by cyprusgeoff » Thu Aug 06, 2009 11:31 am
Yes, reported in the Mail as well.
Things don't look very healthy.
Cash injection to save ailing airline
By Nassos Stylianou
THE GOVERNMENT is poised to inject a further €35 million into Eurocypria in a bid to keep the state-owned charter airline afloat, reports said yesterday.
According to Finance Ministry officials, there would be no official statement on the reports, however Finance Minister Charilaos Stavrakis is expected to make comments on the issue today. The reports said that the additional capital was expected to boost the liquidity available to the troubled airline.
“Eurocypria has an annual turnover of some €100 million. Our paid-up capital is €8,750. So you can imagine with such limited liquidity, we are in no position to face the seasonality of revenues that is the basis of the tourism industry,” Eurocypria Executive Chairman Lefteris Ioannou told the Cyprus Mail.
In the plan proposed by the Finance Ministry, the anticipated investment would be conditional on setting into motion their plan of action for restructuring Eurocypria.
According to the recommendations of the plan reported in daily Politis yesterday, the state-owned carrier will renegotiate its contract with its biggest client, UK tour operator Olympic Holidays, as it looks to agree on a proposed 10 per cent price increase. The airline is also expected to introduce a rise on the prices it offers to its other clients.
Eurocypria is currently also in talks with trade unions over a drop in wages and bonuses awarded to staff that will come into effect next year, a move that would see the airline save in the region of €1.8 million annually.
Given the current global financial crisis and with questions being asked as to whether the Finance Ministry’s fiscal policy is overstretching state coffers, critics are asking why the government is continuing to prop up the ailing airline, which has been in a dire financial situation for the last two years, carrying accumulated losses in the order of €20 million as well an estimated €22 million debt.
Earlier this year, Stavrakis insisted that under no circumstances would Eurocypria be allowed to go under and that the Ministry would support any measures to save the airline because it plays a fundamental role in bringing tourists to the island. According to January figures, Eurocypria was responsible for the arrival of some 300,000 tourists to Cyprus, a share of about 15 per cent share of the incoming market.
Eurocypria was sold by Cyprus Airways to the Government of Cyprus in June 2006 for around CY£13.4 million (€22.9 million), mainly to provide a cash injection to the national carrier.
While a €35-million capital injection will provide some short-term relief for Eurocypria, its long-term financial stability is still in doubt. The airline took out loans in early 2009 in anticipation of an injection of capital and both Eurocypria and outside consultants have submitted studies on the airline’s economic viability.
However the Air Transport Licensing Authority (ATLA) has the authority to “suspend or revoke the licence if they are no longer satisfied that the air carrier can meet its actual and potential obligations for a 12-month period” and will continue to monitor the situation at Eurocypria closely.
Is this the Government supporting lame ducks or lame airline?
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