New company to replace Greece's Olympic Airlines

16/11/2005

Having failed to find a buyer for Olympic Airlines, Greece said on Tuesday it plans to launch a new company in April to replace its money-losing national carrier.

(AP, Reuters, Xinhua, Athens News Agency, The Hellenic Radio, Kathimerini – 15/11/05)

Olympic Airlines would likely be relaunched next April, bearing the same logo and a similar name. [AFP]

Greece said on Tuesday (15 November) it would launch a new company next year to replace Olympic Airlines. The announcement followed the authorities' latest failed attempt to find a buyer for the country's ailing flag carrier.

"Despite our serious efforts it is no longer possible to proceed with this privatisation effort ... We are moving towards an alternative solution immediately," Transport Minister Michalis Liapis said after a government meeting. "Draft legislation will be presented to parliament in a few days for the state to create a new airline ... private investors will control the majority (of shares) and be responsible for its management."

The move follows an European Commission (EC) ruling on 14 September that obliges Olympic Airlines to repay up to 540m euros in illegal state aid. The subsidy gave the carrier an unfair advantage over competitors, the commission said, handing Greece a two-month deadline to decide what measures it will take to comply with the decision. Greece faces daily fines if it fails to take action, European Transport Commissioner Jacques Barrot warned.

Olympic Airlines was set up in late 2003 as the successor of Olympic Airways, which was founded by shipping magnate Aristotle Onassis in 1957.

As part of its latest effort to privatise the money-losing company, Greece negotiated with a consortium consisting of the Greek investment company Olympic Investors and the US investment fund, York Capital. It was not clear Tuesday if the consortium would be involved in the new company following the tender's apparent collapse.

Greece, according to Liapis, will keep the investment bank Lazard as its adviser in the launch of Olympic's successor, which will bear the same logo and a similar name when it kicks off next April. Olympic currently flies to 75 domestic and international destinations and carried about 5 million passengers in 2004.

Local media reports suggested that about half the 6,000 people currently working at Olympic Airlines and affiliated state companies stand to lose their jobs, and the carrier's fleet of 40 aircraft will be downsized to between 25 and 30.

"The government has promised to guarantee the employment of all the employees who will not participate in the new company," said Liapis.

Back in September, the EC ruling sparked fears among Olympic employees that the government could decide to close down the company. The company's employee unions thus cautiously welcomed Tuesday's decision.

"The government has finally come to its senses ... but it remains to be seen whether this solution is viable," the AP quoted Yiannis Kallianos, head of the Olympic engineers' union, as saying.

According to some reports, two previous failed attempts to privatise the airline cost 2.5 billion euros, while the losses incurred from operations over the last few years amounted to 1 billion euros.