Gov’t to sell stake in troubled Cyprus Airways

The Cyprus government is considering selling most if not all of its majority stake in troubled state-controlled Cyprus Airways to shore up the national carrier’s ailing finances.
The airline has gone through several overhauls in recent years but has been hobbled by stiff competition from cheaper carriers on its most lucrative routes to Greece and the U.K., as well as rising fuel costs.
Several bidders had shown interest in the 69% stake last summer, but the communist-led government had refused to consider a sale for fear of public repercussions. It has also made an about-face on the issue of casinos, a plan that President Christofias adamantly opposed. Now, his government is considering allowing five licenses in an effort to shore up its near-bankrupt public finances.
The government is also planning to sell off its defunct Eurocypria charter carrier that was shut down under pressure from Cyprus Airways trade unions and management as last-ditch efforts to keep the national carrier afloat. Past bidders have included Poland’s Itaka tour operator, Luxembourg-based Strategic Airlines, and Middle East investors.
"We have prepared a proposal which will be sent to the cabinet … where I will ask a decision be taken by the government that it is ready to negotiate with a strategic investor or partner, not excluding the granting of a majority stake (in Cyprus Airways)," Finance Minister Kikis Kazamias said.
Cyprus Airways posted a net loss of 29.28 mln euros in the first half of 2011, the last available financial results issued by the airline, with similar performances throughout the past decade due to an exorbitant payroll cost and uncompetitive routes.
The only state benefit the airline is allowed nowadays is a 5 mln euro annual subsidy for its loss-making route to Russia because of Turkey’s refusal to allow Cyprus airlines to fly over its territory.
Kazamias, speaking at a tourism conference, said decisive action was needed. "It cannot be like those (actions) taken in the past, just to solve the problem for the short term."
He said the proposal would be taken to cabinet for approval this month.