12 JANUARY 2015

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Article from BTNews 12 JANUARY 2015

Cyprus Airways grounded

The Cyprus government has suspended operations at its flag carrier after the European Commission ordered the struggling airline to pay back over €65m.

Margrethe Vestager, EU Competition Commissioner, said that Cyprus Airways had no chance of becoming viable without continued state subsidies, meaning money paid out in 2012 and 2013 as part of a restructuring package would have to be recovered.  The EU Commission said that the restructuring plan was "based on unrealistic assumptions."

Under EU rules a company can only receive state assistance once every 10 years.   The airline had already been bailed out in 2007.  It has been acknowledged that State subsidies from 2012 and 2013 were unlikely to be repaid, in clear breach of EU law.  In June 2014 Cyprus Airways announced to the Nicosia Stock Exchange that it is to sell its last Heathrow slot pair to American Airlines for US$31m, which will “enhance the company’s liquidity for 2015."  Cyprus Airlines has been operating out of Stansted since last September.  Aegean and Ryanair could now cherry pick on the Cyprus Airlines routes.

The demise of the carrier is another blow to Cyprus, which was subjected to harsh bailout conditions in 2013 when it was yanked from the brink of bankruptcy by the IMF and the EU.   cyprusair.com

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