Aegean, Ryanair in final stretch for CAIR
Greek scheduled carrier Aegean Airlines and Europe’s leading low-cost operator Ryanair are the only two airlines the government has shortlisted in the race to acquire troubled Cyprus Airways. With the end of the tender process last Friday, the government reportedly received a total of nine bids but asked only Aegean and Ryanair to submit business plans.
They immediately responded with clarification questions and now have until November 15 to submit their final bids.
Among the other contenders were Israel’s Arkia Airlines, a “prominent” Swiss-based Russian investor, “Cyprus Air” a consortium of Cyprus Airways pilots and another Russian investor, the Arevenca Group (a joint-venture between flyAruba and Triple Five Group), Blue Air of Romania, and Russia’s S7 Airlines of Novosibirsk.
The decision to choose Aegean and Ryanair has caused much concern among Cyprus Airways employees who consider both to be “hostile”. Airline unions fear a buy-out by either party will lead to massive redundancies and major pay cuts, with unions staging protests over the past few days demanding that their pensions and jobs be secured.
In the wake of the talks, the national carrier’s financial situation has continued to deteriorate with reports the airline’s board has drafted an emergency plan which would allow the national carrier to survive for a further 6 to 8 months. The plan entails the freezing of collective wage agreements for at least six months.
All eyes are currently on the European Commission with a ruling out soon on whether a EUR73 mln rescue package in 2012 and a EUR 31.3 mln capital increase in early 2013 violated EU state-aide regulations.
The Irish media widely reported that Ryanair was one step closer to taking over Cyprus Airways after getting through to the second round of bidding.
According to incoming finance chief Neil Sorahan, Ryanair was informally told on Friday that it was on a shortlist, meaning it is through to the second round of the process.
However, Sorahan warned that it was “still a long shot” as Aegean is regarded as favourite to take over the airline, thanks to the two nations’ political and cultural ties.
Ryanair is not offering any cash for the airline, but has told the Cypriots that if its bid succeeds, it will expand the airline from five aircraft and 700,000 passengers a year to 20 aircraft and 3 mln passengers over five years. Ryanair boss Michael O’Leary has on several occasions proved true to his word and boosted incoming traffic to Paphos airport where his company already operates a mini-hub.
The main attraction for Ryanair is the Cyprus Airways air operator’s certificate (AOC), which allows it to fly to Israel, Russia and countries around the eastern Mediterranean, where the Irish company is keen to expand.
Ryanair has also applied to the authorities for an AOC, although this is at an early stage.
The airline last week reported a 32% rise in profit to EUR 795 mln for the six months to the end of September, the first half of its financial year. Passenger numbers rose 4% to 51.3 mln.
The company also reported that the numbers who flew with Ryanair in October rose 5% on the same month last year, to 8.4 mln. The carrier increased its full-year profit guidance to EUR 750-770 mln, from its previous range of 620-650 mln.
It plans to slash fares in coming months to boost market share – promising cuts of 3 to 5% over the closing months of this year and 6 to 10% between January and March 2015, the final quarter of its fiscal year.
Sorahan indicated that it could go further if rivals were to respond with reductions of their own. “We have the capacity to cut fares by more than that. We have 4 bln euros in cash on our balance sheet,” he said.
O’Leary said the airline had a bumper first half. In a statement, he acknowledged that it was partly due to the fact that Easter fell in the first quarter, but he added that the airline had a strong summer on the back of its strategy of raising forward bookings and improving customer service.
Meanwhile, a year after the merger of Aegean Airlines and Olympic Air, Vice President Eftihis Vasilakis said that the company is entering a new growth orbit, investing 300 mln euros for the purchase of seven brand new Airbus 320s within the next two years.
Vasilakis said that the joint company covers a network of 120 destinations in 33 countries with 13 mln available seats, 1.2 mln more compared with the pre-merger period. He also said that the airline currently owns a fleet of 50 aircraft, two technical hangars, employs 2,400 people and recorded a passenger traffic of 9.8 mln. The Greek airline has also scheduled a radical renewal of its fleet through an international tender, with priority to be given to aircraft bought in 2007. The company aims to raise its fleet to 70 aircraft by 2023, covering 350 destinations, with a passenger traffic of 15 mln.
Vasilakis confirmed Aegean Airlines’ interest in Cyprus Airways commenting that “we are interested in the development of Cyprus and the development of Greece through Cyprus.”