Ryanair is likely to offer just a "nominal sum" for loss-making Cyprus Airways, which it is eyeing as a potential foothold in the eastern Mediterranean. The Irish airline has confirmed that it intends making a non-binding offer for the troubled Cypriot carrier tomorrow to local officials charged with finding a strategic partner for the business.
Ryanair's chief marketing officer Kenny Jacobs said that only a "nominal sum would change hands" should it go ahead and buy Cyprus Airways, whose losses more than doubled to €56 million in 2012 from €24 million the previous year.
Instead, Ryanair will base its offer on a package that will include taking the loss-making business off the government’s hands, increasing routes to and from Cyprus and boosting tourism, one of the country’s key industries.
Some reports suggest that Ryanair is promising to increase passenger numbers to three million per annum from their current level of 500,000 within three years. Senior Ryanair figures, including chief executive Michael O’Leary, have met Cypriot officials in recent weeks to outline their proposals.
Ryanair is one of 15 suitors on a list that is also said to include Greece's Aegean Air, Spanish group Arevenca and Romania's Blue Air. Mr Jacobs said the Irish company was one of the favourites in the race.
"We have had two meetings with them and they have been very positive," he said. "They are very keen on Ryanair, we are in 30 markets and can offer them better access to the rest of Europe than anyone else."
Cyprus Airways is 93 per cent state-owned but the government, which is still struggling from the collapse of the country’s banking system in 2012, is seeking to offload it. Over the last two years, the administration made a number of attempts to rescue the company, including a €73 million bailout, but the EU is now investigating these for possible breaches of state aid.
The airline itself sold three slots in London's Heathrow Airport, axed jobs and cut costs in order to keep flying. However it is continuing to struggle against competition on key routes to Greece and London and with a recession-hit domestic market. At this stage its key assets are six Airbus craft, a base at Lanarca Airport and an Air Operator's Certificate (AOC).
According to Mr Jacobs, Cyprus Airways is attractive to Ryanair because it offers a potential base from which the Irish airline could open up markets in the eastern Mediterranean, middle east and Russia.
Irrespective of the outcome of the Cyprus Airways bid, he added, Ryanair was interested in this region and in getting into countries such as Israel, Lebanon and North Africa. "It is an interesting part of Europe that's continuing to grow," he said.
Ryanair was carrying 4.5 million passengers a year from the region, compared to zero four years ago.
Last week, Mr O'Leary said the company was interested in establishing an "Israeli Ryanair" that would target the eastern Mediterranean and Russia. The airline is also proceeding with plans for flights between Ireland and Moscow.
Once its offer is submitted tomorrow, the airline will then be given access to Cyprus Airways’s books and other information and from there it will decide whether or not to proceed with a final bid.
Meanwhile, Mr Jacobs reiterated a prediction made last month that tougher trading conditions over the winter season could lead to a fare war involving Ryanair and its main rivals.
