Cyprus Airways, the national airline which received a timely approval from the European Commission for government backed loans released its preliminary 2006 results, showing reduced losses.
The loss for 2006 from continuing operations fell to CYP 14 mln or EUR 24.2 mln from a loss of CYP 17.25 mln or EUR 29.85 mln in 2005. The continuing operations consolidate the results of Cyprus Airways Public Ltd and its wholly owned subsidiaries Zenon NDC Ltd and Cyprair Tours Ltd.Â
The loss from discontinued operations fell to CYP 3.6 mln or EUR 6.4 mln in 2006 from CYP 5.3 mln or EUR 9.3 mln in 2005 and comprises the financial of Hellas Jet S.A., the Group’s failed attempt to enter the Greek market.
Cyprus Airways booked a profit of CYP 10.4 mln or EUR 18 mln from the sale of Eurocypria Airlines Ltd to the
Overall, the net loss attributable to shareholders amounted to CYP 7.2 mln or EUR 12.5 mln in 2006 compared to a loss of CYP 22.6 mln or EUR 39.16 mln in 2005.
Total revenue reached CYP 157,0 mln in 2006 compared to CYP 141,8 mln in 2005, registering an increase of 10,7%.Â
Operating expenditure, which includes cost of sales and administration expenses, was CYP 159,8 mln in 2006 compared to CYP 161,0 mln in 2005, registering a decrease of 0,7%.
The drop in operating expenditure can mainly be attributed to the decrease in staff costs (excluding the redundancy compensation) which was the result of the implementation of the Restructuring Plan. This decrease was mitigated by the rise in the cost of fuel which added CYP 6,7 mln to the Company’s expenditure in relation to 2005.
The redundancy compensation of CYP 10,5 mln, compared to CYP 3,0 mln in 2005, represents the compensation paid to staff which has left the Company’s employment during 2006 as part of the implementation of the Restructuring Plan. Excluding the said compensation Group staff costs, which are included under operating expenditure, are CYP 7,8 mln lower in 2006 than in 2005.Â
It should be noted that the loss of 2005 was reduced by CYP 4,1 mln which was the net profit realised on the sale of one aircraft, one spare engine and aircraft spares.
Net financing cost for 2006 reached CYP 2,3 mln in comparison to CYP 0,9 mln in 2005. This is attributed to the interest payable on short-term loans, including the full year effect of the rescue aid loan raised by the Company in May 2005 following relevant European Commission approval and exchange losses incurred in 2006 compared to exchange gains in 2005.
The associated company Cyprus Airways (Duty-Free Shops) Ltd ceased operating on 30th June 2006 when the strategic investor, Hermes Airports Ltd, took over the operation of the duty-free shops at Larnaca and Paphos airports.
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Discontinued Operations
The loss from discontinued operations for 2006 comprises the loss of CYP 0,7 mln made by Eurocypria Airlines Ltd for the period 1 January 2006 to 15 November 2006, the latter being the date on which 100% of Eurocypria’s shares were sold to the Government of the Republic of Cyprus and the final write-off of CYP 3,0 mln due from Hellas Jet S.A to Cyprus Airways. The comparative loss from discontinued operations in 2005 comprises the loss of Eurocypria Airlines Ltd of CYP 0,1 mln and of Hellas Jet S.A. of CYP 5,3 mln.
Prospects for 2007
The Cyprus Airways Group has proceeded to a large extent with the implementation of the Restructuring Plan as submitted to the European Commission for the approval of restructuring aid. The implementation of the said plan aims at ensuring the long-term viability of the Group. Because of the gradual implementation of the planned measures 2006 has not enjoyed the full benefit from cost reductions, something which will happen in 2007 which is expected to show improved results. In 2007 the Company will continue 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.
In order to safeguard the cash-flow of the Group, the Government guaranteed rescue aid loan has been extended until May 2007 after securing the necessary EC approval. The sale of Eurocypria to the Government has also improved the Group’s liquidity.Â
European Commission approval of restructuring aid has been given on 7 March 2007 and the Company will now proceed with the necessary arrangements for the more permanent financing of the Group through a long-term Government guaranteed loan. The Company is also planning, being part of its Restructuring Plan, to proceed with strengthening its share capital base during the course of the current year.
In view of the above the Board of Directors of the Company reasonably judges that the Group fulfills the necessary requisites to continue operating as a going concern.
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