Cyprus Airways suffered a loss of profits of 19 million euro after tax, compared to a profit of 232 thousand euro in 2010.
According to a press release issued here on Wednesday by the company, the Board of Directors approved the indication of results for 2011 on February 28.
Total revenue of Cyprus Airways reached 212.4 million euro in 2011 compared to 236.3 million euro in 2010, registering a decrease of 23.9 million euro or 10.1%.
“This considerable decrease in revenue was mainly attributed to the reduction in passenger and freight revenue, despite the improvement in yields”, the press release states.
The number of seats available for sale was reduced as a result of the abandonment of unprofitable routes and the limited demand due to the economic downturn and the intensifying competition.
Consequently, the number of passengers carried decreased in comparison to last year.
However, it is noted that improvement was recorded in the revenue passenger load factor.
Operating expenditure for the company, including the cost of sales and administrative expenses, was 264.7 million euro in 2011 compared to 259.8 million euro in 2010, registering an increase of 4.9 million euro or 1.9%.
The increase in operating expenditure was mainly the result of the non-recurring cost of redundancy compensation given to staff leaving the Company following the implementation of a Redundancy Scheme.
In addition, the fuel prices internationally recorded a further increase in 2011 of around 40% in comparison to last year.
Increases were also recorded in the cost of aircraft operating leases and aircraft maintenance costs whereas en route charges, landing and handling fees, catering and selling costs decreased due to the drop in the number of flights operated and passengers carried.
The compensation received by the company by the state for the prohibition to overfly Turkish airspace for the year 2011 has reduced the relevant expense categories, the press release states.
Other income rose to 31.7 million euro in 2011 and includes mainly the benefit which arose from the exchange of slots at London Heathrow airport between the Company and Virgin Atlantic Airways of 22.0 million euro as well as the profit from the sale of one A320 aircraft and three aircraft spare engines.
Additional income of 18.6 million euro in 2010 included the compensation for the prohibition to overfly Turkish airspace for the years 2004-2009 as well as the profit from the sale of one A320 aircraft.
The company recorded 20.6 million euro in operating losses in 2011 compared to 4.9 million in loss in 2010.
Net finance income came in 2011 to 1.7 million euro compared to 1.9 million euro in 2010.
This decrease is mainly attributed to the higher interest rates on loans, despite the repayment and thus reduction of outstanding loan and finance lease obligations.
The profit from discontinued operations in 2010 of 3.4 million euro resulted from the sale of 100% of the shares in Zenon N.D.C. Ltd to the Sabre Group of companies.
“The current year continues to be affected by the economic downturn and the intensifying competition in the main markets where the Company operates”, the company states.
The aggravation of the financial crisis in Greece and the painful remedy measures imposed is expected to have an adverse impact on the airline industry.
In addition, it is noted that the current year is characterized by the instability in the energy sector, the constant currency fluctuations and in particular those of the US Dollar and the Euro, the fluctuations in interest rates, the increase in unemployment and labour insecurity mainly in Europe as well as the political unrest in the Middle East region.
According to the press release “the Group does not have the ability to influence these factors which have the potential to adversely affect the effort to secure its long term viability”.
The company is formulating an Action Plan in order to make the Company competitive and to secure its long term viability.
The main pillars of the Plan include a share capital increase to improve the Company’s capital base, the curtailment of operating costs, a reduction in labour cost and removal from the Collective Agreement of distortions in its mode of operation, the disposal of aircraft and respective decrease in staff numbers as well as further streamlining of the operating schedule and the introduction of measures to increase the Company’s revenues.
It is estimated that the implementation of the measures of the Action Plan will lead to a drastic reduction in the operating losses for 2012 in comparison to 2011 and will have a favourable impact on the long term viability of the Company.
It should also be noted that the efforts for identifying a strategic investor will continue.
