Commission to decide on Cyprus Airways loan

The European Commission is set to decide on whether to give its approval to a crucial CYP70 mln loan that Cyprus Airways (CAIR) is seeking from the Cyprus government. The decision is expected to be discussed on Wednesday, February 7, 2007, but there may be a delay considering that various directorates have not yet forwarded their report to the EU’s Transport Commissioner.
The CYP70 mln is a government-guaranteed loan, approved last year and is part of a ‘restructuring plan’ for CAIR, subject to the Commission’s approval. The gradual repayment of a previous £55 million loan to the airline, part of a drastic ‘rescue plan’, is a sine qua non.
In late 2006, CAIR sold Eurocypria to the government for CYP 13.4 mln in a move to ensure that Cyprus would have an airline even if CAIR was forced to terminate its operations. The European Commission said it would look into whether the sale of Eurocypria amounted to an indirect subsidy. State subsidies are forbidden under EU law.
Although the two airlines are now separate legal entities following the sale, their administrative boards still have three common members. This has prompted moves towards a reshuffle.
CAIR chairman Lazaros Savvides who wishes to vacate his seat and return to manage the Ministry of Interior has said the Board reshuffles will be made when all the crucial elements regarding the airlines’ future are known.