Aegean, Ryanair in fi­nal stretch for CAIR

Financial Mirror (Cyprus) - - FRONT PAGE -

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.”

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