Dark skies for Olympic/Aegean Merger?

New Europe

The case of the merger of two private Greek airliners, Olympic and Aegean is on the spotlight again as the European Commission has to decide, next week whether such merger is possible or not.

Almost a year ago, the boards of the two airlines agreed a merger. As we reported at the time, the establishment of such a brokered agreement between Olympic and Aegean risks resulting in an infringement to national and community competition rules since it could create a dominant position and subsequent abuse of the Greek domestic air transport market.

The Commission responded quickly to our remarks and opened an in-depth investigation under the EU Merger Regulation into the planned merger of the airlines.

The Commission’s initial market investigation indicated that the proposed merger could raise serious competition concerns, and they also had serious doubts as to the compatibility of the transaction with the Merger Regulation in connection with the provision of Public Service Obligation routes in Greece and the provision of ground handling services in Greece. The Commission expected a final decision by 7 December 2010.

Carry On As Normal
The decision was postponed until 12 January, 2011 and again to 2 February, 2011. Part of the reason for the delay was that there was high level pressure being applied, by those who wanted the deal to go ahead. The airlines are owned by the Vassilakis Group of companies (Aegean) and Marfin Investment Group (Olympic). The pressure, however, according to rumors comes only from Olympic because between the two, it is the one who is facing serious problems as if the merger is not allowed they will be obliged to proceed with capital increase.

These groups are also involved with shipping and have considerable lobbying skills and from the Greek shipping community of London, where from, according to rumors, the pressure on Brussels originates from. One example of how powerful Greek ship-owners are is the exemption from carbon emissions taxes for the maritime industry. Currently the tax negotiations have been passed to the International Maritime Organisation (IMO), who spent five years on the issue, without any progress. None is expected.

As to the merger of the two airliners, during this period, something unusual happened; the two companies acted as though the blessing of the Commission was a mere formality and made preparations for the post merger situation.

One example is the dismissal of up to 40 Olympic pilots. According to insiders, they were called in to the Flight Operations Manager’s office, where a lady from HR was also present, informed that their services are not needed any more and handed an envelope with their finishing salary.

Dismissed engineers are rumored to have extracted their revenge by destroying the logs and maintenance records of four A340 planes. Without these records, the planes are, in effect, unusable.

There also seemed to be a change in long distance flights, where a harmonious route sharing suddenly appeared. The golden rule in aviation is to keep hold of your slots. Without these, which allow you to take off and land at airports, there can be no scheduling of flights, no routes and therefore no business.

A Chance To Stand Up For Consumers
Commissioner Joaquin Almunia said in October 2010, “The big difficulty here is that the two companies hold almost all the domestic market in Greece,” Almunia added, “As with previous airline cases, we will need to ensure that consolidation in the airline sector does not happen to the detriment of consumers and businesses in Europe.”

Previously, the Commission disallowed a merger between Air Lingus and Ryan Air on competition grounds. There were some other factors involved, not least that the Irish government was opposed to the deal and the… abrasive character of the Ryan Air boss, who misses no opportunity to show his contempt for customers.

The case against the Greek merger is far stronger.

Airline experts pointed out that Aegean and Olympic Air are already the two leading airlines at Athens airport. Merging the two would give the combined entity between 65% and 70% of all flights and seats at the airport.

Not only that, but the flights are essential to the economies of countless Greek islands, who need fast and cheap connections to keep their economies going.

Handing over control of the domestic flights, even more so to companies associated with the ferry services, could create a situation where the islands and those who do business with them, would be at the mercy of a monopoly.

This is an opportunity for Joaquin Almunia to stand up for citizens, if he can resist the pressure being applied. He may well be more than tough enough.

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