Cobalt Air shuts down, but wants second chance
Liquidity crunch and huge losses sees largest Cypriot airline go under
Collapsed Cypriot airline Cobalt Air said Friday it wanted more time to find investors after the aviation authorities revoked its license following the indefinite suspension of all flights.
“We wanted more time, but our license was revoked,” Cobalt Air chairman Grigoris Diakos told state radio Friday.
“We asked for a suspension, we needed two months to find a strategic investor after the Chinese investor pulled out,” he added.
Cyprus’ Air Transport Licensing Authority (ATLA) decided to revoke Cobalt’s operating license, senior transport ministry official Alecos Michaelides said.
He said there was no reason to temporarily suspend the license as there was no sign of a solid rescue plan.
“A company that is constantly posting losses, and especially losses of around 30 million (euros) a year over a three-year period cannot survive, while finding an investor becomes even harder,” Michaelides told Ant1 TV.
He said the strategic Chinese investors are estimated to have put in EUR 100 mln, however losses continued unabated.
Diakos refuted any suggestion that the company went belly up due to mismagement, but critics argue that Coblat grew too quick with an ambitious flight programme it could not cope with.
Others said the demise was down to the lack of a proper distribution and pricing policy while Cobalt lacked cooperation deals with other airlines.
Although the airline’s license has been revoked, it can reapply to resume operations once it finds the necessary financing, the government said.
Cobalt Air ceased all operations at Wednesday midnight and entered into administration process, after two years and three months of operations, expressing “great regret”.
Transport Minister Vassiliki Anastassiadou was summoned to parliament on Friday to brief MPs on the sudden downfall of the largest Cypriot airline.
She said two million euros had been allocated for the repatriation of thousands of passengers left stranded by the collapse of Cobalt.
Anastassiadou said that other airlines would come in to fill the gap left by Cobalt once the new summer season starts again.
“The market has reacted with a temporary rise in air fares this week, but prices should return to normal levels in November,” Anastassiadou told reporters.
She said all Cyprus-based airlines were being properly monitored and there were no other companies facing financial difficulties.
Several airliners announced that they were offering special fares to accommodate stranded passengers.
Cost of the closure is estimated at EUR 20 mln in loss of revenue to the government, plus the benefits it will to have to pay to the 250-odd staff made jobless.
The government said Thursday it will pay to ensure hundreds of Cobalt Air passengers stranded on the holiday island can return home safely after the sudden collapse of the low-cost carrier.
In a surprise announcement posted on its website late Wednesday, the airline said it was cancelling all flights within hours “due to indefinite suspension of Cobalt’s operations”.
It warned customers its offices would no longer be staffed and urged them to seek refunds through their travel agent or credit card company.
The closure comes just two weeks after Latvia-based Primera Air filed for bankruptcy and a month since Belgian airline Skyworks took the same course.
Cobalt was launched only two years ago, filling the void to become the island’s biggest airline after state-owned Cyprus Airways went bankrupt in January 2015.
Employing many pilots from the defunct national carrier, it went on to operate 13-15 flights daily, carrying up to 3,000 passengers to 23 destinations including Athens, Beirut, Heathrow, Paris and Tel Aviv.
It is now hoped other carriers will step in to make up the 120,000 annual passenger traffic shortfall left by Cobalt.
Shortly before midnight on Wednesday, its website was replaced with a single-page statement announcing the cancellation of all of its flights within two and a half hours.
Its last flight was reportedly in the air back to Larnaca from London at the time.
“As a result, future flights or services provided by Cobalt will be cancelled and will no longer operate,” it said, without elaborating on the reasons.
The airline advised passengers with tickets against going to Larnaca airport or attempting to contact its offices “as no Cobalt flights will operate and no Cobalt staff will be present”.
“For refunds, please contact your credit card provider or travel agent,” it added.
“We sincerely apologise once again and would like to thank our very loyal customers for their support over the last two years of Cobalt operations.”
DIKO MP George Prokopiou said 18,000 been inconvenienced by the airline’s closure.
Airport authorities said there was no panic in the departures hall, with passengers appearing to have stayed away after learning about the airline’s fate and the flight cancellations.
travellers had
On Thursday an emergency meeting was held on the situation to minimise the inconvenience for those stuck in Cyprus and abroad.
Two travel operators, Top Kinisis and Orthodoxou Travel, have been instructed to manage the repatriations and issue tickets on other airlines.
Anastassiadou described the situation as “regrettable” as it comes at a time Cyprus is enjoying a surge in its vital tourism sector with arrivals expected to exceed last year’s high of 3.6 million.
The minister confirmed the airline was struggling but had informed authorities it was looking for funding.
“It seems they were not able to do this, but we had also given Cobalt a deadline of October 22 to present its financial situation,” she said.
Cobalt had ceased operations after failing to reach a deal with a potential strategic investor to help it pay for leasing its six aircraft — two Airbus 319s and four Airbus 320s.
Reportedly, the company had only 15 million euros in its accounts, which it needed to pay its 200 air crew and 50 ground staff.
There was speculation that it was facing cash-flow problems after two of its aircraft were grounded for two days as the lease rental had not been paid.
The company attributed the liquidity problems to difficulties faced by Chinese investors who pulled out their financial backing.
The airline’s largest shareholder is AJ Cyprus, with 49 percent of the shares. AJ Cyprus is owned by China’s AVIC Joy Air.