Ordered By The EC to Repay Millions In 'Illegal' State Aid

Cyprus Airways has ceased all operations after the European Commission ordered it to repay the equivalent of over $76 million in state aid deemed to be illegal by the commission.

In a notice posted on its website, the airline said "As a consequence of the negative decision of the European Commission for competition on the request of Cyprus for approval of the Restructuring Plan of Cyprus Airways, which was submitted in October 2013, the Board of Directors of Cyprus Airways decided in its meeting today [Friday] to put into operation the voluntary liquidation process and to this end take appropriate measures to implement this decision.
 
"In the above context, the company ... decided immediately to suspend flight operations by the end of the current day."

Reuters reports that the EU Competition Commissioner Margrethe Vestager said that there was no way the airline could become viable without continued subsidies from the state. Under the commission's rules, a company cannot received state assistance more often than every 10 years, and the government bailed out Cyprus Airways in 2007.

Finance Minister Harris Georgiades told reporters "The company has ceased being a viable entity ... and cannot continue to operate." He said that the state would cover the cost of flights on alternative airlines for people who already have tickets on Cyprus.

Ryanair posted a notice on its website that it would offer "rescue fares" for passengers with tickets on Cyprus, but analysts said that the low-cost European carrier has limited capacity for those seats, according to Reuters.

Reaction from the staff was relatively low-key, though a few protesters did gather outside the carrier's offices in Nicosia. Petros Souppouris, the head of the airline's pilots union told Reuters that "It's pretty clear from the decision that the government didn't put a viable restructuring plan in place. Our union clearly says that was deliberate; you can turn any company around."

(Image from file)

FMI: http://ec.europa.eu/index_en.htm