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Cyprus Airways facing bankruptcy

4 February 2014

A committee appointed by the Greek Cypriot Cabinet to try and save Cyprus Airways (CY) from bankruptcy, met for the first time on Monday, in the first of many meetings to come as the airline runs out of time before it collapses.

CY has to find a strategic investor, implement a restructuring plan and find another buyer for their Heathrow airport timeslot, in an attempt to secure liquidity before the 2014 summer season.

The specially appointed committee consists of Finance Minister Harris Georgiades, Energy Minister Giorgos Lakkotripis, Accountant-General Rea Georgiadou and head of CY board Tony Antoniou.

A source inside the finance ministry said that Monday’s meeting was very productive but there is an apparent need to speed the process up.

“Mr Antoniou promised that he will inform the committee on their attempts at finding a strategic investor as well as their restructuring plan. Things are looking good but we need to move swiftly,” the source said, adding that the next meeting was scheduled for the end of the week.

Antoniou also briefed the committee on the meeting he had with troika technocrats on Saturday, who he assured that Cyprus Airways will not be needing any more government aid. After the troika meeting Antoniou was very optimistic, telling reporters that there is a chance the national carrier would post profits for 2014.

The national carrier posted losses of €55.8m for 2012, doubling its 2011 losses of €23.9m.

But it remains to be seen whether Cyprus Airways will have a chance to implement their restructuring plan, as the EU Commission hasn’t given the green light yet.

And even if the restructuring plan is successfully implemented, it could all be for nothing if the EU rules that Cyprus authorities weren’t acting within EU law when they gave CY over €100 million, via a €73million rescue loan in December 2012, and a €31.3 million contribution to a capital increase in early 2013.

CY could be ordered to return the state aid, which would result in bankruptcy.

The ailing company lost a 15 million US$ when Qatar Airways pulled out of an arrangement to buy CY’s Heathrow timeslot because of a breach in a confidentiality clauses agreed initially by both parties.

The aviation mediator accused the CY board of breaking the agreement and questioned the CY’s credibility. This will make it more problematic finding another buyer for the timeslot.

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