Cyprus Airways Public Limited

Cyprus Airways Public Limited

21 Alkeou Street
P.O. Box 21903
Nicosia, CY-2404 Engomi
Cyprus
Telephone: (+357) 22 661800
Fax: (+357) 22 663167
Web site: http://www.cyprusairways.com

Public Company
Incorporated: 1947
Employees: 1,700
Sales: CYP 201.15 million (2005)
Stock Exchanges: Cyprus
Ticker Symbol: CAR
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 488119 Other Airport Operations

Cyprus Airways Public Limited is the flag carrier of the Mediterranean island nation of Cyprus. It is publicly traded, though the government owns a majority holding. Its route network stretches from Europe to the Persian Gulf. More than 1.5 million passengers a year fly Cyprus Airways to three dozen destinations in the Mediterranean, Middle East, and Europe. The airline has a fleet of about ten Airbus aircraft. The group includes Eurocypria Airlines Ltd., a charter carrier that specializes in bringing European tourists to Cyprus. Ancillary ventures include a Sabre-affiliated computer reservation system business and duty-free shops.

ORIGINS

Cyprus Airways was formed September 24, 1947. British European Airways held a 44.9 percent stake in the new airline, while the government of Cyprus, then a colony of Great Britain, owned 22.45 percent of shares. Some private investors held the remaining 32.65 percent, according to company literature. Air services were launched on October 6, 1947, according to A History of the World's Airlines, with British European Airways (BEA) operating the aircraft for the first several months. At the time, BEA was also establishing new airlines on the British-controlled islands of Gibraltar and Malta.

According to the company, the new airline's original equipment consisted of three Douglas C-47s. This type was an Allied military transport that had launched many civil carriers after World War II. The planes, which carried 21 passengers each, flew on a route network centered in Nicosia that soon included Rome, London (via Athens), Beirut, Athens, Cairo, Alexandria, Istanbul, and Haifa. By the end of the decade, another three C-47s had been added and the list of destinations included Kuwait, Bahrain, Baghdad, Lydda, and Khartoum (via Haifa).

In 1952, BEA took over service to London with an Airspeed Ambassador, which featured a pressurized cabin that allowed nonstop routing. The next year, BEA allocated one of its new Vickers Viscounts to a London-Rome-Athens-Nicosia run. According to the company, this was the world's first regular turboprop service.

INDEPENDENT IN 1960

The government of newly independent Cyprus became the majority shareholder in 1960 with a 53.2 percent holding, while BEA's stake was reduced to 22.7 percent and private individuals held the rest. Thereafter, Cypriot nationals began to be hired and trained for the flight crews, which had previously been made up of British expatriates from BEA.

Cyprus Airways still relied on the U.K. airline for aircraft. BEA began introducing Comet 4B jets on all routes in 1961 via a joint aircraft pool arrangement that included Greece's Olympic Airways. In 1965, Cyprus began leasing its own Viscounts from BEA for regional routes. Around this time, a winged mountain goat was adopted for the airline's logo.

The Comet and Viscount aircraft were replaced with Trident jets in the early 1970s. Cyprus also leased a BAC 1-11. The faster planes allowed more European trade centers (Frankfurt, Manchester, Brussels, and Paris) to be added to the timetable.

1974 TURK INVASION

Cyprus Airways was forced to improvise after Turkey invaded northern Cyprus in July 1974. The military action destroyed one Trident airline and damaged another one, while the remaining planes were interned after the United Nations took over Nicosia Airport. Within seven months Cyprus had set up an interim airstrip on the island's southern coast. The airline leased Viscount turboprops to fly a stripped down route network to a few key cities in the region: Beirut, Tel Aviv, and Athens via Heraklion, with connections to London on British Airways. Cyprus Airways leased a pair of DC-9 jets in August 1975 to resume its own flights to London (via Salonika). The acquisition of a DC-8 several months later allowed for non-stop service. Cyprus also added flights to Saudi Arabia at this time. The company was soon able to order a pair of new BAC 1-11s.

The DC-8 was involved in an international incident in February 1978. After a group of terrorists took hostages at a conference on the island, the Cypriot government acquiesced to their demand for an escape aircraft, which was manned by volunteers, reported Aviation Week & Space Technology. It returned to Cyprus after being denied landing permission elsewhere. An Egyptian journalist had been killed in the hostage taking, and Egypt sent commandos to attack the plane on the ground. While no more hostages were killed, 15 Egyptian troops died in the ensuing battle with the Cypriot soldiers in charge of guarding the airport. It was a disastrous episode in Egypt-Cyprus relations.

The airline ordered still more different aircraft types in the late 1970s; these replaced some earlier aircraft coming off lease. By 1981, Cyprus's fleet included four Boeing 707s and three BAC 1-11s. The route network again extended from Manchester, England, to Baghdad. A change in ownership structure had taken place, with British Airways selling all but 5 percent of the shares it had inherited from BEA to the Cypriot government. Private investors owned the remainder (24.14 percent).

FIRST WIDEBODIES IN 1984

Cyprus made a transition to Airbus aircraft over the course of the decade. Its first A310 widebodies arrived in 1984, followed by A320s in 1989. The order for the eight A320s was worth more than $250 million.

Profits reached record levels in the mid-1980s as the airline added service from new U.K. cities (Cardiff, Newcastle, and Glasgow). Income of CYP 4.8 million ($8 million) in 1983, a record, would be tripled three years later. By this time, the airline was carrying 740,000 passengers a year.

Upgrading the new facilities at Larnaca continued to be a priority as officials sought to develop it into a kind of regional hub through alliances with global carriers. With liberalization of aviation markets sweeping across Europe, it was already clear that the somewhat overstaffed legacy of the state-controlled company would have to operate on a more commercial basis in the future, said chairman Kikis Lazarides. One goal was to reduce dependence on U.K. traffic. Cargo was one growing source of income. By 1989, revenues were CYP 69.7 million ($160.3 million) a year.

COMPANY PERSPECTIVES

Culture that draws on Europe, the Middle East, and 9,000 years of history, traditional Cypriot hospitality, Mediterranean spirit, modern business practices and uncompromised customer commitment, are only some of the ingredients that make up an airline, which is proud for its achievements.

A NEW LOOK IN 1991

British Airways divested the last of its shares in 1991, leaving the government with an 80.46 percent stake and private investors, the remainder. The airline was flying high, introducing a livery and uniforms as the Airbuses plied new routes to Berlin and Helsinki. Cyprus Airways had also joined the SABRE international computer reservations system and set up a tour operation in the United Kingdom.

In 1992 the group established Eurocypria Airlines Ltd. to fly European tourists to Cyprus on a charter basis. It was expanding into ancillary services as well, taking over duty-free operations at Larnaca and Pafos airports.

Cyprus added many new cooperation agreements with other airlines as it developed its international reach by linking Europe and the Middle East. Its partners included KLM and Saudia. By the mid-1990s, more than one million passengers were flying Cyprus Airways every year; another 4,000 chose the charter operation Eurocypria. The airline's market share approached 40 percent. After a rough couple of years, the company posted a CYP 13 million profit in 1994 thanks to cost-cutting and marketing efforts.

Unfortunately, the success was short-lived and the group posted losses in 1996 and 1997 before returning to profitability in 1998. By 1999, revenues were up to CYP 128.8 million; profits were slipping as the carrier dealt with increasing fuel costs and unfavorable exchange rates against the British pound. Cyprus got its first U.S. codeshare partner in 1999 via a link with Northwest Airlines. It joined the Wings global airline alliance led by Northwest and KLM.

A CHALLENGING NEW MILLENNIUM

Cyprus Airways began the new millennium with 1,600 to 2,000 employees (who were represented by five strong unions) and an economical, standardized fleet of a dozen Airbus aircraft. Its route network included 32 destinations.

The airline introduced restyled livery as it embarked on an ambitious fleet renewal program. Airbus A319s, smaller than its other planes, were added in 2002. The next year, new Airbus A330 aircraft began to replace older A310s on long-haul routes. A fleet of four Boeing 737s was chosen for the Eurocypria charter subsidiary, however.

In 2002, the Cyprus government lowered its ownership stake to 69.62 percent. By this time, the airline was carrying six million passengers a year. As Britain's Financial Times noted, more than 100 airlines were then flying to the attractive tourist destination of Cyprus.

At the same time, it was dealing with a weak global economy, the effects of the September 11, 2001 terrorist attacks on the United States and the war in Iraq on the aviation and tourism industries, and rising fuel costs. Nevertheless, the group was able to remain profitable in 2001 and 2002, thanks to an increase in passenger traffic and help from the duty-free stores.

EU MEMBERSHIP IN 2004

In preparation for the country's entry into the European Union in May 2004, Cyprus was gradually opening up its skies to foreign competitors. The state airline was hit with some loss of income on its lucrative U.K. routes, but was sheltered from competition from budget airlines since the Cyprus-London route was too long for the traditional low cost carrier business model, said an executive in Air Transport Intelligence. EU membership was expected to boost the airline's cargo business, another official told Lloyd's List.

The airline posted a loss of almost CYP 21 million ($43 million) in 2003. This prompted another round of restructuring. Cyprair Tours was closed in November 2004. Two of the airline's 12 planes were taken from service and the 1,800-strong workforce was slated to be cut by 20 percent.

KEY DATES

1947:

Cyprus Airways is founded with assistance of British European Airlines (BEA).

1960:

Government of newly independent Cyprus becomes majority shareholder.

1984:

First widebody aircraft increase capacity in booming U.K. market.

1991:

British Airways divests last of shares inherited from BEA.

1992:

Eurocypria charter airline is launched.

2003:

A difficult year in liberalizing market prompts restructuring negotiations.

2004:

Cyprus joins the European Union.

Cyprus Airways had started a small Greek associate called Hellas Jet S.A. in June 2003, in time for the 2004 Olympic Games in Athens. It was 51 percent owned by local interests. Its purpose was to compete as a low-cost carrier on routes between Athens and London, Paris and Brussels. Hellas also flew charter flights to Turkey (Istanbul), which did not recognize the Republic of Cyprus and would not allow Cypriot aircraft to enter its airspace (an inconvenience that reportedly cost Cyprus Airways CYP 1 million a year). The Greek-registered Hellas planes, chartered by a Greek businessman on behalf of tour operators in Cyprus, were allowed in, however.

Cyprus Airways revenues slipped 1.9 percent to CYP 201 million in 2005, though the pre-tax loss was narrowed to CYP 25 million from CYP 41 million. Negotiations over the airline's restructuring continued into 2006. Management was seeking a CYP 55 million (EUR 95 million) loan from the government, while proposing to sell the Eurocypria charter operation to the state.

PRINCIPAL SUBSIDIARIES

Cyprus Airways (Duty Free Shops) Ltd.; Eurocypria Airlines Ltd.; Hellas Jet S.A. (Greece; 49%); Zenon National Distribution Centre Ltd.

PRINCIPAL COMPETITORS

Aegean Airlines S.A.; British Airways plc; British Midlands Airways Ltd.; Olympic Airways S.A.

FURTHER READING

"Airline Makes $13 Million Net Profits," Moneyclips, February 6, 1995.

Balakrishnan, Ayalur, "Cyprus Airways Starts Major Marketing Drive in Saudi Arabia," Moneyclips, February 15, 1993.

Crisp, Andrea, "Cyprus Airways Seeks Turnaround Aid," Airline Business, May 1, 2006.

"Cyprus Aircraft Commandeering Could Accelerate Security Rules," Aviation Week & Space Technology, February 27, 1978, p. 27.

"Cyprus Airways Expects Air Cargo Profits to Take Off As EU Membership Takes Hold," Lloyd's List, September 15, 2004, p. 19.

"Cyprus Airways to Boost Mid-East Operations," Moneyclips, June 6, 1992.

Davies, R. E. G., A History of the World's Airlines, London: Oxford University Press, 1967.

Donne, Michael, "Cyprus Doubles Airbus Order," Financial Times (London), July 15, 1987, p. 5.

Dunn, Graham, "Cyprus Airways Unaffected by Budget Carrier Impact," Air Transport Intelligence, May 22, 2004.

Endres, Gunter, "Unions Back Cyprus Airways Survival Plan," Airline Business, February 1, 2005, p. 20.

"Greek Cypriot Associate Airline Starts Flights to Turkey," BBC Monitoring International Reports, May 12, 2005.

Hope, Kerin, "State Carrier Lines Up for Take-Off to Part-Privatisation," Financial Times (London), July 3, 2000, p. 3.

――――――, "Taxiing to Build a Niche in Greece," Financial Times (London), October 9, 2002, p. 5.

Kennedy, Tony, "Northwest Forges Alliance with Cyprus Airways," Star Tribune (Minneapolis), September 15, 1999, p. 3D.

Moores, Victoria, "Cyprus Airways Secures Shareholder Backing for Overhaul," Air Transport Intelligence, November 30, 2004.

Morrow, David, "Cyprus Airways Reviews Fleet Plans," Air Transport Intelligence, October 5, 2001.

"New Boss at Cyprus Airline," Moneyclips, September 20, 1993.

"No Access to Turkish Airspace Costly for Cyprus Airways," World News Connection, November 1, 2002.

"Open Skies Policy Alarms National Carrier," Lloyd's List, September 17, 2002, p. 18.

"The Sky Is the Limit in Cypress; Airlines Prepare for a Boom in the Run-Up to EU Entry," Travel Weekly, March 8, 2004, p. 49.

Turner, Aimee, "Cyprus Outlines Recovery Plan for National Carrier," Air Transport Intelligence, August 3, 2004.