EU ruling could ground Cyprus Airways: minister

(NICOSIA) - Cyprus Airways could cease operations if the European Commission rules that the struggling national carrier received millions of euros in state aid illegally, the communications minister said Thursday.

A decision is expected Friday, and the feeling is that the ruling from Brussels will be negative.

Marios Demetriades said the airline could be forced to close if the EU decides Cyprus broke the rules by giving it a 31-million-euro ($37 million) capital increase and 73-million-euro rescue loan.

"At the tipping point Cyprus Airways has reached, a decision that deems substantial aid given to the company as illegal means the company must repay the money; as you can understand, there will be no other choice but to suspend operations," said Demetriades.

The minister did not say how soon a suspension of operations could come in the event of a negative ruling, but he did say contingency plans had been drawn up.

"There will be no gap in the country's connectivity," Demetriades said.

Those who have already bought tickets are expected to be catered for by Ireland's Ryanair and Greece's Aegean Airlines, who operate out of Cyprus.

The government, which owns 93 percent of Cyprus Airways, had searched for investors but interest from Ryanair and Greece's Aegean Airlines was dismissed as "not serious."

The carrier has struggled to survive against intense competition on its most popular routes to Greece and London, and several cost-cutting plans have failed to stem losses.

It posted a net loss of 55.8 million euros in 2012, more than double that of 23.88 million euros the previous year.

The Cyprus Stock Exchange has also announced it will delist the airline's shares from January 13 for failing to submit financial statements for two years.