Cyprus Airways Suspends Operations, Plans Liquidation

State-owned flag carrier Cyprus Airways suspended operations and served notice that it will liquidate its holdings after the European Commission rejected a €102 million ($120 million) bailout package. The commission also demanded the airline repay previous public funding.

In a message posted on its website on January 9, the airline said its board had initiated a procedure to voluntarily liquidate following the commission’s “adverse decision” the same day to deny its restructuring plan. Britain’s Daily Mail on January 12 said the airline reportedly parked some of its Airbus A320s at a remote airfield in Wales, allegedly to prevent them from being seized.

The website message states that Cyprus’s government will pay the cost of alternative arrangements for passengers who have purchased Cyprus Airways tickets for travel through February 9. They are advised to contact a specific travel agency for more information. “We are extremely honored to have made a valuable contribution, over the last 68 years, to the development of the economy of Cyprus and its tourism industry in particular,” stated the airline, which is 93-percent government owned. “We have flown the flag of our country worldwide with pride.”

Cyprus notified the EC of the planned restructuring in December 2013, prompting the commission to open an investigation into the plan last February. It concluded that the proposed financial package would give Cyprus Airways “an undue advantage over its competitors” in violation of European Union state-aid rules. Further, the EC instructed that the carrier “needs to pay back all incompatible aid received,” an amount it calculated at €65 million ($76 million).

“Cyprus Airways has received large quantities of public money since 2007 but was unable to restructure and become viable without continued state support,” stated Margrethe Vestager, European commissioner for competition policy. “Therefore, injecting additional public money would only have prolonged the struggle without achieving a turnaround. Companies need to be profitable based on own merits and their ability to compete and cannot and should not rely on taxpayer money to stay in the market artificially.”