Yet Another New Olympic Airline

A new company is to be launched early next year to replace Olympic Airlines, according to a recent government announcement. This follows the state’s latest failed attempt to find a buyer for the country’s ailing flag carrier. In mid November, government officially declared that the latest international tender for the sale of Olympic – the fifth attempt – was inconclusive.

“Despite our serious efforts it is no longer possible to proceed with this privatization 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.”

Greece had been negotiating with a consortium consisting of the Greek investment company Olympic Investors and the U.S. investment fund, York Capital. The latter said in a newspaper interview that it was still interested in the airline.

Meanwhile, Mr. Liapis said that the investment bank Lazard would be kept on 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. The plan is for the new airline to be set up by the state and that private investors will eventually take over a major share airline and its management.

As well, Mr. Liapis said the government would seek approval of the plan by the European Union and stressed the government was committed to adhere to community competition rules.

On Sept. 14, the European Commission ordered Olympic Airlines to repay the illegal aid, as much as 540 million euros, the airline received from the Greek government during past few years. The subsidy, the commission said, gave the carrier an unfair advantage over competitors. It handed 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 warned.

If the plan is approved, media reports say that about half the 6,000 people currently working at Olympic Airlines and affiliated state companies stand to lose their jobs, but that the government has promised to guarantee the employment elsewhere of all the employees who will not participate in the new company. Also, the carrier’s fleet of 40 aircraft will be downsized to between 25 and 30 and many routes will be cut.

According to press reports, the two previous failed attempts to privatize the airline cost 2.5 billion euros, while the losses incurred from operations over the last few years amounted to 1 billion euros. The same reports say that government is losing about 1.5 million euros a day from the operation of the state carrier.

Olympic Airlines was set up in late 2003 as the successor of debt-ridden Olympic Airways, which was founded by shipping magnate Aristotle Onassis in 1957 after he took over the Greek national airline TAE (Technical and Aeronautical Exploitations). He sold the airline back to the government in 1974.

Olympic currently flies to 75 domestic and international destinations. It carried about 5 million passengers in 2004.