period.
Pretax losses amounted to CYP 22.1 mln from CYP 30.11 mln pretax losses a year ago. After booking a positive taxation amount of CYP 1.7 mln, CAIR reported net after tax losses of CYP 20.404.000 for the first half of 2005 compared to first half 2004 loss of CYP 25.04 mln and net loss of CYP 39.35 mln booked for the whole of 2004.
The loss per share amounted to 18.38 cent from 22.55 cent.
CAIR booked a profit of CYP 2.1 mln from the improvement in changes of derivative financial instruments to hedge its fuel expenses in the Reserve account while it had to endure the CYP 409.000 charge related to exchange differences on its loan portfolio priced in foreign currency, mostly dollars.
