Door reopens on airline incentive scheme

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The government has left the door open to recalling its decision to freeze an incentive scheme supporting airlines to keep Cyprus on schedule through the COVID and the Ukraine war.

In comments to CyBC TV, Transport Minister Yiannis Karousos said he is in talks with Finance Minister Constantinos Petrides over the future of the incentive scheme, following the fallout with Cyprus airports operators Hermes.

He told reporters the decision was not to bury the scheme entirely but to postpone its renewal as the current one has expired.

Karousos’ comments come a day after the Finance Ministry said the government does not have plans to prepare a new incentive scheme.

The suspension of the incentive scheme was essentially the response to criticism and allegations that the government was ready to hand Hermes an extension of the concession agreement at the state’s expense.

MPs and Auditor General Odysseas Michaelides criticised the state’s readiness to expand the concession agreement for another 5.5 years while the company has failed to carry contractional obligation to expand airport infrastructure.

Michaelides said a draft agreement between the government and Hermes would extend the 25-year concession to November 2036.

In exchange, Hermes would waive any claims for compensation for financial losses sustained during the pandemic – when the government closed airports to commercial traffic for several months — and the fallout from EU sanctions on Russia.

However, as noted by the Auditor General, Hermes had yet to commit to undertaking expansion works on the two airports.

The project, costing €250 mln, should have gotten underway between 2017 and 2018.

Business leaders have warned the island’s tourism will suffer collateral damage from a quarrel between the government and Cyprus airports.

The General Secretary of the Cyprus Chamber of Commerce, Marios Tsiakkis, told state radio CyBC that “authorities should rethink the matter, address any issues without blowing everything up in the air”.

The subsidy scheme saw airlines receive compensation if their aircraft arrived in Cyprus with less than 60% capacity.