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Cyprus Mulls Selling National Carrier

By Keith Howard

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Published: 12Mar2012
Word count: 463
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Cyprus Airways is on the agenda for the Nicosia administration this week as it considers selling its stake in the embattled national carrier, according to a report from Reuters. The troubled airline, in which the government is the majority stakeholder, is important as a way to steer tourists to the Cyprus luxury holidays which are a major source of revenue for the tiny island state.

Government spokesman Stefanos Stefanou told media yesterday that the airline itself would decide on how much cash could be raised by a sale of the state's 69 per cent stake. The government, although deeply rooted in communism, is reliant on the income from Cyprus luxury holidays, to balance its budget and sale of the national carrier to a private partner would be seen as a significant political humiliation. But in the face of a net loss of €29.3 million ($39 million) for the first half of 2011, it may have no choice. Results for the full year are due by the end of February.

The airline has been overhauled repeatedly in recent years in an attempt to compete with discount airlines cutting fares on its most lucrative routes. Rising fuel costs have added to the problems as the national carrier struggles to fill seats with full-fare tourists headed for Cyprus luxury holidays.

Stefanou told reporters that the government was keen to resolve the issue rapidly, but declined to name a starting date for negotiations with private investors. However, he told Reuters, the issue is pressing "and the government's intention is to move swiftly".

If the Cyprus government is forced to overcome its distaste for privatisation, it won't be the first time. An economic slump has already forced Nicosia to reconsider ownership in a number of state enterprises.

The airline yesterday dismissed media reports that it will soon be grounded.

"Such scaremongering is unfounded, lacks seriousness and may probably serve other agendas," said the company in a statement released on Wednesday, adding that "It also causes confusion and uncertainty among passengers intending to travel with the company".

The beleaguered airline was badly hit by a 2009 Turkish ban on traffic to Cyprus and recorded a net income of only €215,000 in 2010, despite a €20 million subsidy package from the government.

With the Cyprus tourist season set to begin, the island's operators are hoping for a steady growth in the number of inbound tourists and are waiting to learn whether a possible sale of the airline will bring better services and lower fares, both factors which will attract more tourists seeking Cyprus luxury holidays.

They've received an unexpected boost this year with freezing weather conditions across Europe driving tourists to the island, drawn by the milder Cyprus winter.

While the uncertainty continues, Cyprus luxury holidays continue to be good value and are a specialty of Airworld Tours the luxury holiday company based in the UK.

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