12/11/2010 09:29
According to figures reviewed by the Finance Ministry technocrats lately, Cyprus Airways head towards bankruptcy. Indeed, if their concerns are verified, the trip to bankruptcy will be one-way. The Finance Minister’s statements for the closing of the national carrier aroused strong feelings, but the figures released by StockWatch today boost the government’s fears that before the presidential election in 2013 a new bomb will go off, larger than that of Eurocypria.
The data released by StockWatch show the difficult condition that Cyprus Airways are in, only four years after their restructuring plan.
What did the taxpayers give?
In 2006, the taxpayers paid €23 million to CAIR so as to buy Eurocypria. A year later, they paid €17.5 million more so that the government participates in the rights issue of CAIR. On the same year, the taxpayers guaranteed a low-interest loan of €78 million to the benefit of the national carrier.
The aim was to give to the company the necessary capital.
The Company’s commitment was to adopt a restructuring plan via the early retirement of 559 employees. However, this move cost another €23 million to the tax payers – around €41 thousand per employee.
What did the taxpayers get?
The results of the restructuring are depressing, since the taxpayers received accumulated losses of millions of euros for the capital they granted.
CAIR not only failed to recover, but they managed to lose capital of €30 million. After the capital injections of 2007, CAIR had equity of €13.3 million. Today, they have negative capital of €16.2 million.
This means that even if all its assets are sold, they will not be enough to cover their total obligations. Fortunately for the creditors, there is a state guarantee. But not for those who guaranteed the loan with Hellenic Bank.
In the past few years, the Company is loss-making, except for the marginal profits that it achieved in 2007-2008, right after the absorbance of capital by the rights issue, the sale of Eurocypria and the safeguard of a low-interest loan.
CAIR were hit by competition, since from 2008 to 2009 they lost revenues of €63 million.
Payroll
Despite the negative performance, the 1417 employees cost €71 million in 2009, that is, €50 thousand each.
The cost per employee in 2009 was higher than ever – even before the restructuring plan.
The pay rises are granted normally, irrespective of the Company’s course. According to rumours in the Finance Ministry yesterday, the employees requested pay rises of 6% in 2011.
Liabilities
The net current liabilities of the Company sounded the alarm to the Finance Ministry. According to the six-month results 2010, the Company is not in the position to cover its current liabilities, even if it takes into account the €45 million that it has in cash. Lat June, its negative worth stood at €3 million, while this year it stands at €22 million. This means that in June 2010 the current liabilities exceed the current assets by €22 million.
Will they be saved?
According to the figures, the technocrats believe that the Company will close if it does not generate profits in 2011. To achieve this, it must cover this year’s losses, estimated at €30 million and the additional expenses for salaries and fuel.
More or less, it must do what it failed to in the past few years: To have more revenues than expenses, despite the strong competition and the payroll.
Hopes from…Eurocypria
Part of the technocrats believes that the absorbance of part of the Eurocypria turnover with low cost raises hopes for CAIR survival.
Eurocypria, however, had lower cost that CAIR.
Therefore, the Ministry talks about the adoption of a brave restructuring plan with 500 redundant employees and cutbacks in salaries. In an announcement released yesterday, the Board of Directors said that “that in order to secure viability it is necessary to take drastic measures immediately. There is also need for understanding, contribution and sacrifices by all”.
The data released by StockWatch show the difficult condition that Cyprus Airways are in, only four years after their restructuring plan.
What did the taxpayers give?
In 2006, the taxpayers paid €23 million to CAIR so as to buy Eurocypria. A year later, they paid €17.5 million more so that the government participates in the rights issue of CAIR. On the same year, the taxpayers guaranteed a low-interest loan of €78 million to the benefit of the national carrier.
The aim was to give to the company the necessary capital.
The Company’s commitment was to adopt a restructuring plan via the early retirement of 559 employees. However, this move cost another €23 million to the tax payers – around €41 thousand per employee.
What did the taxpayers get?
The results of the restructuring are depressing, since the taxpayers received accumulated losses of millions of euros for the capital they granted.
CAIR not only failed to recover, but they managed to lose capital of €30 million. After the capital injections of 2007, CAIR had equity of €13.3 million. Today, they have negative capital of €16.2 million.
This means that even if all its assets are sold, they will not be enough to cover their total obligations. Fortunately for the creditors, there is a state guarantee. But not for those who guaranteed the loan with Hellenic Bank.
In the past few years, the Company is loss-making, except for the marginal profits that it achieved in 2007-2008, right after the absorbance of capital by the rights issue, the sale of Eurocypria and the safeguard of a low-interest loan.
CAIR were hit by competition, since from 2008 to 2009 they lost revenues of €63 million.
Payroll
Despite the negative performance, the 1417 employees cost €71 million in 2009, that is, €50 thousand each.
The cost per employee in 2009 was higher than ever – even before the restructuring plan.
The pay rises are granted normally, irrespective of the Company’s course. According to rumours in the Finance Ministry yesterday, the employees requested pay rises of 6% in 2011.
Liabilities
The net current liabilities of the Company sounded the alarm to the Finance Ministry. According to the six-month results 2010, the Company is not in the position to cover its current liabilities, even if it takes into account the €45 million that it has in cash. Lat June, its negative worth stood at €3 million, while this year it stands at €22 million. This means that in June 2010 the current liabilities exceed the current assets by €22 million.
Will they be saved?
According to the figures, the technocrats believe that the Company will close if it does not generate profits in 2011. To achieve this, it must cover this year’s losses, estimated at €30 million and the additional expenses for salaries and fuel.
More or less, it must do what it failed to in the past few years: To have more revenues than expenses, despite the strong competition and the payroll.
Hopes from…Eurocypria
Part of the technocrats believes that the absorbance of part of the Eurocypria turnover with low cost raises hopes for CAIR survival.
Eurocypria, however, had lower cost that CAIR.
Therefore, the Ministry talks about the adoption of a brave restructuring plan with 500 redundant employees and cutbacks in salaries. In an announcement released yesterday, the Board of Directors said that “that in order to secure viability it is necessary to take drastic measures immediately. There is also need for understanding, contribution and sacrifices by all”.
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