Merger of two public airlines rejected

From October 2010, the social partners joined the debate on a possible merger of Cyprus’s two airlines, Eurocypria and Cyprus Airways, in an effort to find a solution that would give a viable and competitive national carrier while safeguarding the future of airline employees. With Eurocypria to close, trade unions at both companies held different views on the merger procedure and serious concerns about jobs and employment rights. In the end, the European Commission rejected the merger in November.

In the last quarter of 2010, the public dialogue on the future of air carriers in Cyprus intensified, along with government’s efforts to retain one state-run national carrier, in view of the political decision to irrevocably shut down state-run Eurocypria on 13 November 2010 (the day coinciding with the end of the company’s summer flight schedule). Meetings between the Ministry of Finance and union representatives at both Eurocypria and Cyprus Airways, which had begun the previous month, continued during October 2010.

The trade unions active at the two companies included the:

  • Pancyprian Airline Pilots Union (PALPU);
  • Cyprus Airways Cabin Crew Union (SIPKKA);
  • Cyprus Airways Employees’ Trade Union (SYNYKA) – member of the Cyprus Workers' Confederation (SEK);
  • Independent Trade Union of Cyprus Airways Employees (ASISEKA);
  • Federation of Private Employees (OIYK), SEK member, which represents employees of Eurocypria;
  • Local Authority Workers’ and Employees’ Trade Union (SIDIKEK), member of the Pancyprian Federation of Labour (PEO), which represents employees of both Cyprus Airlines and Eurocypria.

(For a detailed presentation of these union organisations at the level of representation and collective bargaining see Cyprus national contribution to the Representativeness study on the civil aviation sector).

Brief history of the situation at the airlines

The possibility of a merger between the two public airlines, Eurocypria and Cyprus Airways, had been under discussion since spring 2010 due to the serious financial problems faced by both companies, but especially by the charter flight company Eurocypria. A former subsidiary of Cyprus Airways, Eurocypria was bought by the state in 2006 in an effort to restore it to financial health but it continued to operate at a loss since then. Cyprus Airways also posted substantial losses, amounting to €25 million, during the first half of 2010.

In the government’s view, the main causes of the profound crisis affecting both companies included:

  • the strong competition in air transport;
  • the global economic crisis;
  • oil prices;
  • the prohibition of flights in Turkey’s airspace;
  • the effects of the volcanic ash from Iceland;
  • strikes in Greece;
  • the long-term problems caused by bad decisions by former administrations and governments.

In this context, the government decided to merge the two companies, making clear its political position to keep one state air carrier.

The government estimated that a unified operation and administration scheme would bring savings of around €14 million annually. However, it pointed out that the basic precondition for the whole venture was to design and implement a restructuring plan for the new company, which would include a voluntary exit scheme; the basic objective being to create a viable, competitive company.

The final proposal for the merger was subject to approval by the European Commission, which has since rejected the move. As a result, Eurocypria entered into liquidation in late November 2010.

Opposing views on redundancies and industrial relations

On 14 October 2010, as part of the separate meetings held between the Minister of Finance, Charilaos Stavrakis, and the representatives of the trade union organisations of each company, the government made a commitment that all Eurocypria staff would be absorbed by Cyprus Airways. Almost all Cyprus Airways employees were opposed to this position.

The positions of the union organisations at both companies varied between two diametrically opposed scenarios.

On the one side, Eurocypria employees called for unification of the two companies through the absorption of Eurocypria by Cyprus Airways along with its staff, followed by implementation of a voluntary exit scheme for all employees of the unified company. The General Secretary of OIYK/SEK, Elisseos Michail, believed that until a new collective labour agreement could be concluded to cover all staff in the new company, Eurocypria employees should be transferred to Cyprus Airways, retaining the same terms and conditions of employment they had in their own company.

Directed towards the same end are the positions of SIDIKEK/PEO which, although it represents a smaller number of employees than other union organisations, still represented the interests of employees in both companies. The Secretary General of SIDIKEK/PEO, Antonis Neophytou, stated that the board of directors of the new ‘merged’ company would have to proceed immediately with a restructuring plan. If redundancies were foreseen, the plan would have to include a scheme agreed with the unions for early voluntary retirement directed at all employees. In any case, Mr Neophytou argued that employees of both companies should be brought into the new arrangement under their existing terms and conditions of employment (so as to avoid any victimisation) and the merger should take place prior to any procedure to reduce staff.

On the other hand, employees at Cyprus Airways believed that transferring all 320 Eurocypria employees would create a host of operational problems for the new company. In this context, Cyprus Airways employees called for the implementation of a voluntary exit/early retirement scheme, which would involve both companies and would take place prior to the merger.

The President of SYNYKA/SEK, Andreas Pierides, estimated about 150 redundancies as a result of the merger. Given the turnover at Cyprus Airways as well as cutbacks in Eurocypria’s fleet, Mr Pierides stressed that redundancy costs should be borne by Eurocypria’s employees, as was the case with the restructuring of Cyprus Airways in 2005 when 120 employees retired in order to keep the company viable (CY0410102F, CY0501103F).

PALPU emphasised that the basic objective of the absorption of Eurocypria operations by Cyprus Airways (which seemed the only viable form of unification for both companies) was to create a strong national air carrier. According to PALPU, this would have been impossible to achieve by transferring all Eurocypria’s employees, as it would have had adverse financial and professional consequences for the new company. With reference only to the pilots, whose interests it represents, PALPU pointed out that any unification procedure would be conditional on the full respect of existing jobs as the pilots are an integral part of the performance of Cyprus Airways. Consequently, PALPU would have rejected any attempt to integrate Eurocypria’s pilots on their current terms of employment, as the collective agreement at Cyprus Airways stipulates that hiring new pilots is only possible through trainee positions or first officer grades. PALPU argued that the transfer of crews from Eurocypria to Cyprus Airways could only happen on the basis of specific procedures (most of them time-consuming) and that any haphazard transfer and involvement of such crews would disturb the uniformity and business environment of the company, endangering its performance. In order to transfer Eurocypria crews to Cyprus Airways they would have to be retrained for Airbus in addition to Boeing aircraft.

PALPU also held a firm position on the possibility of strike action in case its demands were not met. A memorandum in this direction was filed in June 2010, and on 26 October 2010, the general meeting of SYNYKA approved a two-hour token work stoppage, announced for 1 November 2010.

Commentary

Despite the fact that any form of unification of the two state air carriers, as well as any restructuring scheme, were subject to approval by an EU committee, it was clear that the final proposal would have come up against strong opposition from some employees. Given the conflicting interests, not only between employees of the two companies but also among the various occupational categories in the air transport sector, it was clear that groups of satisfied as well as groups of disgruntled staff would emerge. As regards recourse to pressure through industrial action, Cyprus Airways employees were in a stronger position and were likely to resort to such techniques in order to safeguard their jobs and terms of employment.

Eva Soumeli, Cyprus Institute of Labour (INEK/PEO)

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