Cyprus Closes Down Flag Air Carrier over EU State Aid Ruling

EU | January 10, 2015, Saturday // 14:26|  views

An aircraft (top) of Cyprus Airways seen landing in Larnaca airport, Cyprus, 09 January 2015. Photo by EPA/BGNES

The Cypriot flag carrier suspended operations at midnight over a European Commission ruling that it had illegally received state aid.

Following an in-depth investigation, the European Commission concluded Friday that a restructuring aid package of over EUR 100 M for Cyprus' ailing flag carrier Cyprus Airways had given the company an undue advantage over its competitors in breach of EU state aid rules.

The struggling flag carrier was informed that it had to pay back all incompatible aid received.

Cyprus Airways was asked to repay over EUR 65 M in illegally received state aid.

The EC also said that Cyprus Airways had no realistic perspective of becoming viable without continued state subsidies.

"Cyprus Airways has received large quantities of public money since 2007 but was unable to restructure and become viable without continued state support... injecting additional public money would only have prolonged the struggle without achieving a turn-around," EU Competition Commissioner Margrethe Vestager said in a statement.

Under the applicable EU guidelines on the rescue and restructuring of companies in difficulty, a company can only receive restructuring aid once over a period of ten years ("one time, last time" principle).

“Cyprus has provided no evidence that Cyprus Airways faced exceptional and unforeseeable circumstances that would justify an exemption from this principle,” the EC said in a statement.

The Commission also found that Cyprus Airways' restructuring plan was based on unrealistic assumptions and did not sufficiently reflect different market scenarios.

Cyprus Airways repeatedly received aid in the period 2007-2013, according to the BBC News.

The government, which owns a 93% stake in the company, has said it is working on establishing a new private airline of the same name.

The Cypriot flag carrier, founded in 1947, has a total headcount of 560 and a fleet of 6 aircraft.

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Tags: Cyprus, flag carrier, airline, state aid


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