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Split over value of Eurocypria

By Charlie Charalambous

THE government and Cyprus Airways are at odds over the true value of budget airline Eurocypria but both sides hope to close the gap to reach an agreement.

Both sides are still trying to thrash out the terms of the deal as the evaluations put on the table show a disparity of Θ3m.

The price range set by an independent auditing house Pricewaterhousecoopers is being questioned by negotiators, with the government wanting to go lower and the company aiming high.

Independent estimates put the purchase of Eurocypria in the sale bracket of between Θ12.5-15.5mat going market rates.

Reportedly, the sum offered by the government is Θ11m while Cyprus Airways are reluctant to go below Θ14m.

Nevertheless, CA chairman Lazaros Savvides was optimistic that both parties will reach a "positive conclusion" during a meeting scheduled for today.

After a second round of negotiations on Tuesday Finance Minister said there were still loose ends that needing tying up.

More work
"There needs to be more work on the questions both sides have raised and clarification on some of the hypothesis used," said Sarris.

"On Friday there will be a new meeting during which we will agree terms under which the government will buy Eurocypria," he added.

But the minister didn't want to enter into a discussion about the sum, as the final sale price remained a "sensitive" issue.

"There are different things that we must be absolutely sure about because our effort is to have negotiations that are as transparent as possible."

"Our aim is to find a price so that nobody can say the shareholders were cheated or that the government has given a subsidy to this company which shouldn't happen in a free market."

A four-man ministerial committee is negotiating with private shareholders to ensure the best price possible for CA. However, there are ethical questions about the government buying from a company that it basically owns.


Cyprus Airways is now preparing an austere restructuring plan ditching nearly 400 jobs axed and pay cuts of up to 25%.

The redundancies will kick-in from March while the pay cuts were enforced from the start of the year.

The government buy-out of charter subsidiary Eurocypria gives it alternative option if the tough restructuring plan fails to save the national carrier from bankruptcy.

If Cyprus Airways shuts down, Eurocypria would operate as an independent airline that would keep open the flag carrier's slots at major airports and keep tourists coming to Cyprus.

The charter airline employs a 150 staff and has four aircraft in its fleet.

The airline is currently losing Θ25m a year and its cash flow is beginning to dry up.

Saving the national carrier is seen crucial to the tourism industry, which is a key contributor to the economy.

In the reworked restructuring plan, the government seeks to slash the workforce by a minimum of 385 staff, while offering a better severance package to employees who leave voluntarily.


A list is being prepared of staff who will get the chop, while some of those who have offered to go will not be allowed to because they deemed essential.

Reducing the 1,800-strong staff, cutting wages, scrapping or decreasing allowances and perks, plus bringing in outsourcing are included in the economy drive to save at least Θ21m annually.

Unions have yet to be convinced that the airline can turn things around and make a profit.

The company presented its business strategy to Brussels last November, so the European Commission could approve a government loan guarantee of Θ70m.

Tough competition following liberalisation after the island's May 2004 EU entry, coupled with losses incurred by its Greek subsidiary Hellas Jet, forced Cyprus Airways to lighten the load.

That involved downsizing the fleet by two Airbus A320s and shedding Hellas, plus loss-making routes were also scrapped.

News from Cyprus Weekly © 2008