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CAIR chose Air France – KLM for restructuring

10/09/2012 16:45
The Board of Directors of Cyprus Airways chose Air France – KLM Consulting to prepare a new restructuring plan against the sum of €226,175 plus expenses.

According to a letter sent to the Parliament and the Ministry of Finance, the new BoD believes that the specifications of the firm meet the provisions of the Law. The letter also describes the terms of order, the process followed and the criteria set for the selection of consultants. “The decision will be finalized after the assent of the House Finance Committee which may meet on Monday”, it added.

During approval of the first tranche of the share capital increase by €15 million of the total of €31.3 million, the House had included a provision according to which the company must select the consulting firm that will prepare the restructuring plan one month after the appointment of the new Board.

According to the Law, the Board of Directors of CAIR must submit the new restructuring plan to the House Finance Committee in a period of three months. The plan’s aim is to make the company competitive and to attract a strategic investor, who will participate in the national carrier with a majority stake.

Also, within 3 months the Finance Ministry must inform the Committee on its decisions with regard to the payment of compensations to the redundant staff either from the company or the state.

The firms

According to the letter, Air France – KLM Consulting was selected among six candidates out of eight invited by CAIR to participate in the process.

They were Lufthansa Consulting against €595 thousand plus expenses, Lowdexx Aviation against €85 thousand plus expenses, Feuerherd Aviation against €214 thousand plus expenses, ICF SH & E with €230 thousand a month plus expenses, KPMG with €380 thousand plus expenses and Air France Consulting with €227,175 thousand plus expenses.

PricewaterhouseCoopers Consulting and Deloitte and Touche Consulting - although invited - expressed no interest.

For the selection of the most appropriate firm, the Board took into account their expertise in the aviation market and their knowledge in air transport, especially for CAIR.

It also took note of the readiness and ability of the firm to provide the required number of qualified staff to complete its restructuring plan within the timeframe of the law and the possibility of monitoring and supporting its implementation in order to solve the practical problems that may arise.

At the same time, there should be a full understanding of the terms of reference and the adaptability of the experts in their spirit and the amount of remuneration paid by CAIR for the services offered by the foreign firm.

The Board members of CAIR assure the Minister and the House that they will work constructively with the experts to achieve the best possible outcome for the company.

The new plan

The new restructuring plan, according to the BoD proposal, must include a review and reassessment of the administrative structure of the carrier, including the middle management, the current business model, business and environmental analysis as well as market evaluation.

The plan must determine the strategic goal of the company, must develop an optimistic business model for maximum profitability based on the strategic goal and must plan a new flight schedule including new destinations and markets. It should also include recommendations for the marketing strategy and forecasts for profits, losses and cash flows.

It is indicated that the pricing policy and procedures must be reviewed.