Ministry proposes survival plan for Cyprus Airways

Download article in original language : CY0501103FCY.DOC

In November 2004, the Cypriot Ministry of Labour submitted a proposal aimed at ensuring the continued existence and operation of the troubled national air carrier, Cyprus Airways. The plan includes a pay freeze and cuts in pay supplements, plus changes in working time for some staff. By mid-January 2004, only one of the five trade unions represented at the company had accepted the proposals.

On 28 November 2004, the Ministry of Labour and Social Insurance submitted a proposed plan aimed at ensuring the survival of Cyprus Airways. The proposal is the product of consultations carried out in the context of industrial disputes referred to the Ministry of Labour by the trade unions at Cyprus Airways. These disputes arose as a result of the measures implemented by company management to address the serious economic situation of the national air carrier (CY0410102F). The Ministry of Labour, with the consent of management and the unions, took the initiative to intervene in order to arrive at a consensus that would create the conditions for restoring Cyprus Airways to health and allowing it to continue in operation. According to the Ministry, the final proposal, including modifications made up to 21 December 2004, takes the views of both sides into account.

Employment levels

Employment levels at Cyprus Airways, and more specifically an overall reduction in staff, are not among the principal issues included in the Ministry of Labour’s proposal. Apart from referring to a specific number of redundant staff in the context of changes under way in catering services, 20 people in all, the proposal focuses on the employment of pilots. More specifically, as regards 12 co-pilots who have been made redundant, after extensive consultations and respective amendments of the initial proposal it was decided not to include this issue in the Ministry of Labour’s proposal. On this specific issue, the provisions of the relevant legislation (Law 24/67 on termination of employment, as amended) will be observed. However, in the event that it becomes necessary to hire pilots within the next three years, the company has committed itself to giving priority to the 12 redundant co-pilots, providing them with the possibility of being re-hired on the basis of seniority.

On 19 October 2004, the Pancyprian Pilots’ Union (PASYPI) had referred to the Ministry of Labour a labour dispute on the subject of safeguarding pilots’ jobs, and specifically the impact of transferring work over to Cyprus Airways’ subsidiaries and reducing the parent company’s turnover to their level of employment. With regard to this issue, according to the Ministry’s proposal, during the examination of the said dispute neither side may take any unilateral action. As regards dismissals of redundant staff more generally, including people who have already been dismissed as well as those slated for dismissal, 'goodwill' compensation will be paid on the basis of a special scheme agreed upon between the two sides.

Terms and conditions of employment

With regard to the issue of current collective agreements and the terms and conditions of employment emanating from them, the Ministry of Labour proposal deals with both pay and non-pay issues.

In the framework of cutting labour costs, it is proposed to suspend pay increases of a total of 6% for the two-year period 2005-6, as well as a 1% increase in related benefits. The pay increase will be granted in two equal instalments on 1 January 2007 and 1 January 2008, while the increase in related benefits will be granted on 1 January 2006. Annual increments for managerial staff (from the level of assistant director and up) and for pilots will also be suspended for two years. A reduction in pay (basic plus indexation) in 2005-6 is also proposed for this category of staff. Specifically, the first CYP 30,000 of annual salary is to be reduced by 5%, and the portion over and above CYP 30,000 by 8%. However, company and staff contributions to various funds, such as the welfare and social insurance funds, will not be affected by this reduction; the welfare contribution will be calculated on the pay level in force before the reduction takes effect. The payment of a range of pay supplements while staff are absent on annual leave and sick leave is also abolished. Out of the total of 11 pay supplements mentioned in the proposal, the subsistence payment for flight staff on rest leave is excepted, and employees who fall ill abroad during their service will receive all pay supplements. Lastly, a 50% reduction in additional compensation for Sunday work is proposed for staff working shifts and scheduled hours. This measure will be in effect for three years, when it may be renegotiated.

In the context of reducing non-pay costs, it is proposed to reduce employers’ contributions to the social insurance fund from 9.4% to 6.3% of pay, and increase employees’ contributions from 3.2% to 6.3%. This measure will be in effect for three years, with no offsets, and after the three years are up part of the increase in existing staff’s contributions will be compensated in the form of a retirement gratuity. Its amount and manner of payment will be subject to negotiation.

As concerns non-pay issues, and working time in particular, the proposal increases cabin crews’ working hours, as set in the current collective agreement, from 62 to 72 hours a month. Seven flights will be carried out without overnight stays, and the number of such flights may be increased in the future. Working hours for other staff hired prior to 31 December 1983 are increased from 33 to 38 hours a week. In the framework of reducing overtime costs, the proposal is to apply a split working day with multiple duties such as days off, early call and extension of duty, a measure which is, however, not applicable to all services or all categories of staff.

An important non-pay change is the redefinition of an employee’s 'home base'. The home base of each employee will be his or her place of work, and as a result a range of pay supplements will be abolished:

  • travel expenses for all eligible staff;
  • transport allowance of CYP 15 per month for all eligible staff;
  • automobile allowance of CYP 25 per month for pilots; and
  • travel time allowance of CYP 0.30 as an additional indexation allowance for each working hour paid to pilots.

The cost of transporting crews to and from Pafos airport will still be borne by the company, and the transport of the staff involved from Lefkosia to Larnaka and back will be the subject of bargaining, the aim being to reach a consensus before 28 February 2005.

Permanent status for temporary staff as provided for in the current collective agreement will be suspended for three years. During the period of suspension, Law 98(I)2004 on fixed-term employees (prohibition of unfavourable and discriminatory treatment) will apply.

The Ministry of Labour’s proposal provides for continued dialogue between the company and the trade union organisations, in a constructive spirit, in order to take additional measures covering all the company’s sectors of activity, aimed at the survival of the national carrier. If not stated otherwise, 1 January 2005 is understood to be the date the measures take effect. Again, if not stated otherwise, the measures will be understood to be of indefinite duration.

Commentary

The proposal by the Ministry of Labour regarding the survival of Cyprus Airways is aimed at restoring the air carrier to economic health and allowing it to continue in operation, with as few adverse changes to terms and conditions of employment as possible. In this context, the content of the proposal is a distinct improvement over Cyprus Airways' own action plan (CY0410102F). However, given the divisions in the trade union movement in the sector, and the clashes of interests between the various occupational categories, it is particularly difficult to achieve agreement between all the trade unions at Cyprus Airways. Specifically, up to 13 January 2005 out of a total of five unions only the Cyprus Workers' Confederation (SEK) and the Pancyprian Federation of Labour (PEO) had accepted the Ministry of Labour’s proposal, whereas the Cyprus Airways Cabin Crews Union (SYPKKA) had rejected it early on. Of decisive importance will be the decisions of PASYPI and the ASYSEKA engineers' union, which are awaited shortly, but if those organisations disagree and take industrial action, the implementation and effectiveness of the proposed measures will become impossible. (Eva Soumeli, INEK/PEO)

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