Cyprus Airways Airbus A330. Courtesy photo

Cyprus Airways reported a provisional full-year net loss of €55.8 million ($72.7 million) for 2012, more than doubling its €23.9 million loss in the year-ago period. The company issued a stark warning that its future hangs on the success of its restructuring plan.

Cyprus Airways said its ability to continue operating as a “going concern” for the next 12 months depends on the successful implementation of its turnaround plan, an increase in its share capital, and EU approval for its rescue aid application, which was filed Dec. 13, 2012.

“The company recognizes that the losses incurred in 2012 should not be repeated,” Cyprus Airways said in a statement. “The company will become viable only with the drastic reduction of operational losses and the only way to achieve this goal is the immediate implementation of the new restructuring plan, including the capital injection provided for in the plan.”

Revenue for the year fell 17.5% to €175.5 million due to the cutting of unprofitable routes, reduced demand caused by the downturn and stronger competition. Expenses fell 16.7% to €224.9 million, although the comparative figure from 2011 included redundancy payments and an impairment on the sale of two Airbus A319s. This produced an operating loss of €49.7 million, compared to €25.5 million in 2011.

The turnaround plan, prepared by Air France Consulting, includes a capital boost, staff cuts, increased productivity, outsourcing of some departments, securing new collective agreements, a streamlined schedule, product improvement and expansion into the Greek market.

“The implementation of the measures of the turnaround plan is expected to lead to a drastic reduction in the operating losses for the current year in comparison to 2012 and it will have a favorable impact on the long-term viability of the company. It should also be noted that the efforts for identifying a strategic investor will continue while the government has already proceeded with a rescue aid application for the company to the European Union,” the airline said.

On Feb. 7, the Cypriot government increased its shareholding in Cyprus Airways from 69.6% to 93.7% through a rights issue.