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The Greek government sees Sabena “solution” as the only solution to Olympic Airways (Greece’s national carrier) “problem”, as it aims to close the airline until 2008. The government’s new plan wants to create a new smaller airline which is going to be sold to a private company immediately after the closure of Greece’s national carrier.

“There is no alternative with the situation as it is” as representative of the government told to the Greek newspaper “Ta Nea”.

Mr. Kostas Karamanlis, the Prime Minister of Greece is also in favor of this solution and has already given the green light for its implementation. However, all these are going to take place as soon as European Union gives its approval.

As soon as this happens, the procedures for the closure of the Olympic Airways will be immediately effective and a new company will take its place, as it happened with Sabena in Belgium, and will have either the same brand name and logo with Olympic Airways or a related brand name and logo.

The new airline will inherit the largest part of the today’s route network of Olympic Airways and it will be in operation immediately after the closure of Olympic Airways.

The new carrier will mostly cover the local network and the basic European and regional destinations while its fleet will not exceed 30 airplanes.

However, the biggest difference with Sabena case is that in Greece due to its islands and the geographical morphology of the country, “the new company can not afford to be smaller from the one today.”

The aim of the plan is also to preserve the aircrafts’ maintenance base, ground handling services, air fuel companies and the pilots’ academy. All these activities are going to be sold to private companies.

If this is the case, then many people are facing to lose their job as fewer than the half will have to leave the company. Those who will remain in the new company will have to sign new work contracts.

The Greek government’s next step is to look for new investors for the smaller “Olympic Airways” solution but no interest has been registered so far.

ATHENS, Dec 7 (Reuters) – Greece said on Friday a rescue of its ailing Olympic Airlines was unlikely but the state company could shut down and reopen debt-free.
“Our first aim is to rescue the airline exactly as it is but this is not the most likely scenario,” Transport Minister Kostis Hatzidakis told parliament. “A new company can be created, along the lines of Israel’s El Al, which closed down one day and opened the next, debt-free.”
Budget airline Ryanair said last month it was suing the European Commission for failing to act on the Irish company’s complaint that the Greek government provided illegal state aid to Olympic.
The Commission first ruled in 1996 that Greece was in breach of EU state aid rules.
After efforts to find a buyer failed, Olympic Airways was split into two units in 2003 – a debt-heavy services company and a debt-free carrier, Olympic Airlines. Brussels still regards it as one company.
Olympic lost its commanding domestic position in 2006 to its main competitor Aegean Airlines, which won a 51 percent market share due to an aggressive expansion, more routes, newer planes and better services.
Hatzidakis said the government hoped it could transfer Olympic’s name, logo and slots to the new company.
“We want to avoid a vacuum, we want a different, healthy airline,” he said. (Reporting by Athens bureau, Editing by Erica Billingham)

The Greek government is considering the closing of the Airline company Olympic Airlines, the Greek daily Ta Nea reports. Since Brussels continues to insist that the company returns to the state the subsidies it has been allotted /about EUR 500 Million/, the government is considering options to solve the problem. According to the information, the plans include the closing of Olympic Airlines in 2008, and the creation of a smaller company, which is to be sold immediately. The daily notes that the Prime Minister Kostas Karamanlis has okayed the idea and procedures are to start after they receive the approval of the European Commission.

Greece’s transport minister has warned that national carrier Olympic Airlines faces a dim future as speculation increases that the airline will be closed within a few months.

In a series of carefully worded statements late Friday and over the weekend, Costis Hadzidakis reaffirmed the government’s commitment to keep the airline aloft.

But he also stressed that the government would protect the interests of Olympic employees and the Greek public if the carrier is shut down, which the Greek media has widely interpreted as a sign of its imminent closure.

Hadzidakis’ statement came after a Friday meeting in Brussels with EU Transport Commissioner Jacques Barrot and followed a recent legal complaint by Ireland’s low-cost carrier Ryanair Holdings PLC against the European Commission concerning Olympic.

The complaint, filed late last month, charges that the commission has failed to recover hundreds of millions of euros worth of illegal state-aid to Olympic.

“After the lawsuit by Ryanair against the commission, the situation for Olympic has become even more difficult,” Hadzidakis said.

The commission has taken Greece to court twice demanding the return of more than 700 million euros ($1.02 billion) in illegal state subsidies to the carrier — a sum Greece says makes it impossible to find investors for the hoped-for privatization of the airline.

Late last year, a Greek court awarded Olympic 563.9 million euros ($825.47 million) in compensation from the Greek state for violating an existing contract relating to its facilities at Athens’ old international airport.

Since being appointed Transport Minister in September, Hadzidakis has been trying to negotiate with the EU to see if the Greek court award could potentially offset a large part of the commission’s demands.

In his statement Saturday, Hadzidakis said that none of the estimated 8,500 workers at Olympic will lose their jobs and that none of the Greek islands would lose their air links to the mainland.

He also pledged that the government would ensure that Olympic is not replaced by another monopoly carrier on domestic routes. Recently-listed Aegean Airlines is widely seen as benefiting from a potential closure of Olympic.

Since first taking office in March 2004, the center-right New Democracy government has been critical of past mismanagement at Olympic, highlighting that the carrier costs Greek taxpayers some 300,000 euros ($442,830) a day.

Fri Nov 30, 2007 4:04 PM GMT

ATHENS, Nov 30 (Reuters) – Ryanair’s (RYA.I: Quote, Profile , Research) lawsuit against the European Commission over its failure to make Olympic Airlines [OLY.UL] pay back state aid will discourage any investors interested in the airline, Greece said on Friday.

Greece has been trying to privatise the airline, renamed from Olympic Airways, but repeated calls for interest from investors have yielded no results for the debt-ridden carrier.

Budget airline Ryanair said last week it was suing the European Commission for failing to act on the Irish airline’s complaint the Greek government provided illegal state aid to Olympic Airlines.

The Commission has also ordered Greece to retrieve hundreds of millions in state aid dating back to the 1990s, something which it has yet to do.

“Ryanair’s lawsuit … and the demand to open up dossiers on ‘new illegal state subsidies’ are worsening the situation of Olympic,” Transport Minister Kostis Hatzidakis said in a statement following a meeting with European Transport Commissioner Jacques Barrot in Brussels.

“Anyway, as long as legal problems with Brussels remain unsolved, any credible investor is discouraged,” he said in the statement released in Athens.

The Commission first ruled in 1996 that Greece was in breach of EU state aid rules.

Olympic Airways was split into two units in 2003; a debt-heavy services company and a debt-free carrier, Olympic Airlines. Brussels still regards it as one company.

Olympic Airlines was thrown a lifeline last December when Greece’s Supreme Court ordered the state to pay the carrier 563 million euros for unpaid services it had rendered in the past.

“Despite these problems the battle (to rescue Olympic) will continue,” Hatzidakis said. “Taxpayers should know we respect their money and are seeking a … viable solution.” (Writing by Karolos Grohmann; Editing by Paul Bolding)

LONDON (Dow Jones) — At the headquarters of Heathrow airport’s operator, BAA, employees drink tea out of “Making Heathrow Great” mugs.

A few miles away, at the home of flagship carrier British Airways Plc, impatient executives watch a clock that’s counting down the hours to the opening in March of the airport’s much-hyped and long-awaited Terminal 5.

There’s a good reason British Airways and BAA, who have toiled together on the 4.3 billion-pound (about $9 billion) project for more than two decades, are on edge.

The very future of Heathrow as a key European travel hub hangs in the balance.

In the last two years, the reputation of the airport has taken a battering. The phrase “Heathrow hassle” has entered the lexicon, coined by passengers tired of creaky infrastructure, endless queues caused by new security and the recurring menace of lost luggage.

In a 2007 survey of travelers published last month by Web site TripAdvisor, Heathrow tied with Chicago’s O’Hare as the world’s least favorite international airport.

As Tony Douglas, the airport’s former chief executive, put it when he resigned earlier this year, Heathrow is “bursting at the seams,” crippled by delays and increasingly unable to process 68 million passengers a year in a structure intended for 45 million.

The threat of the airport losing its dominance in the U.K. and Europe is a real one, with budget-conscious travelers flocking to smaller, less crowded facilities and international business travelers increasingly preferring to touch ground in Paris, Amsterdam or Frankfurt.

It’s no wonder then, that as March 27 draws closer, T5 is being promoted as the panacea to all travel ailments.

British Airways and Spanish-owned BAA promise the new building will eradicate not only queues and lost bags, but ease delays and general travel stress too.

Even British Airways Chief Executive Willie Walsh can barely mask his impatience, saying in a speech this fall that T5 was “crucial” to the airline’s long-term future and wasn’t coming a “moment too soon.”

MarketWatch earlier this month gained access to the building and spoke to top executives in charge of the project to understand how much it will change the Heathrow experience. See video on new terminal.

A long time coming

British Airways has been waiting for a new Heathrow home for more than 20 years.

While the original design for T5 was approved in 1989, it wasn’t until 11 years later, following a comprehensive public inquiry, that planning consent was granted. Construction began in September 2002 on a swamp between the airport’s two runways.

The final structure, the size of 13 American football fields, is the largest free-standing building in Britain. The facility includes a baggage system that can handle 12,000 suitcases an hour on 18 kilometers (11 miles) of conveyer belts.

Jonathon Counsell, head of T5 development for British Airways, stressed the central role given to the luggage system as the facility evolved.

“Most airports consist of a luggage system built around a terminal. This is a terminal built around a luggage system,” he told MarketWatch.

The system is so essential to the smooth running of the terminal that it has been tested nonstop for the past year. It was, after all, the failure of its luggage setup that made Denver International a case study in how not to open an airport. There, in April 1994, airport authorities treated reporters to a demonstration of the automated luggage system only to see most of the bags thrown off the belts. The airport’s opening was delayed; eventually the luggage system was scrapped.

Given the extensive testing of the baggage system at T5, passengers shouldn’t be treated to scenes of strewn luggage in London come March. What will capture their attention instead, both British Airways and BAA fervently hope, is the quality of the building itself. Check out a video of the concourse.

ABN Amro analyst Andrew Lobbenberg, who visited the facility, said he found it “very impressive,” if not radically superior to other new airport terminals in Europe, such at Madrid Barajas’ Terminal 4, home to national airline Iberia, which can handle 20 million passengers a year and cost 6 billion euros ($8.8 billion) to build.

He describes T5 as a “truly giant leap forward” and said the new terminal will offer a “far improved customer experience.” In the medium term, it will mean ” material operating-cost benefits” for British Airways, thanks to a more centralized operation, shorter taxi times for aircraft and better reliability in terms of baggage and punctuality, he added.

Poor record on punctuality, lost luggage

In the busy summer period, British Airways ranked 24th among 25 European airlines that detailed lost baggage statistics, according to the Association of European Airlines. British Airways also ranked 26th out of 28 European carriers for punctuality.

BAA didn’t fare much better. The association data show that Heathrow and Gatwick, also operated by BAA, had the worst record for delayed flight departures among all leading European airports this summer.

These statistics help explain why BAA, which was bought last year by Spanish infrastructure giant Grupo Ferrovial , has faced a barrage of criticism this year.

In the wake of rising complaints from passengers and airlines, Britain’s Competition Commission got involved. The regulator is now investigating whether BAA’s ownership of seven U.K. airports may inhibit competition and investment.

Attacked on many fronts, BAA hopes T5 will help restore its reputation.

Perhaps the most impressive feature of the new building is the top-floor departure hall, which has unobstructed views of one of the airport’s two runways, said Mark Bullock, who took over as Heathrow’s CEO following Douglas’ departure. On a clear day, passengers will be able to see as far as the Canary Wharf financial center in east London to the British royal family’s Windsor Castle in the west. Watch an interview with the Heathrow CEO.

“From the departure lounge, there are fantastic views across the airfield and you will feel the buzz of travel,” Bullock added.

Passengers should get a chance to enjoy those views, he said, as 96 automatic check-in counters, twenty security lanes and new X-ray machines reduce the time it takes to get to the gate.

More retail space; hope for higher charges

Airport authorities hope less time queuing means more time shopping at one of the terminal’s 144 stores, or eating at one of its 25 restaurants. The food venues include ‘Plane Food,’ the latest venture of Michelin-starred chef Gordon Ramsay.

T5 will increase Heathrow’s total retail space by 50%.

BAA hopes that passengers will come to the airport early to shop and eat, rather than coming early because they’re consumed with the fear that, stuck in an immobile check-in or security queue, they’ll miss their flight.

Retailers competed ruthlessly for T5 space, giving BAA, which gets 38% of its income from retail operations, the opportunity to select those willing to go the extra mile by doing something a bit special.

British fashion designer Paul Smith, for instance, will decorate its shop with travel memorabilia from around the globe. Magazine and book retailer WH Smith Plc , meanwhile, is installing self-service checkouts to cut queues.

And Coach International (COH) , a U.S. accessories store, will be launching its first European shop at Heathrow, hoping to use the outlet to establish the brand in the U.K.

But T5 is not just about getting travelers to shop.

BAA has been using the expansion as a springboard to lobby its regulator, the Civil Aviation Authority (CAA), for an increase in the fees it charges airlines to use Heathrow. Those fees are lower than at most leading airports, including New York’s JFK and Paris’ Charles de Gaulle. But the regulator last month didn’t recommend the price increases BAA wanted.

Without additional investment and a third runway, BAA has warned that capacity constraints — 98.5% of its flight slots are already filled — mean it risks losing its dominance to competitors such as Paris’ Charles de Gaulle and Schiphol in Amsterdam, which run at about 70% capacity.

British Airways’ Walsh made the same point in a speech to the Guild of International Bankers in London last week.

“If we as a country turn our backs on expanding Heathrow, then we are throwing in the economic towel — and must prepare ourselves for the consequences of a low-growth or perhaps no-growth economy in the future,” he said

“More capacity at the country’s hub airport is essential for the future prosperity of an island nation in a globalized economy,” he added.

The British government is equally concerned with the need to expand congested Heathrow to support London’s continued economic growth. Last week Transport Secretary Ruth Kelly unveiled proposals for a third runway and a sixth terminal. The CAA has estimated the project could cost as much as 9 billion pounds.

“If nothing changes, Heathrow’s status as a world-class airport will gradually be eroded — jobs will be lost and the economy will suffer,” she cautioned.

Once seen as Europe’s No. 1 airport, Heathrow now serves fewer destinations than Frankfurt, Amsterdam and Paris.

Until these plans get the green light, a process likely to take years, BAA argues it needs the extra money from higher fees to carry out major refurbishments to other Heathrow facilities after T5 is completed. The airport’s four other terminals have been in use for 50-odd years, and are showing their age.

With T5 nearly completed, lobbyists have turned their attention to the other terminals.

Earlier this month city business leaders demanded government action to reduce “Heathrow hassle,” which in the third quarter included the temporary closure of terminal 4 following a security alert and repeated failures of the luggage system.

The 30-plus senior executives at a biannual meeting put their concerns to BAA management. Business leaders see the current fee review by the CAA as an opportunity to set tougher standards for quality of service and prioritize investment to restore Heathrow to world-class status.

Business passengers will fare especially well at T5, with half a dozen lounges, a champagne bar, a wine gallery and a spa, as well as showers and changing rooms.

But BAA’s Bullock is adamant that all passengers will enjoy the benefits of T5, if indirectly.

“T5 does two things for us. It lets 27 million passengers move out of existing terminals and into British Airways’ new home and it creates opportunities for us to redevelop the other terminals,” he said.

Work has already begun on T1 and T3 and is starting later this month on T4. T2 is set to be demolished and entirely rebuilt. Most airlines flying to and from the U.S. out of Heathrow, including American Airlines (AMR) , United Airlines (UAUA) and Virgin Atlantic Airways, are based out of Terminal 3, which was built in the sixties.

BAA is hoping to have all the work done in time for London’s 2012 Olympic Games.

Some aviation experts, however, caution that expectations may be too high. They said the new terminal is unlikely to entirely eliminate Heathrow hassle.

“T5 has to be seen as a remedial action without any doubt,” said Peter Morris, chief economist of U.K.-based aviation consultancy Ascend. In particular he noted that T5 means British Airways passengers will no longer face the “misery” of having to trek from T4 to T1 to change flights.

“That’s a huge improvement,” he said.

But regardless of T5, Heathrow will remain a building site for the next five years as older terminals are refurbished, he added.

“T5 is by no means an overall panacea,” he concluded.

Will it be enough?

Some analysts also worry that the move to T5 won’t be enough for British Airways to offset the negative effect of the “open-skies” pact between Europe and the U.S. The agreement is set to liberalize transatlantic traffic starting in April and means the carrier is likely to see much more competition on some of its most lucrative routes.

Rivals Air France-KLM (AKH) and Delta Airlines (DAL) have already unveiled plans for a joint venture that will see them share costs and revenue on transatlantic routes.

Many other airlines are considering similar alliances.

Meanwhile, investors are growing impatient with the airline’s share price. British Airways’ shares are down roughly 37% so far this year compared with a 27% decline at Air France-KLM and a 15% drop at Lufthansa .

“It is our view that T5 will definitely be beneficial to British Airways, but we do not see it supporting earnings materially in fiscal 2009,” said ABN Amro’s Lobbenberg. Instead, he sees “open-skies” denting earnings in that period.

For British Airways, the financial benefits from T5 will start to trickle through in 2010, Lobbenberg said.

For travelers, it will undoubtedly be “a much better passenger storage facility,” said Ascend’s Peter Morris. Can “Heathrow harmony” be far behind?

(END) Dow Jones Newswires
11-26-07 0517ET
Copyright (c) 2007 Dow Jones & Company, Inc.

Ryanair Holdings PLC filed a lawsuit Thursday against the European Commission — its third such action this month in complaints challenging funding of national airlines by European governments.

In its latest suit, Ryanair accused EU competition authorities of failing to investigate €500 million (US$740 million) in money paid by the Greek government to Olympic Airlines.

Last week, Ryanair filed a suit accusing the EU of inaction over German government funding of a loss-making terminal at Munich Airport used by Lufthansa. Two weeks ago, it took the same action, claiming that France subsidized the airport charges and other costs for domestic Air France flights.

All three suits have been filed at the European Court of First Instance in Luxembourg, the second-highest EU court, which appears in danger of having its caseload overwhelmed by lawsuits involving Ryanair.

Ryanair is the target of several suits already filed by other European airlines, which allege that Ryanair has struck government-subsidized deals with far-flung airports from Finland to Sardinia. Ryanair’s Irish rival, Aer Lingus, also filed a suit in Luxembourg this week calling on the EU to force Ryanair to sell its shareholding in Aer Lingus.

O’Leary said Greece had paid Olympic about €500 million over the past year, “mostly for ‘unpaid services’ allegedly provided by Olympic to the government. However, the (European) Commission has refused to do anything about this since 2006, which left us with no alternative but to challenge the commission’s inaction in the European courts.”

He said the commission “repeatedly ignores blatant state aid to Air France, Lufthansa, Olympic, Alitalia and others.” He said flag-carrier airlines “would never fly to smaller airports and are simply trying to prevent competition and consumer choice.”

O’Leary said he remained confident that Ryanair eventually would acquire Aer Lingus, regardless of an EU verdict in June ruling out its takeover plan as likely to create an Irish monopoly.

He said Ryanair had suffered a paper loss of €60 million (US$89 million) from its purchase of a 29.4 percent stake in Aer Lingus.

“I’m celebrating the fall in value in our investment in Aer Lingus. It’s an accurate response to the management’s current performance,” O’Leary said.

“Aer Lingus is likely to be taken over. But the most likely candidate to take over Aer Lingus is Ryanair, because frankly nobody else has any interest in taking over Aer Lingus,” he said. “It’s too small and too high-cost to survive as an independent airline.”

Ryanair shares were up 0.7 percent at €4.55 (US$6.74) amid another day of heavy losses on the Irish Stock Exchange. Aer Lingus was up 2.1 percent at €1.94 (US$2.87) — still 12 percent below its September 2006 flotation price, and 31 percent below Ryanair’s takeover price offered in October 2006.

Ryanair has become the largest shareholder in Aer Lingus. But analysts say it stands little chance of reaching the 50 percent threshold for a viable takeover because the government and Aer Lingus employee-controlled trusts, which together hold about 45 percent of shares, oppose Ryanair’s plans.