Cyprus Airways (CAIR) reported significantly reduced losses and details of a forthcoming rights issue aiming to raise CYP 14 mln or EUR 24 mln in fresh capital to overturn the company’s negative net worth and provide desperately needed working capital.
The total revenue of the Group, excluding Eurocypria’s revenue (CYP21,1 million) from the comparative figures of 2006, increased by CYP8,1 million or 12,3% to CYP73,8 million in the first six months of 2007 or to EUR 126.4 mln.
The Group’s operating expenditure, which includes cost of sales and administration expenses was EUR 135.8 mln compared to EUR 173.2 mln a year ago in the same period and appears lower because the 2006 comparative numbers include the operating expenditure of Eurocypria Airlines of CYP22,2 million. Excluding these expenses, the Group’s operating expenditure has increased by CYP0,4 million mainly as a result of the increase in ad-hoc aircraft rental charges by CYP1,6 million, the costs associated with the utilization by the Company of an additional A320 aircraft, which was wet leased to Eurocypria last year, mitigated to a certain extent by the drop in costs achieved through the implementation of the Restructuring Plan.
Redundancy compensation paid to staff which left the Company’s employment as part of the implementation of the Restructuring Plan amounted to EUR0.4 million in 2007, compared to EUR17.4 million in 2006. Excluding the said compensation as well as Eurocypria’s staff costs from the 2006 comparatives, Group staff costs, which are included under operating expenditure, are CYP1,8 million less in 2007 than in 2006.Â
The net loss for the first half of 2007 fell sharply to EUR 11.68 mln from EUR 39.9 mln in the first half of 2006 with the loss per share at 10.52 euro cent, down from 35.99 euro cent.
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Prospects for the second half of 2007
The results of the second half of each year, which incorporate the peak months in respect of passenger traffic, are under normal circumstances markedly improved in comparison to those of the first half.Â
In order to safeguard its cash-flow and liquidity position Cyprus Airways entered into a long-term Government guaranteed loan of EUR78 million, in May 2007, after approval from the European Commission. Part of the proceeds from this loan was used to repay in full the rescue aid loan of EUR51 million.
In addition, it is important to note that the Company’s share capital is expected to be increased before the end of the current year by approximately CYP14 million (EUR24 million) through a rights issue to existing shareholders. This will further improve the Company’s capital base as well as its liquidity.
At the same time the Group is continuing with the next phases envisaged in the Restructuring Plan which are essential in order to cut its costs further whilst at the same time improving its product and customer appeal. Specifically the Group is in advanced negotiations for the setting up of a Joint Venture company that will undertake the passenger and ramp handling of the Company at Larnaca and Paphos airports, following the liberalization of the provision of these services. It is expected that this development will lead to substantial savings for the Group. The possibility of setting up a Joint Venture to undertake its aircraft catering operations at Larnaca airport is also being considered. The reassessment of the commercial orientation and the operational activities of the Company has also commenced with a view to updating and improving them in order to be able to operate more effectively and in this way offer better customer service, face competition, maximize income and reduce expenses.
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Rights issue
The Board of Directors of Cyprus Airways at its meeting held on 27 August 2007 decided the issue of 111.039.500 Rights to be offered on a nil-paid rights basis to the existing shareholders of the Company on the Record Date, as this will be determined upon obtaining the necessary approvals from the competent authorities.
Each Right will be converted at the time of the exercise into 2,52 new shares of a nominal value of CYP0,05 each, at an exercise price of CYP0,05 or EUR 0.085 per share.
It is expected that from the exercise of the Rights 280.000.000 new shares will arise and the increase of capital will be about CYP14 million.
The record date, the trading period of nil paid rights, as well as the exercise period of the Rights, will be decided by the Company’s Board, after obtaining the required approvals from the competent authorities, and will be communicated to the investors through a new Company Announcement.
