Troubled Cyprus Airways faces fresh closure fears after the European Commission yesterday opened an in-depth investigation to verify whether its restructuring plans comply with EU rules.
The beleaguered national carrier has received €102.9 million from the state in various painful restructuring efforts to stay afloat. Without the cash the national carrier would go under.
“The Commission has doubts whether the restructuring plan is suitable to ensure Cyprus Airways' long-term viability and whether the airline is capable of withstanding likely challenges in the air transport market during the next years,” it said.
There are also doubts whether the proposed capacity reduction through the cancellation of routes is sufficient to compensate for the distortions of competition created by state support.
The Commission also has concerns that the airline's contribution to the cost of restructuring may be insufficient.
In December, Cyprus notified the Commission about the aid package to finance the carrier’s restructuring plan.
According to EU rules, restructuring aid may be granted only once over a period of 10 years. The Commission already approved restructuring aid for Cyprus Airways in 2007. Since then, the airline has benefited from additional public interventions, including a 2012 capital injection and a €34.5 million rescue aid loan in 2013.
In March, the Commission opened an in-depth investigation into these measures and an envisaged state compensation to the airline's redundant staff.
An exception to the "one time, last time" principle can be granted in exceptional and unforeseen circumstances, it said.
But it added: “At this stage, the Cypriot authorities have not provided an adequate justification to that end.”