EC tells Olympic Airlines to return illegal state aid
18 Sep 2008
In a first in the European aviation sector, the European commission has asked Olympic Airlines to pay back €850 million to the Greek government which it had taken as illegal state aid, before the airline is privatized.
The European Commission approved a plan by the Greek government to rescue its ailing national carrier Olympic Airways. As per the plan, Olympic would be liquidated, and some of its assets sold at market prices to private sector investors.
The airline would be re-born as a new company, codenamed Pantheon, which will be granted Olympic's name and famed five-ring logo. The new company will acquire 65 per cent of Olympic's capacity, including its landing slots.
Two other new companies will acquire ground-handling and maintenance assets.
The deal, which was approved by the European Commission yesterday, makes the closure of 15 years of litigation between the EC and successive Greek governments. At the centre of the litigation was the Greek government's funding of billions of euros into Olympic Airlines, which was always running in losses. All the illegal funding went towards keeping the airline afloat, and to buy off union resistance to restructuring.
Greek transport minister Costis Hatzidakis said the privatisation would finally resolve "an issue that has beset Greek society and politics for some 30 years".
The transaction resembles the liquidation of Belgian national carrier Sabena and its re-emergence as Brussels Airlines, which was recently taken over by Lufthansa. (See: Lufthansa picks up Brussels Airlines)
Olympic Airways was founded by shipping tycoon Aristotle Onassis in 1957, after he acquired the Greek national airline TAE. Onassis resold Olympic to the Greek government for about $68 million in 1974, on the death of his son Alexander in a plane crash.
Subsequent mismanagement flew the national carrier into financial hardships in the 1980s; eventually the airline became severely indebted.
After three failed attempts to restructure the airline in the 1990s, a further restructuring in 2003 established Olympic Airlines, a slimmed down version of the original Olympic Airways. Olympic Airways was renamed Olympic Airways Services, which includes its ground handling, cargo handling, aviation training and technical maintenance operations. The airline operates 37 aircraft to 36 domestic and 36 overseas destinations, and has around 8,000 employees. It has been facing losses since its relaunch, with a reported net loss of €23 million in 2003 and €87 million in 2004.
