FT says deal “makes sense”, Aegean also bids for takeover

Financial Mirror (Cyprus) - - FRONT PAGE -

Having re­jected the idea a month ago, low­cost car­rier Ryanair boss Michael O’Leary was back on the is­land last Fri­day to sub­mit a com­pre­hen­sive pack­age that would in­clude buy­ing all or part of the trou­bled Cyprus Air­ways (CAIR), as well as set­ting up a re­gional hub at both Paphos and Lar­naca air­ports.

Ryanair and Greece’s Aegean Air­lines, that sub­mit­ted a sep­a­rate non-bind­ing bid on Mon­day, were 15 of the po­ten­tial in­vestors short­listed to sub­mit non-bind­ing of­fers by Au­gust 29, af­ter which the gov­ern­ment will en­ter di­rect ne­go­ti­a­tions to sell its 94% stake in the air­line that has re­mained in the red for decades due to high labour costs driven by union and politi­cians’ abuse.

O’Leary said af­ter meet­ing Trans­port Min­is­ter Mar­ios Deme­tri­ades in Nicosia that with the help of the Ir­ish low-cost air­line, CAIR could get back on a path of rapid growth with new routes and more flights, with pas­sen­ger num­bers ris­ing from the present lows of 600,000 to 3 mln in a few years.

“We hope that by the end of Septem­ber, be­gin­ning of Oc­to­ber we will come up with the best so­lu­tion,” Deme­tri­ades said on Mon­day. The whole pro­ce­dure might be con­cluded be­fore the end of the year, he added af­ter a meet­ing with Aegean’s of­fi­cials.

Ryanair’s CEO had stated in late July that he did not wish for CAIR to close, but if it did, then his air­line could of­fer al­ter­na­tives to en­hance the is­land’s air con­nec­tions, has also been crit­i­cal of the high rates charged by air­ports op­er­a­tor Her­mes, sug­gest­ing Cyprus land­ing costs were “very ex­pen­sive” and even dou­ble that of, say, Ber­lin.

“I be­lieve … we could put Cyprus Air­ways and Cyprus’ tourism back on a path of a very much re­newed and rapid growth, with new routes, more flights and new jobs for pi­lots, cabin crew and en­gi­neers here in Cyprus,” O’Leary told the press.

“It’s a long pro­posal and the Gov­ern­ment will have to take a care­ful look at it to see whether it meets our ex­pec­ta­tions and we of course have our own pro­pos­als,” the Trans­port Min­is­ter noted.

The main re­quire­ments at­tached to the po­ten­tial sale is that any new in­vestor main­tain the brand name and Cyprus as the op­er­a­tional base. CAIR is no longer el­i­gi­ble for any other as­sis­tance as it has al­ready ac­cu­mu­lated some 100 mln eu­ros in state grants and gov­ern­ment guar­an­tees, some­thing which is be­ing scru­ti­nised by Euro­pean Com­mis­sion reg­u­la­tors.

Mean­while, the Fi­nan­cial Times sees Ryanair’s takeover as a pos­i­tive devel­op­ment as it would open up new routes and cre­ate more hubs in the Mediter­ranean.

The news­pa­per re­ported that Ryanair has not made an ac­qui­si­tion of a ri­val since it bought Buzz more than a decade ago, and that O’Leary has fre­quently dis­dained the takeover ap­proach to ex­pan­sion. How­ever, that has not stopped him from lay­ing pro­longed siege to Aer Lin­gus, in which Ryanair owns a stake of nearly 30% but blocked by reg­u­la­tors and the Ir­ish gov­ern­ment.

The FT fur­ther quoted an­a­lysts as say­ing that “any pur­chase of Cyprus Air­ways could make long-term sense as Ryanair sought to ful­fil its aim of lift­ing pas­sen­ger num­bers to 1.2 mln, within five years. The Cypriot air­line has just six air­craft, while Ryanair has 180 new Boe­ing 737 air­craft on or­der, the first of which are due to be de­liv­ered later this year.”

David Holo­han, head of re­search at Mer­rion Cap­i­tal, a Dublin bro­ker­age, told the FT that Ryanair could use some of the new air­craft to cre­ate a hub in Cyprus if it wanted to tar­get north­ern Africa and to ex­pand around the Mediter­ranean.

“Cyprus Air­ways would be a very small ad­di­tion to Ryanair, but if he can pick it up for the right price, it would make sense,” Holo­han said.

Cyprus Air­ways car­ries about 600,000 pas­sen­gers a year, com­pared to nearly 80 mln for Ryanair which “has been try­ing to shed its rep­u­ta­tion for brash­ness and bare-bones ser­vice, with an im­proved on­line of­fer­ing and more con­ces­sions for pas­sen­gers. It is due in the next few weeks to un­veil a strat­egy to at­tract more busi­ness trav­ellers,” the FT con­cluded. Out­go­ing CAIR chair­man Tony An­to­niou re­signed on Fri­day af­ter a year and a half at the helm, fol­low­ing al­le­ga­tions that he had abused his power to choose a ser­vice provider and that he bur­dened the com­pany with per­sonal car main­te­nance ex­penses. A pre­lim­i­nary re­port cleared him of any wrong­do­ing. An­to­niou is ex­pected to be re­placed by for­mer Trans­port Min­istry Direc­tor Gen­eral Makis Con­stan­tinides sub­ject to a cabi­net de­ci­sion on Wed­nes­day. The Fi­nan­cial Mir­ror has com­mented in past editorials that it was a mis­take of the pre­vi­ous ad­min­is­tra­tion to shut down low-cost char­ter op­er­a­tor Euro­cypria and keep the loss-mak­ing Cyprus Air­ways afloat, sim­ply be­cause of the vot­ing power the air­line’s staff and their families ex­erted on po­lit­i­cal par­ties in Cyprus, that are known to be spine­less and very of­ten suc­cumb to union bul­ly­ing tac­tics.

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