Airline Merger Talks - Fin. Min. Meets with Unions

Finance Minister Charilaos Stavrakis is to meet with trade unions and Eurocypria management to brief them on a proposed merger between state airlines Cyprus Airways and Eurocypria.

The decision to merge the two ailing airlines came after Cyprus Airways reported a 25 million euro loss for the first six months of 2010, compared to a loss of 3.8 million euros for the same period in 2009. In May this year, Eurocypria asked the government for another 35 million euros to cover its debt payments.

"It is certainly clear that Cyprus cannot afford both companies, but the merger is not a simple thing," said government spokesman Stephanos Stephanou.

The government is in the process of assessing the situation with CA's shareholders, the future of the employees, and requirements from the European Union, he said.

Cyprus Airway's financial loss was due to the global financial crisis and increased competition in the airline industry as well as industrial action in Greece, said CA.

"The re-emergence of Olympic Airways as a strong market share contender in the Greece-Cyprus routes and its fierce competition with Aegean in the run-up to the expected merger between the two companies led to an unprecedented reduction in fares with an impact on Cyprus Airways as well," said CA.

CA said it is taking measures to streamline its flight schedule in response to the losses and is also claiming 12.8 million euros from the government in compensation for losses blamed on the ban on Cyprus flights through Turkish airspace.

"This unfair treatment to which the Company continues to be subjected adversely affects its competitiveness and renders it more vulnerable, especially in routes where it is forced to use longer flight paths than other competiting airlines," said CA, adding that the financial loss due to the ban is calculated over the period 2004-2008.

The proposed merger will have to be approved by the European Commission.