Transaero bankruptcy a negative develpment, Lakkotrypis says

(Update-4)

By Stelios Orphanides – Cyprusbusinessmail.com

Yiorgos Lakkotrypis, minister of energy, commerce, industry and tourism said that reports about a probable bankruptcy of Russian airliner Transaero is a negative development, the Cyprus News Agency reported.

Lakkotrypis said that authorities are looking to assess how this development could affect tourists already vacationing in Cyprus as well as how it would affect tour operators in the months ahead, the news agency reported.

The minister’s comments preceded a crisis meeting at the Cyprus Tourism Organisation to assess the situation which was scheduled to start at 12:30. Still, CTO deputy director Annita Demetriadou said that she expects no disruptions in October, in which more arrivals are expected compared to November and December, according to the CNA.

Cyprus’s tourism board, responsible for the promotion of Cyprus as a destination, is monitoring the situation through its representative offices in Moscow and St. Petersburg

Transport minister Marios Demetriades said that a probable failure of Transaero, which carries 70 per cent of Russian tourists to Cyprus, could create a gap in Cyprus’s connectivity to Russia affecting the tourism industry, the CNA reported. Demetriades said that according to a bilateral agreement, Russian carriers which have a local airline licence would then have to cover the gap with additional flights adding that no other airline in Cyprus currently has such a licence.

Following the failure of state-owned Cyprus Airways in January which had a 4 per cent share of the market, there is no Cypriot carrier to fill the gap, as three applications are pending, Demetriades said, he said according to CNA. Even if such a company existed, it would be in a more disadvantageous position as Turkey blocks its airspace to Cypriot airlines, the minister said.

Concern over Transaero’s probable failure emerged after Russian prime minister Dmitry Medvedev gave the airline the go ahead to file for bankruptcy after state owned competitor Aeroflot refused to inject money in to the ailing company, the pro-Kremlin news website reported on Thursday.

Russia is Cyprus’s second largest source of incoming tourists after the UK. In 2014, ten Russian tour operators went out of business, including four with operations in Cyprus, leaving affected tourists unable to return home for several days. In the first eight months of 2015, the number of Russian tourists visiting Cyprus dropped almost 20 per cent to 388,398 compared to the respective period of 2014.

The devaluation of the Russian rouble by 46 per cent in a year, caused by Russia’s falling revenue from energy exports and western sanctions prompted by the country’s support to separatists in Ukraine, also resulted in a considerable drop in revenue from Russian tourists, Cystat data show.

Indicatively, Russian tourists reduced their daily per person spending in Cyprus 18 per cent to €80 in June, the month with the latest available figures. Directly or indirectly, tourism makes out roughly one quarter of Cyprus’s economy.

Dinos Kakouras, who chairs the Association of Cyprus Travel Agents said on Friday that in the remaining months of 2015 alone, Transaero was expected to transport 100,000 tourists to Cyprus. Kakouras was commenting on state radio CyBC.

Transport minister Demetriades said that Transaero carried around 350,000 passengers to Cyprus this year and is expected to carry another 30,000 adding that the impact would be therefore limited for the rest of the year.

Transaero flies to the airports of Larnaca and Paphos from 18 other airports in Russia which is Cyprus’s second largest source of incoming tourism. Hermes Airports, the company operating the two Cypriot airports was unavailable for a comment.

Akis Vavlitis, chairman of the Association of Cyprus Tourism Enterprises, a business group representing hotels, marinas, waterparks and other tourism related services, said that Transaero may affect Russian tour operator Biblio Globus’s operations, which has a 70 per cent share in incoming tourism flows from Russia.

Vavlitis, who was also speaking on state radio CyBC, said that for the moment Transaero continues carrying out is flight programme and competitor Aeroflot agreed to continue Transaero’s it over the winter season, even at an extra charge for passengers.

Reuters reported on Thursday that Transaero, which had a total of €1.6bn in debt in 2014 and saw its passenger numbers rise 2.7 per cent in the first seven months of the year, was affected too by the slowdown of Russia’s economy.

Reuters also reported that Russian transport minister Maxim Sokolov ordered Transaero to stop selling flight tickets. Around 650,000 people have bought tickets from the ailing company may expect that all obligations will be fulfilled, Reuters reported citing Sokolov.

 

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