Purchase to reduce CAIR debts by CYP 15-20 mln
The government plans to spin-off Eurocypria, the wholly-owned charter subsidiary of Cyprus Airways, and convert it into a scheduled airline in the event that unions reject the government’s rescue plan.
The Council of Ministers has given the Minister of Communications Haris Thrasou the go-ahead to put into motion the necessary steps to proceed with the purchase of Eurocypria, presently valued at CYP 15-20 mln by PricewaterhouseCoopers.
Government spokesman Kypros Chrysostomides said that the state may also decide to buy or lease additional planes from Cyprus Airways as Eurocypria is turned into a scheduled carrier, but there was no mention of how Cyprus Airways’ slots at prime European airports such as Heathrow would be treated.
So far, the engineers union of Cyprus Airways ASISEKA decided by a wide margin of 78% to support the restructuring plan, but a unanimous decision from all five unions is necessary in order to proceed with the rescue plan.
Thrasou told the press after an extraordinary meeting of the Cabinet on Saturday that the government has appointed a Ministerial Committee which will make the negotiations with the Cyprus Airways Board of Directors, on the basis of a report by independent experts.
He added that the Cabinet reaffirmed its decision that the restructuring plan for Cyprus Airways remains unchanged. The Cabinet gave the trade unions until Wednesday to accept or reject the restructuring plan.
Commerce, Industry and Tourism Minister George Lillikas said that the purchase of Eurocypria aims to secure that Cyprus will not remain without an airliner if Cyprus Airways closes down.
The current rescue plan envisages some 500 across-the-board layoffs, salary reductions and other cost cutting measures.
The Eurocypria Scenario
Market analysts believe that the Eurocypria option is the boldest move made the present government, as this is a lean-operated, efficient airline. It flies with no spare capacity and its modern fleet of four Next Generation Boeing 737-800s will be enhanced with a fifth delivery in May to satisfy growing demand.
The analysts add that the charter subsidiary’s options would best be described to the Swissair takeover by its subsidiary, Swiss, that has inherited all the routes and other assets of Swissair. In such a scenario, experts believe that Eurocypria only needs two or three months to restructure its operations and take over the main Cyprus Airways route network if necessary, but not necessarily inheriting the mother company’s obligations.
Cyprus Airways is also burdened with an ageing Airbus fleet that carry a high cost to maintain and are less fuel efficient than the brand new Boeings.
Eurocypria posted net profits of CYP 2.0 mln in 2004, a four-fold increase of the 2003 profits of CYP 500,000.
Upbeat about Eurocypria’s comeback, General Manager Yiorgos Souroullas told the Financial Mirror recently that the company is on a profitable path of expansion, raising its client list by 50%, mostly in Europe, with Cyprus accounting for only 10% of its customer base.
Souroullas credited his company’s achievements to the cost-efficient fleet of four Boeings leased from International Lease Finance Corporation (ILFC) that recently marked a milestone 10,000th flight of the fleet with engine-maker CFA International, and its highly productive staff and crew.
“We have flexibility in decision making, as we are a private company, and enjoy a high use of aircraft, clocking some 7,000 hours of flight in two years, that averages out to 11 hours a day and a technical reliability of 99.5%”.
One of Eurocypria’s efficiencies, apart from the fact that it has a young crew employed on different terms to the ailing Cyprus Airways, is that it uses a single crew for its flights, apart from CAIR’s union-imposed policy of using two crews for each leg of the farther scheduled route flights.
Souroullas said the 737-800 NextGen “is ideal for charter operators, which is why it is also used by well-known low-cost operators such as Ryanair and easyJet.”
After beginning operations in 1992 with two brand new Airbus A320s, Eurocypria added a third A320 to its fleet in April 1993 and a fourth in March 2001.
Between February and April 2003, Eurocypria replaced its Airbus fleet with four brand new Boeing 737-800w aircraft, capable of flying up to 5,380 kms, each with 189 leather seats and the latest in-flight entertainment systems.
Eurocypria has a long-term commitment up to 2011 to lease Boeings from ILFC.
