Ailing CY will become prey to competitors
THE €20 MILLION state aid package for Cyprus Airways (CY) may have prevented its closure for now but the launch of a daily flight from Larnca to London-Heathrow at a competitive fare by Aegean means increased competition on two main routes, analysts said yesterday.
Bernard Musyck, an expert in aviation economics said: "The fact that Aegean decides to station planes in Cyprus and turn the island into a hub is a very bad sign for Cyprus Airways.”
He added: "It resembles a situation of carrion birds starting flying over an animal in the savannah, which is about to die. Aegean wants to be in position to exploit a possible bankruptcy of Cyprus Airways".
Greece's largest airline seems willing to seek more opportunities abroad after it posted a €23.3 million loss in 2010 compared to a €23 million profit in 2009, mainly on weak domestic demand. The company announced this month that it took over slots at Heathrow and Charles de Gaulle airports from its competitor Olympic Airways. In January, the European Commission vetoed the merger of the two companies.
Aegean, which has been flying to Cyprus since 2003, announced on March 10 that it would turn Larnaca Airport into a hub by stationing three Airbus 320 aircraft there, and by linking it to six additional Greek airports. It also said it would increase the frequency of flights from here to Thessaloniki.
By contrast, CY posted a profit of €215,000 last year, thanks to the €20 million contribution from the Cypriot taxpayer. The state-owned carried had to reduce its operations and staff in an attempt to cut cost with a €40 million restructuring plan. These measures may be insufficient, Minister of Finance Charilaos Stavrakis said on February 7.
"Aegean's increased presence in Cyprus will hasten the collapse of Cyprus Airways. They will have to compress prices to remain in the market" Musyck said.
Still, even as CY responded with a 'buy one, get one free' offer for travelers to London to counter Aegean's special offer of a €102 one-way ticket from Larnaca to London, it may be forced to sell tickets for London flights at a higher price at some stage, as ticket prices depend on the number of passengers a plane carries, Kyriakos Kyriakou, spokesman of Cyprus Airways said. "If the load factor drops, prices go up. If the load factor goes up, prices fall".
Even as Cyprus Airways takes the pricing of its competitors into account, it has "no intention of entering a price war," the company's spokesman said. "Fuel is getting more expensive on a daily basis and keeping fares below cost cannot get you far".
The price of Brent oil rose 23 per cent since the beginning of the year to above $116 a barrel on Friday mainly on fears the recent political unrest in Arab counties could cause a shortage in supply.
www.cyprus-mail.com
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THE €20 MILLION state aid package for Cyprus Airways (CY) may have prevented its closure for now but the launch of a daily flight from Larnca to London-Heathrow at a competitive fare by Aegean means increased competition on two main routes, analysts said yesterday.
Bernard Musyck, an expert in aviation economics said: "The fact that Aegean decides to station planes in Cyprus and turn the island into a hub is a very bad sign for Cyprus Airways.”
He added: "It resembles a situation of carrion birds starting flying over an animal in the savannah, which is about to die. Aegean wants to be in position to exploit a possible bankruptcy of Cyprus Airways".
Greece's largest airline seems willing to seek more opportunities abroad after it posted a €23.3 million loss in 2010 compared to a €23 million profit in 2009, mainly on weak domestic demand. The company announced this month that it took over slots at Heathrow and Charles de Gaulle airports from its competitor Olympic Airways. In January, the European Commission vetoed the merger of the two companies.
Aegean, which has been flying to Cyprus since 2003, announced on March 10 that it would turn Larnaca Airport into a hub by stationing three Airbus 320 aircraft there, and by linking it to six additional Greek airports. It also said it would increase the frequency of flights from here to Thessaloniki.
By contrast, CY posted a profit of €215,000 last year, thanks to the €20 million contribution from the Cypriot taxpayer. The state-owned carried had to reduce its operations and staff in an attempt to cut cost with a €40 million restructuring plan. These measures may be insufficient, Minister of Finance Charilaos Stavrakis said on February 7.
"Aegean's increased presence in Cyprus will hasten the collapse of Cyprus Airways. They will have to compress prices to remain in the market" Musyck said.
Still, even as CY responded with a 'buy one, get one free' offer for travelers to London to counter Aegean's special offer of a €102 one-way ticket from Larnaca to London, it may be forced to sell tickets for London flights at a higher price at some stage, as ticket prices depend on the number of passengers a plane carries, Kyriakos Kyriakou, spokesman of Cyprus Airways said. "If the load factor drops, prices go up. If the load factor goes up, prices fall".
Even as Cyprus Airways takes the pricing of its competitors into account, it has "no intention of entering a price war," the company's spokesman said. "Fuel is getting more expensive on a daily basis and keeping fares below cost cannot get you far".
The price of Brent oil rose 23 per cent since the beginning of the year to above $116 a barrel on Friday mainly on fears the recent political unrest in Arab counties could cause a shortage in supply.
www.cyprus-mail.com
CIAO
_goa
