Rescue plan for Cyprus Airways

A last-ditch rescue plan for Cyprus Airways was submitted by company management in February 2011. The measures outlined included a substantial reduction in labour costs, with an estimated 156 redundancies. A special agreement on the cuts was concluded by the company and employees, following a mediation proposal prepared by the Ministry of Labour and Social Insurance. The plan also includes re-working the state air carrier’s flight schedule and reducing operating costs.

Background

The new management at Cyprus Airways was officially appointed on 16 December 2010. Its rescue plan, based on a detailed study of the company’s finances, was submitted to the government and the social partners in January. Management then submitted a final plan on 21 February 2011 which is aimed at reducing labour costs, reworking the company’s flight schedule and reducing operating costs.

Employment and labour relations

The plan’s basic provisions were defined in the framework of a special agreement entered into on 18 February 2011 between Cyprus Airways and the five trade unions affected. The agreement was signed on the employees’ side by:

  • the Pancyprian Pilots Union (PASYPI);
  • the Cyprus Airways Cabin Crew Union (SIPKKA);
  • the Cyprus Airways Employees’ Trade Union (SYNYKA), a member of the Cyprus Workers’ Confederation (SEK);
  • the Independent Trade Union of Cyprus Airlines Employees (ASYSEKA);
  • the Local Authority Workers’ and Employees’ Trade Union (SIDIKEK), a member of the Pancyprian Federation of Labour (PEO).

The agreement is the result of a mediation proposal prepared by the Ministry of Labour and Social Insurance on 21 January 2011, in an attempt to find a consensual solution that would create the conditions for the continued operation and greater competitiveness of Cyprus Airways.

Pay cuts and redundancy plan

The basic provisions of the agreement, which has been backdated to run from 1 January to 31 December 2011, set out a 9% pay cut for all employees, with the exception of those whose gross monthly pay does not exceed €2,000. This measure is expected to reduce labour costs by €4.8 million in 2011. In addition, the agreement provides for:

  • three days’ less annual paid leave for all staff;
  • a 10% reduction in total expenditures for wages abroad, training expenses, subsistence costs and transport of staff from and to other countries, including business trips;
  • less duty free;
  • a reduction inpublic holidays from 10 to five days a year;
  • reduction in sick leave without a doctor’s certificate to two consecutive days twice a year and one day once a year.

The two sides have also committed to making every possible effort to reduce, on an annual basis, overtime by 30% and sick leave by 40%.

The redundancy plan is expected to be completed by the end of March 2011, with the payment of 60% of the relevant compensation before 31 May 2011 and the other 40% by 31 May 2012. According to initial estimates, a total of 156 people will be made redundant, and the cost of the compensation, which will be paid on the basis of the severance pay plan introduced in 2006 (CY0410102F, CY0501103F) amounts to around €9 million. The company will also close down some of its offices in other countries, and assign its business to general sales representatives between March and June 2011, which is expected to increase turnover significantly. It has been decided to keep the retirement age for employees at 60.

Management and unions have committed to enter into dialogue in order to correct any distortions. Management has also committed to briefing the unions every three months on the implementation of all actions aimed at improving the company’s finances.

Commentary

In contrast with the strong confrontation between the company and the trade unions in 2006, the present agreement shows the determination of the social partners to help rescue the national air carrier. This is despite the admittedly conflicting interests of the various occupations involved, and the fact that basic established employment rights are being affected. Additionally, the fact that the agreement is the product of social dialogue is expected to facilitate its implementation. The agreement is a necessary precondition for parliament to approve crucial state support of €20 million, without which the carrier will not survive. This amount has been calculated on the basis of compensation for losses incurred by the airline between 2004 and 2010 due to the prohibition of its flights over Turkish airspace. A number of analysts, however, along with some trade unionists and policymakers, think the company, in an environment as competitive as that of air transport, will survive only if its ownership status is reconsidered.

Eva Soumeli, Cyprus Labour Institute (INEK/PEO)

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