“Middle East Airlines is currently negotiating with Cyprus Airways. The details of these talks are highly confidential because both parties signed an agreement not to disclose any details about the progress of these negotiations,” an industry source told The Daily Star.

The source, who was speaking on condition of anonymity, said MEA would have a final answer from the Cyprus Airways at the end of May at the latest. The source did not say if MEA was interested in acquiring all or part of the Cyprus Airways but assured that if the Cypriots agreed to the terms then the Lebanese company would score a major achievement.

“There will be a synergy between both airlines if the talks succeed. MEA could benefit from the low cost of operation and expand the network of its flights abroad,” the source said. Sources said that the cost of networking for Cyprus Airways was much cheaper than MEA.

These sources said the MEA chairman and one of his top aides paid several visits to Cyprus recently to hold talks with Cyprus Airways.This is not the first time MEA has held talks with Cyprus Airways, but experts say the deep economic crisis in the island country has compelled the the Cypriot firm to restart the negotiations.

The company laid off hundreds of pilots and staff in a bid to cut the mounting losses, but even these drastic measures have not been sufficient to break even. MEA, with a fleet of 18 brand new Airbus planes, managed to make an operational profit of $40 million in 2012 in spite of the difficult conditions in Lebanon and the region.

Cyprus Airways incurred a loss of $73.17 million in 2012 despite the drastic cuts the company made last year. Cyprus Airlines disclosed the talks with MEA in a stock market filing Tuesday, saying that consultations were at an early stage and preliminary, while giving no further details. The filing said consultations were also being held with other companies. Earlier this month the carrier had announced that there were “encouraging” signs that China’s Beijing Yi Xiang Da Investment could buy it. The Cypriot government controls 93.67% of Cyrus Airways.

The government, which is hoping to keep the carrier operational through the key summer months, has made it clear that the cash-strapped airline must undergo a drastic transformation or be shut down. The government has described the airline’s current situation as “very difficult and fragile,” and the carrier said authorities had adopted its restructuring plan for the 11 Airbus fleet to be reduced to six with one in reserve.

Trade union estimates said the company has presold 400,000 seats for the summer, and unions say an agreement has been reached to reduce the 1,030-strong workforce by 490. Last month, it said its future depended on it receiving rescue aid through a 31 million euro government share capital injection which would be subject to European Union approval. But the European Commission has launched an investigation into whether the money that the state has pumped into Cyprus Airways breached competition law.

Source: The Daily Star