The Cyprus Airways name returns to the skies, but things look very different in the Cypriot market

15 June, 2017

A start-up backed by a leading Russian airline has resurrected the Cyprus Airways brand and boost connectivity from the Mediterranean island. Established under the name Charlie Airlines, the business, which shares common ownership with S7 Airlines paid just over €2 million to the Cypriot Government for rights to operate under the Cyprus Airways brand for the next ten years.

The ‘new’ Cyprus Airways launched flights at the start of June 2017 with a single Airbus A319 linking Larnaca with St Petersburg and Tel Aviv - it will also add seasonal flights to Heraklion and Rhodes before the end of the month.

This is just the first stage in the loading of the airline’s planned inventory and it is also planning flights linking Larnaca and Paphos to destinations in Greece, Russia and the UK where it is understood to be seeking to fly to London Stansted, Manchester and Glasgow.

Cyprus is a very competitive and very seasonal market, with a strong leisure focus. The new Cyprus Airways' simplified business model suggests that it should have a lower unit cost than that of its defunct predecessor, but finding a defendable niche will be crucial. Although a number of existing carriers have boosted capacity in the Cypriot market, none more so than Greek operator Aegean Airlines, the start-up’s backers believe there is sufficient demand for the new offering.

CHART - Annual Tourism Arrivals into CyprusSource: CAPA - Centre for Aviation

Cobalt Aero has also already been established to partly fill the void from the collapse of Cyprus Airways. Last winter it flew to Athens, Chania, Heraklion and Thessaloniki in Greece; Paris, France; Tel Aviv, Israel; and Birmingham, London and Manchester in the UK. This summer it has added flights to Brussels, Belgium; Dublin, Republic of Ireland; Madrid, Spain; and Zurich, Switzerland. More recently Orion Airways and TUS Airways have also introduced aircraft into the Cypriot market.

It is now over two-and-a-half years since the original Cyprus Airways was place in voluntary liquidation at the start of 2015, resulting in the suspension of all of its air services from January 9 the same year. The closure of the carrier followed a ruling from the European Commission that the Cypriot government had breached rules on support for struggling companies when it offered state support to the ailing carrier between 2007 and 2013 and that the carrier was required to repay over €65 million of illegal state aid.

The airline’s closure followed many failed attempts to find a sustainable future for the business and unsuccessful talks to find a new investor. It had faced significant competition in the years ahead of its closure as foreign low-cost carriers introduced flights to the Mediterranean Island and other established carriers boosted their own activities from Larnaca and Paphos.

The government acquired the Cyprus Airways logo, brand name and trademark in December 2014, a month before the loss-making state-run airline run out of cash and under the licencing agreement with Charlie Airlines, the state will remain the owner of the Cyprus Airways brand name, logo and trademark. It will closely supervise the start-up through a special committee that will ensure adherence “to certain standards of quality with which the successful bidder has to comply”, says the Cypriot finance ministry’s privatisation unit.

Capacity data from OAG shows that since Cyprus Airways’ closure in the second week of January 2015, a number of airlines have boosted capacity from the island. Comparing international departure capacity from Cyprus in last year’s summer 2016 schedule with that of summer 2014, the final full schedule period flown by Cyprus Airways we see that the likes of Aegean Airlines, Blue Air, Qatar Airways, S7 Airlines and Ural Airlines have more than doubled capacity from the island. Meanwhile Alitalia, airberlin, Cobalt Aero, Danish Air Transport, EllinAir, Israir, Pobeda, TUIfly Nordic, TUS Airways, Yanair and Vim Airlines have all begun flights into Cyprus.

CHART - Scheduled Annual Seats in CyprusSource: CAPA - Centre for Aviation and OAG Schedules Analyser

The Blue Swan Daily analysis shows that the international capacity offering from Cyprus has actually risen since the collapse of Cyprus Airways with the number of departure seats up 6.2% in summer 2015 compared to summer 2014. This rose a further 13.3% last and is up 9.9% year-on-year during the current summer schedule.

READ MORE… Cyprus Airways reborn into very different competitive landscape; pre-empted by Cobalt Air & Tus Air