FROM Monday and up to February 28, holders of Cyprus Airways (CY) tickets with departure dates from February 10 until October 25 are being told to contact any travel agent licensed by the Cyprus Tourism Organisation (CTO) to issue new tickets, the government has announced.

“The above arrangement is for passengers that hold tickets for Cyprus Airways flights, who have not submitted an application for reimbursement to any credit or debit card or travel insurance,” the announcement said.
It adds once passengers have been re-issued a ticket with another airline, they will no longer have the right to submit a claim for reimbursement to any credit or debit card or travel insurance.

Any additional costs concerning re-ticketing, the announcement said, will be undertaken by the Republic of Cyprus.
If passengers miss the February 28 deadline, they will not be allowed to claim a replacement ticket and no further arrangements will be made by the government, the announcement said.

When the airline carrier was closed down earlier in the month, Top Kinisis travel agency was appointed by the government to re-ticket Cyprus Airways passengers, with departure dates up to February 9.

By Constantinos Psillides

KEEPING Cyprus Airways (CY) operational was not a legally feasible option, said Auditor General Odysseas Michaelides, following the conclusion of a probe into the shutdown of the national carrier.

The auditor general’s office was tasked by President Nicos Anastasiades to conduct a probe regarding a number of issues raised by the pilots’ union PASYPI and other CY workers on the conditions leading to the shutdown of the airline earlier this month.

Michaelides concluded that the government had no legal alternative other than to try to secure a strategic investor, which would lead to setting up a new company operating under the same name and logo.

“The procedure followed was correct and based on the advice of experienced legal councillors,” concluded the probe.

Michaelides also found that the committee consisting of Communications Minister Marios Demetriades and Finance Minister Harris Georgiades – tasked with overseeing the procedure for finding a strategic investor – did not exhibit any preference towards any of the bidders.

CY workers had claimed – in a number of instances – that the two ministers favoured Ryanair and Aegean Air both of which were in competition with CY and ignored other companies that were supposedly ready to give tens of millions to acquire CY.

“The terms set by the committee were general and inclusive enough to lead us to the conclusion that no preference was shown to any single company,” concluded the probe, adding that any decision made to sell off airline property was not harmful to the goal of securing a strategic investor.

The workers, especially the pilots’ union, blasted the state for selling the company’s three timeslots at Heathrow airport, accusing the finance ministry of stripping the company of its assets in order to sell it at a lower price to one of its competitors.

Regarding the apparent conflict of interest stemming from the fact that KPMG Cyprus acted as an advisor to the committee, despite KPMG in Ireland being employed as auditors for Ryanair, Michaelides notes that it indeed raises issues but adds that it’s a common occurrence in such cases.

“What is interesting is that in the non-binding proposal submitted by Ryanair for the acquisition of Cyprus Airways on September 3, KPMG Cyprus and KPMG Ireland are listed as its financial advisors, leading KPMG Cyprus to issue a statement on October 10 clarifying that it was never approached to provide its services. It would indeed be reprehensible if KPMG Cyprus acted as an advisor for a company submitting a bid which they oversaw. This goes to show that large companies like Ryanair look upon Cyprus as country were institutions don’t work like they are supposed to,” he said.

The government is currently in the process of setting up a new airline, in collaboration with the private sector. The new company will be privately owned.

On January 9, the European Commission ruled that a 2012-13 €65m state aid package to CY had been in breach of EU competition rules and the airline was ordered to pay back the full amount. The government revoked CY’s operating licence later on the same day.

Following a decision by the government-appointed board of directors, the company is now under voluntary liquidation.

By Constantinos Psillides

An investigation by the auditor general’s office found no indication that President Nicos Anastasiades had anything to do with Ryanair’s bid to buy off the now defunct Cyprus Airways (CY), according to statement issued on Monday.

The probe was in response to a public outcry after daily Phileleftheros run a story in November saying that according to a report drafted by CY’s financial advisers KPMG, the law firm founded by Anastasiades had represented the low-cost airline back when it had submitted a bid to buy the former national carrier.

Prior to its shutdown, CY had tried to secure a strategic investor. Ryanair and Aegean Air were the favourites, before the airline ceased operations early in January.

Both Anastasiades as well as his law firm – where his daughters are employed – said they initially acted as legal advisors for Ryanair in relation to Cyprus Airways but subsequently terminated their relationship with the Irish airline.

The law firm had released then a communiqué to the low-cost airline, dated September 30, through which it had informed Ryanair in writing that they were no longer interested in acting as their legal advisors in the process.

The president had also admitted that he had a short meeting with Ryanair CEO Michael O’Leary and a representative from his law firm on October 8.

The probe concluded that the meeting was not relevant to the scope of the investigation.

“Even if the issue of Cyprus Airways came up, which it probably did, what we are here to determine is whether the president or his law firm had directly or indirectly anything to do with the decision made from that moment on,” read the statement, adding that the president didn’t gave any indication during the meeting that he would intercede in any way to favour Ryanair.

But while the probe clears Anastasiades of any suspicion, it does note that the law firm’s actions raised ethical questions.

“The law firm made a mistake when it decided to represent Ryanair and made an even worst mistake when it sent two of its lawyers to work with the Soteris Pittas law firm, especially since these two lawyers tried to hide the true identity of their employer,” read the statement.

Soteris Pittas LLC was the law firm that assumed the airline’s legal representation.

The auditor general states that despite the law firm’s mistakes, no evidence was found indicating that the firm tried to influence the procedure in any way.

Cyprus Airways’ creditors will convene a general assembly meeting on Friday in order to approve an extraordinary resolution of voluntary liquidation.
The President of SYNYKA SEK Trade Union Vangelis Mappourides told CNA that Cyprus Airways staff would attend the meeting but they were not planning to protest.

“We will assess the situation today and tomorrow and we will see how to proceed,” he said, adding that they were expecting a response from the government as regards their future.

The state-owned airline entered voluntary liquidation on January 9, after the EU Commission ruled that it should return €103 million in state aid it had received since 2012, breaching EU rules.

A press release issued from the airline on Tuesday said the meeting would consider an extraordinary resolution for the voluntary winding up of the company which may be passed by the shareholders, the nomination of a liquidator for the purpose of the winding up of the affairs and the distribution of the assets of the company. (CNA)

By Evie Andreou

Cyprus’ air connectivity is gradually being restored as airlines are announcing more flights to fill in the gap left by the closing down of Cyprus Airways (CY), grounded earlier in the month after the EU Commission ruled that it should return some €66m in state aid.

Communications Minister Marios Demetriades had said last week that air connectivity was still high despite the demise of the national carrier, and that almost all of the routes on which Cyprus Airways had been operating were covered. The national carrier had a 10 per cent share in the Cyprus aviation market.
As of Tuesday, Aegean Air will fly from Larnaca to Tel Aviv three times a week.

The Greek airline had announced new destinations for Cyprus such as Kiev, Paris, Munich, Milan, Rome and Beirut including Heathrow. CY had ceased its flights to Heathrow in September opting to use Stansted Airport instead.

The Greek airline, whose new flight plan is expected to begin by the end of March, will also be relying heavily on flights to Greece, increasing their daily flights by 60 per cent.

In addition to their flights to Bucharest, Romanian low cost carrier Blue Air, started two weeks ago flying from Larnaca to Athens seven times a week and three times a week to Thessaloniki.

The representatives of Blue Air in Cyprus, Orthodoxou Aviation said that reservations for the two Greek destinations have exceeded their expectations.
Earlier in the week, British Airways announced that by the end of March, they were to increase the number of flights from Larnaca to London Heathrow, from 7 to 13 per week.

The airline is also running its regular London Gatwick to Paphos and London Gatwick to Larnaca flight schedule.
Travel agents and the consumers association had expressed their concerns that in the long term the closing down of CY would affect airfare prices since they anticipated increase in flights for 2015 rather than replacement of the existing ones.

The airlines however, are so far advertising competitive prices. Aegean Airline’s deputy Eftyxhios Vasilakis had said at the presentation of his company’s activity expansion in Cyprus that the one who survives in the free market is the one who provides consumers with the best combination of quality, value and cost.

Avgoustinos Papathomas and David Dunckley, financial advisers, have been appointed as liquidators for the now defunct Cyprus Airways (CY), creditors and shareholders decided during an assembly on Friday.

The assembly was eventful, according to the Cyprus News Agency. It reported that former workers and shareholders protested the decision, claiming the whole procedure was a sham. Both the workers and the investors present at the meeting stormed out of the auditorium, shouting at the panel comprised of government officials, the report said.

CY private investors are in the process of suing the company, claiming that the airline’s closure by the government has cost them not only the capital they poured in but also deprived them of any right to recover their investment.

Polis Polyviou, the legal representative for Cyprus Airways responded that the only authority that could proclaim the assembly illegal were the courts.
Cyprus Airways is 93 percent owned by the state, the rest is owned by some 4,000 private investors. The former national carrier was grounded in January, after the EU Commission issued a ruling ordering the company to return some €66 million it had received in state aid in 2012.

The assembly also appointed a committee to oversee the liquidation process, comprised of three officials from the office of the Accountant-general and two representatives from the workers’ unions.

By Elias Hazou

NO one connected to the former law firm of President Nicos Anastasiades appears to have broken the law, the Attorney-general said yesterday.

“Based on existing evidence, there does not appear to be cause to investigate a possible criminal offence by any person or legal entity,” AG Costas Clerides said in a statement.

Issues pertaining to ethics or potential conflict of interest do not fall under the scope of the Attorney-general’s office, he added.

The AG had been asked by Anastasiades himself to look into the level of involvement of Nicos Chr. Anastasiades & Partners – a law firm the President co-founded – in representing Ryanair in the latter’s bid to buy off the now defunct Cyprus Airways.

Last week, Auditor-general Odysseas Michaelides, having investigated the same, said he found no indication that Anastasiades was involved in the process.

That probe was launched after it was reported that the firm had represented Ryanair back in September when it had submitted a bid to buy the former national carrier.

The law firm said they initially acted as legal advisors for Ryanair in relation to Cyprus Airways but subsequently terminated their relationship with the Irish airline.

The firm had released a letter to the low-cost airline, dated September 30, through which it had informed Ryanair in writing that they were no longer interested in acting as their legal advisors in the process.

Ryanair was taken over by Soteris Pittas LLC.

However, in a meeting discussing Cyprus Airways on October 31, along with Pittas were two lawyers who, it transpired later, worked for the Anastasiades law firm.

The two apparently tried to disguise their identities by signing with different names.

The “presence, role and comport” of these two lawyers at the October 31 meet is, meanwhile, to be investigated by the Bar Association, following a decision by the Attorney-general, who chairs the association.

Over the weekend, Fanos Philippou, one of two senior partners in the law firm, took full responsibility for the October 31 meeting, saying it was his own decision to send the two lawyers.

In a statement, Philippou said the two lawyers were asked to attend by Soteris Pittas LLC in order to assist with any pertinent information on the Cyprus Airways case. The two kept a low profile throughout, and did not stay there for more than 30 minutes.

Philippou rejected the notion that the two lawyers disguised their identities.

According to Philippou, on assuming office in March 2013, Anastasiades had given his former law firm strict and explicit instructions to refrain from representing any clients “whose interest depends on government decisions,” in a bid to avoid even the veneer of conflict of interest.

However, on Philippou’s own recommendation, on September 21 last year the firm agreed to represent Ryanair regarding its interest in Cyprus Airways. He subsequently informed the President of this decision.

“Mr. Anastasiades was categorically against this, and so on September 30, we addressed a letter to Ryanair terminating our association.”

On October 8, Philippou said, he personally accompanied Ryanair CEO Michael O’Leary to a meeting with Anastasiades at the Presidential Palace.

However, during a session of the Cabinet held later the same day, Anastasiades instructed the body to reject Ryanair’s proposal, arguing that the airline’s bid was “unacceptable.”

This in itself, far from suggesting impropriety or conflict of interest, proved the opposite, argued Philippou.

He also sought to play down the role of Anastasiades’ two daughters, who are partners in the same law firm, something which has prompted criticism that the President continues to have ties to the company despite his repeated denials.

According to Philippou, Anastasiades’ daughters became partners there after their father’s election to the Presidency. What’s more, he said, the daughters are not managing partners in the company and have no say in its running.

It is clear, Philippou said, that the allegations of improper conduct are politically motivated against the President.

But the Greens party was unconvinced. In a statement yesterday, they set out the following ‘logical’ question: “If the law firm is independent of the President, as it is being claimed, how is it that it immediately heeded the President’s call [for the law firm to terminate its association with Ryanair]?”

Also over the weekend, Anastasiades issued a terse statement “lamenting the political ethos of all those who deliberately seek to twist the facts.

“If it were true that I went along with, or was implicated, in any conflict of interest, would I have asked the Commissioner for Privatisations to initiate a new call for interest [in Cyprus Airways], thereby eliminating Ryanair?”

Despite the explanations, DIKO leader Nicholas Papadopoulos banged on. Speaking to reporters on Sunday, Papadopoulos drew attention to Anastasiades’ earlier pledge to resign if the law firm was found to be involved with Ryanair’s decisions.

Asked whether in his opinion the President should therefore now step down, Papadopoulos dodged a direct answer.

“I want him to clarify what he meant. He should explain to us whether he was playing with words or taking people for a ride.”

The state has decided to grant over €10 million to Cyprus Airways (CY) workers after the airline closed in January when the EU ordered it to return millions in illegal state aid, it was announced on Tuesday.

Deputy government spokesman Victoras Papadopoulos said the government was ready to plug a shortfall in the provident fund in excess of €9 million.

“The deficit will be covered through a proposal that will be put to the cabinet tomorrow and passed on to parliament immediately so that Cyprus Airways workers receive their share of the provident fund as soon as possible,” Papadopoulos said.

The government has also decided to pay €2.7 million in compensation to those laid off between December 2012 and December 2014 so that they were treated the same way as those who lost their job when the airline shut down last month.

Compensation will also be paid to workers whose employment terms did not provide for one. The amount will be determined later.

Unions also demanded that CY workers be employed in other parts of the public sector but the spokesman said there were many legal and financial constraints.

“But the government is ready to continue discussion with the unons to see if a solution can be found.”

Cyprus Airways, the island’s national carrier for 67 years closed down in January after the EU commission ordered the company to return €66 million deemed as illegal state aid.

Unable to do so, the company was deemed unviable and ceased all operations immediately.

By Constantinos Psillides

Travel agency Top Kinisis, which was tasked by the government to handle passengers of the now defunct Cyprus Airways, has asked the finance ministry for more money as it cannot cover the increased cost of some replacement flights.

According to a company official, the travel agency expects a sharp rise in ticket prices over the Easter holidays – Orthodox Easter Sunday is on April 12 – and the budget allocated by the government will not be enough.

“We were given a budget by the state and asked to accommodate all passengers that weren’t interested in a full refund. Where it was possible we would suggest a direct flight or else go with connecting flights,” said the company representative.

“Unfortunately, ticket prices have gone up and the money allocated by the state is not sufficient to cover the cost of the [new] ticket. To that end, we have filed an official request with the finance ministry and are awaiting their answer any day now.”

The state allocated an average €320 per passenger for travel arrangements. For people who had booked with Cyprus Airways well in advance, the figure might have been close to the cost of the fare but the nearer a travel date is, normally the more expensive a ticket becomes, especially at times like Easter.

When announcing the CY shutdown in January, Finance Minister Harris Georgiades pledged that the state would not leave any ticket-holder stranded without offering a valid travel alternative, or a full refund.

The Cyprus Mail was contacted by a family of four saying they had been asked to pay an extra €480 in total to replace a direct CY flight they had booked from the UK.

“Top Kinisis are asking me for an extra €480 for a family of four unless I take indirect flights which my wife is too ill to do so,” said the man, who feels entitled to a direct flight given that was what he had booked and paid for in the first place with CY.

“The government said it would undertake any additional costs for replacing tickets,” he added.

Indeed the government in its announcement at the time said: “It is noted that affected passengers shall not bear any additional costs in relation to the reissuance of their tickets, as such costs will be undertaken by the Republic of Cyprus.”

The Top Kinisis representative said the company had encountered a handful of such cases. “We are aware of these cases and almost all of them have to do with medical problems. We included those cases in our appeal to the finance ministry so we should be able to accommodate the passengers once we get the green light from the ministry,” said the representative.

There could however be many more such cases over the busy summer period as the last ticket purchased for Cyprus Airways was for October 2015.

Complaints stemming from complications due to the Cyprus Airways shutdown also extend to postage. Having lost their biggest distributor, the Cyprus post office is now struggling to operate smoothly.

The Cyprus Mail contacted Cyprus Postal Services director Andreas Gregoriou, who admitted that there is indeed a problem.

“It is true that when it comes to the island’s connectivity, shutting down Cyprus Airways was a blow. Our only means of transporting post is almost exclusively by airplane, which are usually filled with luggage or cargo. Planes transporting post – especially to the UK – go through connecting flights with all the subsequent problems. Bags forgotten, left overnight or even in some instances lost. We are very much aware of this problem and we are doing our best to resolve it,” said Gregoriou.

The airline was shut down in January after the European Commission ruled that a €65 million state aid package violated competition laws. The ailing carrier was asked to give the money back, which led to its bankruptcy.

All Cyprus Airways ticket holders have up to February 28 to either be refunded or make alternative travel arrangements, the government said on Tuesday.

Those who do not exercise this right by February 28 will not be able to make a claim, an announcement said.

Ticket holders are asked to contact either travel agencies licensed by the Cyprus Tourism Organisation. The CTO itself has no involvement and ticket holders should not call there.

The state has commissioned Top Kinisis (77787878 or 22 869999) to deal with ticket holders. People can either ask for an alternative travel arrangement or be fully refunded for their purchase.

Cyprus Airways was grounded in January after the European Commission ruled that a state aid package was in violation of competition regulations. The company was ordered to return €65 million, which triggered the shutdown.

Evie Andreou

Consultants KPMG, which were hired by Cyprus Airways (CY) to find a strategic investor will the first to be called by the ad hoc committee tasked with uncovering why the national carrier went bankrupt, the committee’s head Nicos Tornaritis said on Friday.

Tornaritis told the Cyprus News Agency that on Wednesday the committee begins its “serious investigation into the whole issue”.

Cyprus Airways was closed down in January, after 67 years of operation, after the EU Commission ruled that it should return some €66m in state aid.

The committee will start investigating decade by decade, starting at the beginning of 1980, Tornaritis said.

He added that all documents concerning the national carrier that were in the archives of Parliament will be given to MPs and they will also be made public so that the process was transparent.

The documents, dated from 1980 until 2015, include letters, reports, financial statements, budgets, minutes, and other documents on the company’s finances, assets, the purchase and leasing of aircraft.

Documents also concern Eurocypria, the charter airline subsidiary of CY set up in 1992, which ceased operation in November 2010, and the creation of the Greek-based CY subsidiary Hellas jet, which began operations in 2002 and ceased in 2010.

Tornaritis said that after KPMG, CY’s legal consultants would be called, followed by the former directors of the company, former board members and ministers “to be able that way to have a full picture on what took place and what went wrong in every time period,” Tornaritis said.

He added that documents had been requested from everyone involved and that during each session of the committee, representatives of the finance ministry and of the attorney-general’s office would be present.

“It is an arduous task; we are talking about thousands of documents and decisions” said Tornaritis.

By Jean Christou

DEPUTIES investigating the demise of Cyprus Airways (CY) are demanding to know why the airline bought 14 aircraft between 1980 and 1990 and why staff numbers increased by a whopping 40 per cent in 1987, making labour costs the state-owned company’s single biggest overhead.

The discussion into the financial history of CY, which folded on January 9 this year when the European Commission ruled that the national carrier needed to return some €65m in illegal state aid, is being discussed at an ad-hoc parliamentary committee.

Questions were put to Finance ministry and Audit office officials on Friday, along with the airline’s long-time auditors KPMG.

Committee chairman Nicos Tornaritis presented the officials with a list of questions deputies wanted answered by the next session, which will take place next week. “We have to get to the truth,” he said.

According to the Cyprus News Agency, KPMG representative Nicos Syrimis said that between 1981 and 1989 CY did not have any financial issues.

Asked about the huge bump in staff in 1987 from 1,080 to 1,500, he said it was more or less justified as the airline had increased business.

Syrimis said there had never been a hint of fraud in the airline’s accounts.

DISY MP Marios Mavridis asked that not only should financial records be handed over, but also internal memos and documents.

Speaking after the meeting, DIKO MP Antonis Antoniou said that the Commission was starting with the purchase of new aircraft and the staffing levels.

EDEK’s Nicos Nicolaides said there had obviously been acts and omissions that had contributed to the downward spiral of the company. He also mentioned “unnecessary recruitment” and questioned “who had advised the purchase of new aircraft?”

EVROKO deputy Demetris Syllouris said it was crucial to examine all documentation from the decade 1980 to 1990, particularly on the purchase of the new aircraft.

By Constantinos Psillides

A FORMER general manager at Cyprus Airways (CY) used a company plane to transport his son’s car to another country at the airline’s – and taxpayer’s expense – deputies heard yesterday during a meeting of the ad hoc committee into the national carrier’s demise.

The incident was just one of several cases of mismanagement that were related to MPs by CY’s former legal adviser and its accountants.
Mismanagement, ineptitude and too-close ties with political parties and the government, led to CY’s downfall, according to the company’s legal advisor Polys Polyviou, who appeared before the ad hoc parliamentary committee. The committee is examining company documents dating back more than 30 years.

“Cyprus Airways was a miniature version of Cypriot society, and as such had its [society’s] positive and negative traits,” he said.
Polyviou spoke of the company’s inner workings and how it was continually exploited by managers, and politicians for political gain and profit.

KPMG’s managing director Andreas Christofides was also present and gave a shocking account of what took place in the company in the 1980s.

Christofides made specific mention to the term in office of one of the company’s former managers, Evdokios Savva. KPMG was appointed as an auditing firm to look into the company’s finances following Savva’s resignation in July 1981.

Savva, deputies heard, kept a secret account in a London bank where “politically exposed persons” from the UK wired money to pay for their tickets. The money never made it to the company, according to Christofides, but was instead deposited to Savva’s account.

Once the scandal was revealed, an arrest warrant for Savva was issued but he fled the country to the United States were it is believed that he currently resides.

The KPMG managing director spoke of other incidents of corruption and gross mismanagement, including another when Savva ordered a plane to be uses to transport his son’s car. Christofides also mentioned money that disappeared from the employee welfare fund that was used to pay overtime for the manager’s secretaries. In another incident changes to a CY building at the old Larnaca airport had cost 60 per cent more than originally budgeted.

“There were truly some terrible things happening in the company,” noted Christofides.

Polyviou shed some light on the subsequent management team, when Stavros Galatariotis took over.

By that point the government at the time, given what had gone on under Savva, decided to keep a tighter rein on the airline.

Polyviou said then President Spyros Kyprianou kept a close eye on the airline and that Galatariotis routinely “knocked on Kyprianou’s door to submit his requests.”

Galatariotis however, probably to encourage oversight, upgraded political party involvement in decision making by requesting that representatives from all parties were on the board.

“The signs were there and can be seen in the very close cooperation of the state and the company. No government has ever let Cyprus Airways operate based purely on company law,” Polyviou said.

He said the company did not bring in experts to advise them on major policy decisions but instead relied on the government and the political parties.

The resulting lack of proper expertise, according to Polyviou, was the “tragic” decision to buy the 20 per cent share British Airways had in Cyprus Airways in 1983, and expanding the company fleet.

Polyviou said Galatariotis’ reasoning was that if a representative of a rival company sat on the board he would be privy to inside information. The legal advisor said such a scenario wasn’t possible, since anyone sitting at board meetings was legally bound by confidentiality.

“Driving out British Airways deprived the company of a major strategic investor,” he argued.

After buying BA out, the CY board decided to expand the company fleet by buying from Airbus, a decision Polyviou also described as tragic. He suggested to the committee that they call upon then Galatariotis advisor at the time, a man named Rigas Doganis, to shed more light into why the company decided to buy the planes.

Polyviou also suggested that they look into Eurocypria, a charter subsidiary of Cyprus Airways that went bankrupt in 2010.

Polyviou said that when the EU looked into the inner working of Eurocypria they found evidence of mismanagement, such as overcompensation for retirement schemes and bloated staff bonuses.

“You are trying to save Eurocypria when you should be concerned with the fact that in two years time you will be called upon to prevent the shutdown of Cyprus Airways,” the EU had told CY executives in 2010, according to Polyviou, when the state was requesting permission to approve a state aid package that would keep the two companies afloat.

Polyviou also talked of Hellas Jet, also set up by CY. Hellas Jet was founded in 2003 to carry out scheduled flights from Athens airport but suffered heavy losses and was forced to shut down in 2005. CY sold Hellas Jet in 2006.

The former legal advisor to the company said Hellas Jet faced numerous problems from day one. He said he had to fly to Athens on the second day of operations to prevent the company offices being auctioned off.

The EU commission wasn’t the only one who saw the end of the company coming. During a cabinet meeting in 2007, former president Tassos Papadoulos had remarked that the company was no longer viable and that the path it was on would lead to bankruptcy. The President was commenting on the 2007 restructuring plan that was submitted by the state to the EU commission. According to Polyviou, Papadopoulos had said then that the plan was CY’s last chance.

Cyprus Airways was grounded in January, after the EU Commission issued a ruling ordering the company to return some €66 million it had received in state aid in 2012.

By Andria Kades

A new airline – Cobalt Air – has applied to set up operations from Cyprus, intending to use the island as a base for operating “a strong European airline”.

“CobaltAir will operate a fleet of modern, fuel efficient, Airbus aircraft and will launch in 2015 with flights to ten destinations,” the company said in a statement.

The company submitted the Cyprus Air Operator Certificate to the Department of Civil Aviation on Monday and have already registered as a local company, according to communications ministry spokesperson Demetris Constantinou.

“We are establishing a ‘New Age’ airline that will be based in Cyprus and will operate regionally and throughout Europe. We believe Cyprus provides an excellent environment in which to develop a new airline for a pan-European market,” Chief Executive Officer Peter Kelly said.

The airline promises to have the best attributes from both low cost and full service carriers and if approved, the company’s planes would bear characteristics specific to the island such as ‘Visit Cyprus’ slogans. Originally, the charter company had considered buying assets from now defunct Cyprus Airways such as the name and emblem but proceeded to set up their own operations.

“We see Cyprus as being strategically positioned at the crossroads of the Middle East, Europe (including Russia/CIS) and Africa – and offers a mature market with a qualified and skilled labour force,” Kelly added.

Constantinou would not go into details as to where the company is based however reports said that the initial equity capital, submitted as part of the application costing €16,500, showed funds came from Europe and Asia.

He said their request would be reviewed within the next four to five months and the Ministry of Communications would proceed to give an official response.

The executive team has a collective experience of more than 70 years in aviation and one of the board directors is reportedly Cypriot. Kelly, an Australian national founded Airological Consulting Group and held several titles such as general manager at Qantas Airways and chairman of Suji.com, an Asia-Pacific online travel agency.

Andrew Pyne, the Chief Operating Officer brings his managerial experience from British Airways, Avianova, Virgin Atlantic and Cathay Pacific Airways where he had stints at Hong Kong, Mumbai and Sri Lanka, to the table.

Michael Hayden has the title of Chief Commercial Officer and has a past working at Dobrolet, Avianova, Jazeera Airways and EUJet.

The company is currently recruiting locally for a number of positions.

By Constantinos Psillides

THE man in charge of Cyprus Airways from 1981 to 1989, Stavros Galatariotis, is mainly to blame for the company’s downfall, former board member Marios Eliades said on Wednesday, appearing before the ad hoc parliament committee set up to investigate the reasons behind the former national carrier’s demise.

Eliades, who sat on the company board when Galatariotis was chairman, said that the former CY boss made a grave mistake when he decided to buy out the 20 per cent share British Airways owned in the Cypriot airline.

During an earlier committee meeting, former company officials had argued that if British Airways kept its 20 per cent stake, decisions to expand the fleet, increase the workforce and closely work with the government would never have taken place.

Galatariotis was also accused of not heeding to warnings regarding the liberalisation of the airline industry and that CY wouldn’t be able to compete with other airlines once the island joined the EU.

“I urged Galatariotis not to take British Airways out of the picture. His response was that we were going to ‘cypriotise’ Cyprus Airways by removing all other elements. We also discussed the need to modernise and restructure the company to be able to compete in the free market. Unfortunately, the company board ignored all that at the end,” said Eliades.

Olga Eliades, who used to work in the company’s operational department, was also present at the meeting. She told MPs that the company could not survive in a free competition environment because of the bloated payroll and financial decisions that burdened the company.

According to her, CY bought their first two Airbus A320 planes at the price of $100m.

The former CY officials told the committee that the man who brokered the deal between Airbus and Cyprus Airways, Ioannis Christofides, received a commission but that the fee was paid by Airbus and not Cyprus Airways.

Former Central Bank Governor Afxentis Afxentiou, who was Finance Minister at the time, said that the blame should not fall on Galatariotis alone. “There was a government and a board too at the time,” he said.

Statements at earlier meetings of the ad hoc committee heard that Galatariotis took over after a string of scandals forced the former board chairman to resign. It was also said that then President Spyros Kyprianou kept a close eye on the company and that Galatariotis used to visit him regularly at the palace.

Responding to comments saying that people might have received kickbacks to mediate the planes’ acquisition, Afxentiou said that he had heard those rumours before but added that there was never any evidence or proof.

“The offer made by Airbus was the most favourable of those submitted. The government at the time was faced with a dilemma. Either approve the fleet expansion or close down the company. A study was commissioned at the time and found that the company was profitable and that it could service its loans,” he said, adding that the company should have been privatised when Cyprus entered the EU.

Asked about the British Airways buy out, Afxentiou said that he was not involved since he was Governor of the Central Bank by the time.

Afxentiou criticised MPs for setting up the committee, explaining that they lack the knowledge and experience to carry out such a task and that they should hire an expert.

Committee chairman, DISY MP Nicos Tornaritis, told the press that he will request technical support, noting that without it the committee report will be incomplete.

Cyprus Airways was grounded in January, after the EU Commission issued a ruling ordering the company to return some €66m it had received in state aid in 2012.

By Elias Hazou

GOVERNMENT and party meddling in Cyprus Airways (CY) played a key part in the eventual demise of the national carrier, a special parliamentary panel said on Wednesday.

The malaise pervading the airline – crony hiring, unconsidered salary bumps and party-controlled management – were all evident as far back as the 1980s.

In 1983, for instance, a decision was taken that political party members would participate on the board of CY.

“Parties ought to have had no business in a commercial company,” said DISY MP Nicos Tornaritis, who chairs the parliamentary panel.

For his part, Petros Soupouris, head of the pilots union, likewise affirmed that the airline was under the thumb of politicians.

Because of party and trade union pressure, he added, workers at CY got successive salary increases, though the employees should not be blamed for the company’s downfall.

Olga Eliadou, of the airline’s personnel department, highlighted the lack of a strategic investor in CY, which meant the company was not profit-driven.

“We flew loss-making routes in a bid to boost tourism… profit was not the primary objective,” she said.

An ad hoc parliamentary committee was set up in January to look into the reasons leading to the shutdown of the airline.

The panel has just finished reviewing the period 1981-1989. The post-mortem on CY will continue with a look at the 1990s.

CY was grounded on January 9 this year after the European Commission ruled that a multi-million state aid package the company received in 2012 was in breach of EU competition laws.

The company was ordered to return €66m to the state and as it was unable to comply, it was forced to shut down. The company’s closure left around 500 people out of work.

By Constantinos Psillides

If low-cost subsidiary Eurocypria had been allowed to operate, it could have been a viable substitute for Cyprus Airways (CY) former chairman of the defunct national carrier chairman Kikis Lazarides said on Wednesday.

Speaking before the ad hoc parliamentary committee set up to investigate the reasons behind CY’s demise, Lazarides defended his decision to push for a low cost airline back in 1992, arguing that charter airlines would be the future and that the business model Eurocypria operated from made the company more competitive.

Lazarides, who was chairman from 1989 to 1993 and again from 2004 to 2010, said that during its first nine months of operations Eurocypria made a profit of €2.1 million while the following year revenue was up by €540,000.

“Charter airlines were just coming into the market in 1992. Cyprus Airways had a large fleet of nine Airbus planes that weren’t properly utilised. Even if Cyprus Airways went bankrupt, Eurocypria could step in and take over,” he said.

Lazarides said when he left the company went in a different direction, stressing that Eurocypria never benefited from Cyprus Airways in any way.

Eurocypria began operating in 1992 and shut down in 2010 amidst accusations of mismanagement. Despite being profitable in the beginning, the company ended up with €28 million in debt. Parliament approved a state aid of €35 million to help the company stand on its feet but still ended up ceasing operations only months later.

Lazarides also told MPs of his plans to cut back on  CY staff and benefits, which according to him, were “too much”.

He said that while the company’s base of operations was in Larnaca, for staff purposes the base of operations was Nicosia, so they would be entitled to extra money for travelling to work at the airport.

He also said that during his time as chairman he managed to scrap the three-day stay in London for pilots and cut the staff by 161. Unlike Cyprus Airways, Eurocypria staff had no overnight stays abroad.

“When Eurocypria first opened up they had excellent staff with half the money in salaries, away from all Cyprus Airways issues such as the constant threat of strikes,” he added.

Lazarides said that by 1982 CY staff increased by 80 per cent while in 1987 a study found that productivity per employee was amongst the lowest in Europe though wages were high.

Asked whether he was pressured by political parties during his tenures, Lazarides said he never felt any particular pressure.

“But when an election was around the corner, the staff always increased,” he added.

Cyprus Airways, the island’s national carrier for 67 years closed in January after a decision by the EU commission declared €102 million given to it in state aid was illegal, ordering the company to return €66 million.

By Constantinos Psillides

LAID-OFF staff of the now defunct national carrier Cyprus Airways (CY) protested on Thursday outside the Finance ministry, demanding that minister Harris Georgiades meets with union representatives to discuss issues of compensation and employment.

The minister later issued a statement saying that additional payment would be made within a few weeks, but re-hiring the airline’s staff was out of the question.

A crowd of around 100 people gathered outside while union representatives handed a resolution to a ministry official.

In contrast with previous protests, there was no incident.

The former employees demand immediate compensation for being terminated from their jobs and that the government guarantees their re-employment.

The CY employees point out that parliament approved the expenditure on May 4 but they still haven’t received any money.

“As workers that were thrust into unemployment, we are overflowed with feelings of rage. We believe that we deserve priority in matters that concern us,” read the resolution.

The state-owned airline entered voluntary liquidation on January 9, after the EU Commission ruled that it should return €66m in state aid it had received since 2012, breaching EU rules.

Finance minister Georgiades and Transport minister Marios Demetriades said that the state was looking into setting up a new company, in collaboration with the private sector. Six months after CY’s closure, the government had no luck in finding an investor that would be interested in buying the airline’s logo and operate a new airline based on the island. Georgiades had promised that provided they meet all other criteria, priority would be given to former CY staff when it came to employment in the new airline.

The minister responded to the employees’ demands later in the day, saying in a statement that the compensation issue will be resolved within the next few weeks.

“The total amount owed to the 525 employees and 65 pilots for redundancy is €68.23m. The state has also decided to give employees that left during the 2012-2014 period additional compensation so that they are treated equally with those who left in 2015. Up to now, we have paid out €35m and the rest will be processed by the Treasury department within the coming weeks,” read the statement, adding that further compensation or hiring the former CY employees in the public sector, as requested by the unions, is not possible.

“We have already informed the unions that this is not legally, financially or in any other was feasible,” responded Georgiades.

By Jean Christou

TO SAY the demise of Cyprus Airways (CY) has been a bit of a boon for seat capacity to the island almost six months on might not be kosher but it is exactly what has happened, though industry chiefs caution that filling them might not prove as easy.

Figures provided to the Sunday Mail by airports operator Hermes show that in 2014, before it was shut down last January, Cyprus Airways had 1.12m seats in and out of the island, and carried 758,739 passengers – well below its capacity.

In the six months since, capacity on the ex national carrier’s routes has gone up to 1.18m seats, or an additional 60,000.

Larnaca has seen four new destinations and 20 additional weekly flights on existing routes, while Paphos has added nine new routes and three extra weekly flights on existing routes since January.

The airlines that stepped in to plug the gaps included, Ryanair, Fly Nikki, Wizzair, Qatar Airways, Monarch, Germanwings, Germania, Edelweiss, Sun Express, Air Baltic, Transavia, easyjet and Aegean.

Though no one the Sunday Mail spoke to in the industry would admit on the record that CY’s demise might have been ‘a blessing in disguise’, when it came to discussing the resulting new ‘open skies’ policy, most admitted that the ‘facts appeared to speak for themselves’.

Cyprus Airways: destroyed by politics

A Cyprus Tourism Organisation (CTO) assessment of the year ahead, made in late April and which was seen by the Sunday Mail, said: “The open skies policy has favoured the Israeli market. There are plenty of flights, mostly to Larnaca, leading to a growth estimate of +30 per cent (90,000 arrivals),” the document said.

It also said France and the Netherlands seemed to benefit from changing carriers, with lower fares, cheaper freight, and better servicing of the market “an overall positive benefit”.

“Poland, the Czech Republic and Austria seem to benefit from increasing flight capacity,” the CTO said, predicting expected increases of 15-20 per cent.

A CTO official confirmed that the changes had been “particularly good” for the Tel Aviv route, which Cyprus Airways had controlled through a bilateral agreement that had given passengers only two options. “When it came to choice of airlines there were two, whereas now there are three,” the official said. “The gap is probably more than covered on certain routes.”

Hermes Airports spokesman Adamos Aspris echoed the fact that CY did have some routes ‘locked’ “especially in the Middle East”, which prevented other airlines from coming in but things had now changed.

“Seat capacity is higher and passenger traffic is higher compared to the same time last year,” Aspris said.

Hoteliers would agree. In their annual report, sent out during the week, Cyprus Hotel Association (PASYXE) addressed the benefits of the new open skies policy saying it had “improved and enhanced” accessibility to the island.

PASYXE Director General Zacharias Ioannides, asked if this was down to the demise of CY said: “It would be unfair to the history of the airline to say that. But it has been encouraging for the country that the loss of the ex national carrier has not left gaps but on the contrary it seems not only has the gap been covered but additional capacity has been provided.”

Aspris cautioned however that increased capacity was all well and good but filling the seats was more important. “If the number of passengers keeps up only then will we be in a position to have a better idea and make comparisons. For the time being there is a very high seat capacity. If we manage to maintain this… but it’s early days yet,” he said.

This is one of the biggest concerns for the industry. If the airlines cannot fill the seats they could reduce capacity or pull out at the drop of a hat.

“The concern is wait to see how many will maintain their schedules by the end of the year,” said Aspris.

This was also a worry for the Association of Cyprus Travel Agents (ACTA). Its president Dinos Kakkouras said more seats should mean lower fares “but most important is to fill all of those seats”.

“If they are still empty by the end of the year there is the possibility of cancelling routes. On Athens for instance there are a lot of seats available and we are worried,” he added.

Kakkouras said the situation on the Tel Aviv routes was “definitely better” but he also said that like Athens, a lot of seats had been added for Germany as numbers from there are expected to recover this year. However Kakkouras said many of them were empty.

Aspris said airlines generally lay on extra capacity with the strategy that if there are more seats, there will be more options for passengers and more bookings will result, or as the famous line from the film Field of Dreams goes: “If you build it they will come”.

“Competition provides additional advantages for travelers, not only in terms of which airline to choose but they also benefit by lower prices,’ said Aspris.

Or do they?

Noel Josephides, chairman of the Association of British Travel Agents (ABTA), and chairman of the UK-based Sunvil Holidays said travellers benefit from lower fares only during the off-season.

Excess capacity in low season fares are competitive, he said, but once you get to the peak times, Easter, summer and Christmas, they tend to be very high as airlines make up for the giveaway offers.

“This causes consternation everywhere. There are people who can only travel in July or August. If they can travel other times of the year it can be really cheap. In the old days there was more of a balance and tour operators were running charter flights but there are none any more.  If you wanted to book a family trip to Cyprus right now you would not find anything cheap,” Josephides said.

The closure of Cyprus Airways and the swooping in of multiple airlines with extra capacity was, he said, a double-edged sword for Cyprus.

“Cyprus is now at the mercy of airlines that are purely commercial animals. If for any reason there is not much money or there is too much capacity they will just walk away. Ryanair is a case in point,” he said.

Airlines can control whole countries

The changed circumstances also means the authorities have to work harder to keep those airlines happy and to offer incentives to make Cyprus attractive to them, hence the constant worry about passenger numbers.

“It will keep them on their toes as it’s an extremely competitive business and you’re dealing with big beasts,” said Josephides. “Airlines now control whole countries.”

Josephides said that with a national carrier a country would always have that backup that would allow authorities to stand up to bullying airlines and he said in that respect CY did provide a lifeline but was certainly not the ideal. “It could not continue as it was,” he said. “It was destroyed by politics. It was an airline that died from many cuts.”

And, as if the final nail was being put in CY’s coffin, the government is on Wednesday due to issue a public call for expressions of interest in purchasing CY’s logo and trademark, which it bought from the airline for €1.2m prior to its closure.

Cyprus on Monday invited expressions of interest for the trademark and logos of defunct Cyprus Airways.

Authorities said interested parties had until July 24 to submit expressions of interest (EoI) for the logo and trademark of the carrier.

“The purpose of this EoI process is to determine interest of prospective parties for the exclusive license to use/exploit the Logos and Trademarks for the operation of a flights schedule out of the Republic of Cyprus,” the privatisation commissioner’s office said in a statement.

The 65 year old carrier suspended operations after the European Commission ordered it to repay more than €65 million it received in illegal state aid.

Cyprus Airways’ nickname was the ‘Flying Moufflon’, after its logo, an endemic mountain sheep. (Reuters)