GREECE: Defending Nationalism In The Air
A little history on the Olympic Airlines/European Commission conflict
ATHENS, Jan 14 (IPS) – The European Commission (EC) announced a formal investigation Dec. 20 into complaints that the Greek state is illegally subsidising its national air carrier.
This is the third time that the EC is taking up this case.
The national carrier comprises two separate legal entities – the Olympic Airlines (OA) and Olympic Airways Services (OAS). The two companies emerged from a split in Olympic Airways in 2003 in a move to part privatise the company.
OA took over the flying part and OAS the handling and technical services. It also picked up Olympic Airways shares in other companies which provided services like catering and information technology assistance.
This division followed the first investigation by EC, which found that the government had given subsidies worth 160 million euros.
The commission argued then that between 1994 and 2000 the Greek state was allowed to reform Olympic Airlines under the “one time, last time” principle. That makes it lawful for a state to support restoration of a public company once.
A Greek court held that the new entities did not bear the financial responsibilities of the older one. But the Commission considered the two new companies successors of the older one, and said they, rather than the state, should be responsible for their debts.
A second investigation in March 2004 found that Olympic Airlines had received another 450 million euros in illegal financial assistance.
Subsidies came by way of not collecting taxes and social security contributions from the company. It was also found that the state had supported lease of aircraft on behalf of the company, and since 2005 has protected it with a special law on private creditors.
The commission also says the Greek state over-compensated the airline when it sued the government over past obligations.
The third investigation now follows further moves by the Greek government to evade collection of debt owed by the airline. The inquiry is expected to lead to an EC request to reclaim more illegal financial support from the funds it gives to Greece.
“No selective treatment against Olympic is applied, we just want that the state implements the Commission’s decisions and recovers illegal financial support,” EC spokesperson Michele Cercone told IPS.
Airline officials strongly oppose the EC moves. “The Commission is picking on issues with the airline that are pending also for every other company in Greece, like delayed social security contributions and taxes,” Emmanuel Patestos, president of the Union of Airways Workers told IPS.
“It also ignores that the relation between the company and the state is not based exclusively on market criteria. During the construction of the new Athens International Airport, 100 billion drachmas (pre-euro Greek currency) went from the accounts of the company to developing services infrastructure at the airport, thus serving state interests.”
The public character of Olympic means it is not just profit oriented. The company maintains various daily flights to non-profitable destinations like the islands during the winter.
It is widely accepted that liquidation of the company would lead to a sharp increase in air fares and huge unemployment. A decline in safety standards is also feared if private companies take over.
Permanent staff has been reduced more than 50 percent since 1998. The airline currently employs about 4,000. Another 4,000 are on seasonal contracts. The airline maintains 100 domestic and international flights daily, and carries 6.5 million passengers a year.
OA is also considered one of the safest companies worldwide, with a highly qualified maintenance crew. It receives many requests for technical support to fleets of major European companies. But bad management and lack of personnel have meant that such services have done little to erase debts.
EC commissioner for transportation Jaque Barro has recommended reduction of the company’s services in line with the pattern followed for the Belgian airline Sabena. “Respecting the law is the only way to secure a healthy future of the air transport market in Greece, based on fair competition and providing for the interests of Greek consumers and taxpayers.”
But despite its problems the company enjoys the support of the public and the Greek diaspora. “The consequences of liquidation will be enormous,” Patestos said. “We speak of a company which has for decades contributed the most in Greece’s economic development, supported the periphery, and maintained bonds with another 10 million Greeks abroad.”
The market has not failed the company, he said. “It is the Commission’s political decision to dissolve smaller national air carriers and support private companies that dictates what happens in this case.” The commissioner’s spokesperson declined to comment on this statement.
By Apostolis Fotiadis