(Reuters) – Aegean Airlines (AGNr.AT) may have to offer fresh concessions to secure EU approval for its second bid to buy Greek rival Olympic Air (MRFr.AT), after the EU’s competition watchdog deepened its investigation into the deal on Tuesday.

Aegean submitted concessions to the European Commission last month, including capping fares on some domestic routes. It sees the 72 million-euro ($94 million) deal as vital to its survival in the shrinking Greek air transport market.

But the Commission said in a statement on Tuesday that it was concerned a deal would lead to price rises and poorer services on some domestic routes out of Athens, where the combined group would have a monopoly or strong position.

The routes in question were used by Greek passengers as well as foreign travelers, it said.

“We have the duty to ensure that Greek passengers and people visiting Greece can travel at competitive air fares, even more so during challenging economic times,” EU Competition Commissioner Joaquin Almunia said in the statement.

The Commission will now decide on the deal by September 3. Reuters had reported the Commission still had concerns earlier this month.

The regulator blocked Aegean’s first bid for Olympic in 2011, worried that the combined group would have a quasi-monopoly in the Greek air travel market.

And blocking another deal in the sector, the Commission rejected Ireland-based carrier Ryanair’s (RYA.I) third bid for Aer Lingus (AERL.I) in February this year, saying Europe’s biggest low-cost airline had not offered sufficient concessions.

(Reporting by Foo Yun Chee; Editing by Greg Mahlich)

Flight Global
By Alan Dron

Flights to and from Greece are being severely affected as two national strikes sweep across the country to protest the government’s austerity plans.

All flights using Greek airports have been cancelled for the duration of strikes by air traffic controllers between 06:00-10:00 and 18:00-22:00 local time on 28 and 29 June.

By 10:00 GMT Greece’s largest airline, Aegean Airlines, said it had so far cancelled 26 flights and planned to reschedule a further 97 throughout the day. It added that it planned to cancel 31 flights and reschedule a further 82 on 29 June as a result of the dispute.

Olympic Air said that the 28 June strike had led it to cancel 39 round trips and reschedule 24.

Public transport to and from Athens Airport has also been stopped by the strike.

Bulkan Business News

Michael Roberts – 04.03.2011

In a recent release, Olympic Air’s new Board of Directors, decided to reshape the company’s planning, focusing on strategic development. The target for Olympic Air is to become a leader in Southeast Europe by exploiting the competitive advantage of its high quality services.

EU’s Competition Commission recent decision not to approve the merger with Aegean Airlines disrupted the plans of creating a single major Greek airline with pan-European range. And now the difficult conditions and medium term prospects of the market, are leading the company to revise its flight schedule, in order to match the new planning.

In this context the following routes will be added in the domestic flight plan: Athens – Corfu, Athens – Alexandroupolis, Thessaloniki – Heraklion, Thessaloniki – Chania, Thessaloniki – Mytilene and Thessaloniki – Rhodes. Furthermore, the international network is adjusted as to maintain or expand flights to Amsterdam, Belgrade, Bucharest, Cairo, Istanbul, Larnaca, Sofia and Tirana, while canceling routes to Vienna, Brussels, London and Paris.

At the same time all existing agreements on code share flights with Delta Airlines for flights to U.S. and Etihad Airlines, to Australia and South Africa, will continue. Further international agreements will be evaluated in order to enhance services to our passengers.

Finally, Olympic Air together with Aegean Airlines will appeal against the decision of the European Competition Commission which had not approved the merger of the two airlines.

Olympic Air’s President, Mr. John Karakadas made the following statement:
“After 15 months of operations Olympic Air has presented obvious results to all Greek citizens. In our effort to revive our historical and national carrier, we plot a new course today in order to shield the sustainability of our initial commitments. Our new strategy obviously takes into consideration both the decision of the Competition Commission and the ongoing turmoil in the markets. However, our central and non-negotiable target remains to provide the highest quality services to our passengers, while the reorganization of our network will allow us to address more effectively the challenges that surround us and to maintain the leadership profile of Olympic Air in our region. ” Source; Olympic Air

Posted Friday, 4 March, 2011 – 11:16 by Sara Turner
Greek carrier Olympic Air will drop its flights to London Heathrow and London Gatwick from March 27.

The airline will also stop flying to Brussels, Paris and Vienna, instead focusing on expansion of its network in south-east Europe.

The move follows the EU Competition Commission’s decision to reject the proposed merger between Olympic Air and fellow Greek airline Aegean.

The two airlines have also announced they plan to appeal against the EU’s decision.

Associated Press

ATHENS, Greece – Greece’s Olympic Air says it will cut routes to London, Paris, Vienna and Brussels as part of a reorganization in the wake of the European Commission’s decision to block a proposed merger with local competitor Aegean Airlines.

An Olympic statement says both companies will appeal to European courts against the Jan. 26 ruling, which stated the combined carrier could monopolize Greek air travel.

Wednesday’s statement said Olympic’s board decided to reorganize its routes, increasing domestic flights while maintaining or expanding services to Amsterdam, Belgrade, Bucharest, Cairo, Istanbul, Larnaca, Sofia and Tirana.

The statement said Olympic aims to become a dominant airline in southeastern Europe.

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.

Greece’s two major airlines, Olympic Air and Aegean Airlines SA, are merging to create a “national airline champion,” the companies said in a statement Monday.

The two airlines together have 97 per cent of the Greek domestic air travel market and will use the name Olympic Air after a transition period in which the Aegean name will be used in parallel.

The companies said they were combining to better compete within the European Union and preserve jobs in the industry.

“The prevailing conditions in the Greek economy as well as in the aviation sector dictate the combination of forces in order to maintain competitive customer prices, protect levels of employment and increase our competitiveness at a European level,” said Olympic Air chairman Andreas Vgenopoulos, head of Olympic’s 100 per cent shareholder, Marfin Investment Group (MIG).

The merger must be approved by European Union regulators, a process that “will take several months,” MIG spokesman Seraphim Konstantinidis said.

The combined airline is not expected to operate before October, 2010, at the earliest, sources say.

The merged company will have 5,850 employees, including Aegean’s current 2,500, Olympic Air’s 1,300, as well as 2,000 in Olympic Handling and 50 in Olympic Engineering, which will be 100 per cent subsidiaries of the new company.

Olympic Air is the successor airline to state-owned, debt-ridden Olympic Airways, later Olympic Airlines, which accumulated massive deficits for all but one of its 34 years of state ownership, from 1975 to 2009. It was sold to MIG, after several unsuccessful privatization attempts.

It currently flies on 41 domestic and 15 international routes, a drastic cutback from its heyday in the 1980s.

Aegean Airlines flies to 24 domestic and 26 international destinations. It is a regional partner of Lufthansa and collaborates with Brussels Airlines, Portugal’s TAP and Britain’s bmi.

When the latest incarnation of the Greece’s ‘Olympic’ finally left the ground on 1 October this year, what would the airline’s original founder Aristotle Onassis have been feeling had he been alive? Probably relief.

For years the Greek government has been under pressure from EU regulators in Brussels to offload the loss making Olympic operation which was being kept barely alive by ongoing injections of subsidy long held illegal by the EU.

By the end of 2008 Olympic Airways and its later re-corporatisation as Olympic Airlines had amassed a debt of over EUR2 billion. This was predominantly due to a lack of strategic vision by constantly changing management with little support from government. Such poor decisions included a scale-back of long haul operations to Australia and Asia in the late 1980s and a short lived, but nevertheless profitable foray into Japan cut short by increasing union pressure in Athens.

Olympic’s position as a ‘national icon’ within Greece meant that the government was highly sensitive to union unrest which inevitably led to the airline becoming a political ‘hot potato’ successive governments would actively avoid touching. Added to this was an aging fleet of fuel hungry first generation ATR 42/72, B737-300/400 and A300 aircraft and a brand damaged both within Greece and internationally by a lack of customer focus from an unmotivated workforce. The rise of the focused Aegean Airlines as the airline’s first real competitor in its history also impacted Olympic.
Repeated attempts to revitalise

In late 1999, an attempt to revitalise the airline, with the purchase of four A340-300 aircraft to replace the aging B747-200 long haul fleet, was combined with the engagement of British Airways consultancy ‘Speedwing’ to assume full management of the airline. It was thought such a move would kick-start a ‘transformation’ within the working culture at both operational and management levels and shift the pervading public service mentality to one focused on service and profit. The experiment failed and in early July 2000, the unhappy marriage between Speedwing and the Greek government was terminated 6 months into a 2 year term.

Adding to Olympic’s woes was the successful start-up of scheduled services by Aegean Airlines in May 1999. Privately owned, Aegean had originally started as an executive charter operation whose owners, the Vasilakis Group, identified the need for competition within Greece’s domestic market. Aegean posed as the biggest threat to Olympic’s domestic monopoly in the airline’s history to that point. Its non unionised workforce and customer-orientated focus was a direct threat to Olympic’s tired product. Olympic management, however, underestimated this threat which grew further with the merger of Aegean and Cronus Airlines, resulting in their expansion of services into Europe.

In 2003, with continued losses and debt mounting came the ‘band-aid’ solution of Olympic Airways becoming Olympic Airlines. This was an attempt by the Greek government to erase the debt of the former by transferring flight operations to Macedonian Airlines S.A., an Olympic Airways subsidiary, and renaming the subsidiary Olympic Airlines. The remaining companies under the Olympic umbrella, including Olympic Airways Handling and Olympic Airways Technical Base, merged to form Olympic Airways Services. Olympic Airways was then shut down and the debt eradicated.

The restructure also allowed Olympic management to cull less profitable or strategically ineffective routes, an example being Bangkok and Sydney. Olympic had flown this route on and off since its inception. In 2000, with the introduction of new A340-300 aircraft, replacing the aging B747-200 aircraft on the route, Olympic was finally able to provide a competitive product on the key Sydney/Melbourne to Europe markets as well as its services from Athens to New York, Johannesburg, Toronto and Montreal. Athens was well positioned as a transfer point for Southern European destinations, such as Italy and Turkey, and the onboard product, which included personal televisions and a 32 inch seat pitch were more generous than competitor’s offerings.

Olympic, like Gulf Air more recently in Australia, also marketed its Business Class product as a more affordable alternative, with fares up to 40% lower than its competition. Yet Olympic was unable to attract the corporate market by keeping frequency at just two flights a week. This made the route unattractive to business and unviable from an operational costs perspective and services ended in November 2003.

From 2004, the Greek government, acknowledging the limitations of state ownership, started making noises about a potential privitisation of the airline. Whilst this was met with strong approval from the EU in Brussels, who had been vehement critics of Olympic’s continued reliance on State subsidy, the public reaction in Greece was far from positive. With a fear of heavy job losses and the airline’s strong national profile, with its unique role in connecting the vast island population to the mainland, the political ‘hot potato’ just got hotter.

A procession of potential buyers, including Olympic’s main competitor Aegean Airlines and German low cost operator DBA, considered and rejected the airline as a potential takeover target. For the Athens-based Aegean Airlines, this would have given the fledgling airline access to Olympic’s regional, European and US, Canada and South African slots but at the cost of inheriting a damaged brand which did not compliment Aegean’s reputation as an efficient, ‘fresh’ and customer focused airline.

Between 2004 and 2007, the Greek government was consistently unsuccessful in selling Olympic Airlines in its existing form. Upgrades to the product, including e-ticketing and online check-in, came largely as a reaction to Aegean’s success as a ‘world’s best practice’ operator as well as pressure from IATA to abolish paper tickets by the end of 2007. However with continued operational losses, ongoing industrial uncertainty and debts mounting, Olympic Airlines continued to be an unattractive proposition to any potential investor. What the airline needed was a clean slate.
Enter Pantheon

In September 2008, the Greek government announced the planned closure of Olympic Airlines. To replace it would be Pantheon Airways. This airline would operate purely on paper until April 2009 when Olympic Airlines would cease operations and Pantheon Airways, using the name of Olympic Air granted to it by the Greek government, would assume operations as Greece’s national airline. Pantheon would operate as a new company and would have a separate legal identity to Olympic Airlines. There would be no continuity of product and Pantheon would inherit no staff or assets from Olympic Airlines. This was a key difference to the change in 2003 from Olympic Airways to Olympic Airlines where the name change had been largely cosmetic.

In Feb 2009, a formal tender for the sale of the assets of the Olympic Airlines Group (consisting of Olympic Airways Handling and Olympic Airways Technical Base), the assets of Olympic Airlines and the name ‘Pantheon Airways’ collapsed due to a lack of interest. Following this came an offer by Marfin Investment Group (MIG) to buy the flight operations and technical support businesses, with Swissport submitting an offer to buy the ground handling division.

A third offer, this time for the Olympic Group in its entirety, came from Aegean Airlines who were backed by a Greek- American equity consortium Chrysler Aviation. The last minute bid by Aegean, who had previously publically stated it was not interested in any part of Olympic, was a knee jerk reaction by the airline whose management had mistakenly assumed that Olympic would be left to ‘die’ with Aegean left to pick up the pieces. Indeed with cashed up MIG and Swissport at the table, Aegean’s bid was seen as panic driven than commercially sound. In the end, the Greek government rejected the bid on the grounds that it would have resulted in a virtual monopoly.

With no other bidders at the table, in March 2009, the Greek government announced the sale of the technical and operational arms of the Olympic Airways Group to MIG. The ground handling business was also acquired by MIG a week later after negotiations between Swissport and the Greek government collapsed. The acquisition included the ‘Olympic’ brand name and the 6 ring logo as well as the majority of slots owned by Olympic Airlines.

The ground handling unit started operation as Olympic Handling on 29-June-2009, with Olympic Engineering following soon after. Using Pantheon Airways as its legal identity, flight operations commenced informally on 29-Sept-2009 under the brand of Olympic Air with formal operations commencing two days later on 1-Oct-2009.
The Age of Marfin

Marfin Investment Group was founded in 1998 with a strategy focused on the restructuring and consolidation of the Greek banking sector. This was achieved through the acquisition of various Greek and Cypriot financial institutions culminating in the establishment, in Dec 2006, of Marfin Popular Bank (MPB.) MPB became one of the largest retail banking groups in Greece and Cyprus. Following further consolidation within the Greek banking sector, MIG assimilated its banking assets in MPB with Laiki Group S.A. and Egnatia Bank S.A. MIG then divested its banking interests to MPG in order to concentrate on a broader scope of investments.

Today, these investments include businesses within the tourism and leisure sectors; healthcare; real estate; transport and shipping; food and beverage; and telecommunications. The purchase of ‘Olympic’ compliments a number of other high profile Greek brands within Marfin’s portfolio, such as the SuperFast and Blue Star ferries servicing the Greek islands and the Electronics retailer Radio Korasides. Total assets of the group exceeded EUR7.6 billion in 2008.
A completely new airline

In the world of airline mergers and acquisitions, Olympic Air is unique. Whereas most mergers or privatisations involve the transfer of some key assets, MIG started Olympic Air operationally from scratch.

None of the ageing 737s and A300s of Olympic Airlines made the transition. Instead, Marfin has leased 16 Airbus A319/320 aircraft for its medium haul Europe and Middle East operations and 5 Bombardier Dash 8-100 bought from Olympic Airlines; 10 Bombardier Dash 8 Q400 aircraft under a dry lease agreement with Flybe and 1 ATR-42 for its regional services within Greece. The Flybe aircraft will be progressively replaced after deliveries commence of the 8 ‘next generation’ Bombardier Q400 aircraft, ordered with much fanfare by MIG at the Paris Air Show in July 2009.

The new aircraft will provide Olympic with a modern and efficient fleet, in striking contrast to the fuel guzzling ‘classics’ operated by its predecessor.

With the new fleet has come a revision of the livery. Chosen from a shortlist of high profile public submissions, the rings remain virtually unchanged, although they now feature the colour green as a nod to MIG’s corporate branding and its heavy use of the colour green. There had been much expectation that the font used by Olympic, in various forms, would be modernised or indeed changed altogether, however the strength of Olympic as a sign of national identity resulted in only a marginal change to the logo. The paint scheme has been modernised and features a predominantly blue and white scheme with a line of green as a further reflection of its parents stamp on the iconic brand.

The uniforms, as with the livery, reflect a stark modernisation of the brand and reflect Marfin’s desire to make Olympic a fashionable symbol and brand representing Greece abroad.

Indeed, from a brand perspective, this is where Olympic had traditionally failed and where Aegean has succeeded. The ‘old’ Olympic did not resonate with the increasingly aspirational and materialistic Greek youth and middle class. In contrast, the new Olympic Air was launched with a series of television advertisements centred on national pride with the tag line: “Olympic Air: Greece rising”. The campaign, hailed a major success within advertising circles, is seen as Marfin’s first step in setting up Olympic Air as a first class airline with an exciting future.
Some notable absences and inclusions

One of the fatalities coming from Marfin’s acquisition of Olympic has been the A340-300. These aircraft were some of the youngest in the Olympic Airlines fleet but they reflect the conservative strategy adopted by MIG in establishing Olympic Air’s route network.

Notable changes include the suspension of services to New York’s JFK, once the jewel in the crown of founder Aristotle Onassis’s aviation empire and represented by the mighty ‘Olympic Tower’, a 50 storey tower positioned on Fifth Avenue in Manhattan which now houses luxury apartments, the Onassis Cultural Centre and the headquarters of the NBA.

Further route cuts by Marfin include Johannesburg, Toronto and Montreal which also used the A340-300. With the exception of JFK, Olympic ran a monopoly on these routes but still struggled to make a profit from what was predominantly a cost conscious VFR customer base distinct from the high yielding corporate market. On flights to JFK, Olympic competed with recent arrivals Delta and Continental as well as full service European carriers who benefitted from being members of Star Alliance, oneworld or SkyTeam, with their strong hubs and networks. Previously Olympic was never in a position to join the alliance set.

Olympic Air CEO Antonis Simigdalis has signalled that Olympic may return to those markets but not in the immediate future as it focuses on consolidating its position within Europe and domestically within Greece. Codeshares with Delta to NYC, Air France to Toronto and Montreal and Etihad to Johannesburg and Sydney will maintain the Olympic brand in those markets. It is questionable, however, whether Olympic’s traditional long haul market, consisting primarily of Greek diaspora, is likely to appreciate purchasing an Olympic ticket only to fly on an Air France aircraft without Greek speaking crew. Olympic Air arguably faces alienating what loyal customers it has left in those markets.

Within Europe and the Middle East, Olympic Air has maintained 65% of its predecessor’s network, but with some key changes. Olympic Air has withdrawn entirely from Germany where it once served Dusseldorf, Munich, Hamburg, Frankfurt and Berlin, the last two in direct competition with Lufthansa. By comparison, Aegean services Berlin, Dusseldorf, Frankfurt and Stuttgart in their present schedule. The airline has maintained key ports such as Heathrow and Paris CDG, however with Heathrow it has lost its competitive advantage on two fronts.

London Heathrow was one of Olympic’s most profitable sectors and this was largely due to the high population of Greeks working and studying in the English capital. Two of the three flights a day were operated with A340-300 aircraft. Compared to the single aisle aircraft used by competitors Aegean, British Airways and easyJet, Olympic made the decision to offer a widebody long haul configured aircraft with personal televisions and a 32 inch seat pitch as well as larger sleeper seats in business class. Historically, executives at Olympic took great pride in the fact that they had beaten off Virgin Atlantic on the route in the early 2000’s and forced BA to make a loss on the sector to stay competitive. Aegean and easyJet, meanwhile, were forced to operate from Stansted and Gatwick respectively although Aegean has recently commenced services to Heathrow in direct competition with the new Olympic.

Olympic Air’s new A319/320 aircraft will offer a more contemporary, if not necessarily more comfortable-flying experience to their customers with seat pitch set at 31 inches. In an industry where brand perception can make or break, the impression that passengers will most likely have upon boarding an Olympic Air flight will be more positive than under the old airline. Business Class on the Airbus aircraft will be 4 abreast as distinct from the ‘empty middle seat’ strategy of most European carriers. The new uniform will elevate style to a higher priority than before. Whilst in no way remarkable, the new onboard product brings Olympic Air with other European full service airlines.
A new direction? Becoming Relevant Again

In a recent interview MIG president Andreas Vgenopoulos remarked that Olympic has plans to join SkyTeam in the near future with further ambition to become a European market leader and eventually “one of the largest airlines in the world, if possible”.

Olympic’s success in the short term is largely dependent on its ability to restore the brand, establish relevance in the market through its network strategy and establish a reputation as being a high quality, reliable, customer focused service provider.

In this challenge it has an uphill battle. The perception most consumers who are aware of the Olympic brand have of the airline is one of dirty planes filled with low fare passengers, served by dour flight attendants. Customer satisfaction websites such as ‘airlinequality.com’ list pages of negative reviews for Olympic Airlines that reflect the inherently bad reputation the airline generated. In that sense, Olympic Air has years of neglect to reverse both within Greece and beyond.

Olympic is also facing potentially rising fuel costs and downward pressure on yields from heavy discounting within the European regional market as airlines continue to battle declining demand with existing capacity. The Greek economy is one of the most sluggish in the EU with rising unemployment, particularly amongst youth, coupled with one of the highest costs of living of any European capital. The savings and disposable income of most Greeks has shrunk heavily since the introduction of the Euro in 2001 and the global economic crisis has done little to change that trend, slashing retirement savings from middle class ‘mum and dad’ investors who had only just become accustomed to trading on the stock market in the last ten years or so.

Membership of SkyTeam has been widely touted by management and commentators alike and it seems a logical step help Olympic become relevant in terns of its network offering, as well as to counter the impact of Aegean’s upcoming admission into Star Alliance. It also reflects the code-share agreements already in place with Delta and Air France. Membership to such an alliance would not only provide Olympic Air with access to a greater network globally, but would also bolster its reputation as a full service carrier and member of a relatively elite club of airlines.
Battle over the Aegean

Aegean Airlines has demonstrated that Greeks can run a profitable airline and a good one at that. Now the largest Greek airline by size, Aegean has remained profitable, won a string of awards and has prospered under a measured expansion strategy by management.

Yet part of Aegean’s success has been based on the brand differentiation between itself and the national carrier. In short, Aegean has relied on the message ‘we are not Olympic’. This has attracted to it many brand conscious Greeks who associate Aegean as a quality product and Olympic as the distinct opposite. Greek aviation is now presented with two airlines, both vying for pole position.

Olympic may have been the ‘shame’ of Greece for many years but most marketers do acknowledge that the ‘Olympic’ name is synonymous with the country. There is a lot of grass-root support for the new Olympic Air including the Greek diaspora. The emotional connection many people feel towards their former national carrier could prove a major drawcard for the new airline. Unlike much of the developed world, flying is still a luxury for many Greeks. When faced with a choice of airlines, many Greeks will make their choice not only on price but also on how strongly they relate to the product. This may be less an issue for the corporate travel market, with whom Aegean’s product has been a hit for many years. But it is this higher yielding customer that Olympic Air needs to attract if it is to be profitable long term. Reliability and consistency will need to be the primary focus when it targets the corporate market and the new Olympic needs to match the frequency of its competitors otherwise it risks becoming irrelevant.

The relationship between the two carriers looks set to be a highly competitive but also potentially aggressive one as well. Just prior to Olympic’s launch in Oct-2009, Marfin publicly criticised the Greek Civil Aviation Authority (YPA) for granting Aegean Airlines the right to service the Athens-Istanbul route, one of the most profitable for the old Olympic. Aegean Vice Chairman Eftyhios Vassilakis denied claims that there had been an ‘under the table’ deal. Aegean has openly sought access to the route since commencing international services in 2003 and this was actually granted in 2004. The obstruction to services commencing earlier had been slot availability at Istanbul’s Ataturk International Airport. These were finally granted in May-2009 but Olympic is continuing to challenge Aegean’s right to operate the route.

Olympic and Aegean will go head to head on most domestic routes. A condition, set by the Greek government, of Marfin’s use of the Olympic brand was that the Greek domestic market be completely deregulated. Aegean has had access to the key island ports, such as Rhodes, Santorini, Heraklion, Samos and Mykonos, but will now have access to all of the old Olympic’s domestic network which is particularly lucrative in summer but a loss maker during the winter season as island populations shrink.

Within Europe, Aegean and Olympic will continue to directly compete on key routes including Athens to Heathrow, Paris CDG, Brussels and Vienna with the notable exception of Germany. Aegean’s imminent accession to the Star Alliance will give it access to Lufthansa’s international network from Frankfurt and Munich. If Olympic successfully joins SkyTeam, it will similarly be able to tap into Air France’s network from Paris CDG beyond Europe.
Outlook: what happens when the ‘party’ is over?

Whether the gods look kindly on Olympic Air depends on various factors. Two months from the start of operation finds the airline basking in a honeymoon period fuelled by public anticipation stemming from its high profile launch.

For Olympic, the maintenance of public excitement and internal enthusiasm is critical to its medium and long term success. Historically, one of Olympic Airways/Airlines inherent weaknesses was the apathetic approach its workforce took to operating the business. This came from the top down and was reflected in how Olympic presented its product and certainly how that product was perceived. The biggest asset Olympic Air has today is the enthusiasm of its new staff to make the business a success. External pressure from a re-invigorated Aegean, will be a challenge which will only be met if the new Olympic can maintain a disciplined and focused approach to building its business. This also extends to Olympic re-building its reputation within Europe’s competitive short haul market.

With union pressure that dogged its predecessor neutralised by the de-nationalisation of the airline (thus freeing it from the stranglehold of the powerful public sector union) Marfin needs to nevertheless build a culture of discipline and focus. Marfin’s track record of providing high quality facilities and services within Greece, particularly within the tourism and hospitality sectors suggests that the benchmark will be set high. New staff, a complete fleet renewal and a re-invigorated brand- both domestically and within Europe- provide the key ingredients for Olympic Air’s future success.

However management need to be disciplined in their growth strategy. For now, it is arguably better for Olympic to ‘think small’, invest in and build the product and position the carrier between bigger and more powerful allies through alliance membership, rather than an overly ambitious expansion strategy.

In recent weeks, however, Marfin has signalled a desire to acquire state owned Serbian carrier JAT. The airline, whose name harks back to its former life as the Yugoslav state carrier, was plagued by years of political instability in the former Yugoslavia and the sanctions which resulted limited the airline’s commercial potential. In recent years, attempts to expand JAT’s European operations further afield to the US and Canada have stalled due to a variety of regulatory and financial hurdles. The continuing rise of tourism and foreign investment in the Balkans presents an opportunity for growth.

Whether Marfin proceeds, or is just ‘kicking the tyres’, remains to be seen. If it is serious, Marfin may seek to rationalise JAT’s ageing fleet of 737 aircraft by replacing them with twin aisle Airbus A320 family aircraft as it has done with Olympic Air. The efficiencies gained by combining fleet operations and the development of duel hubs in Athens and Belgrade would also be benefited by continued Greek investment in the former Yugoslav states and Greece’s vocal support for the inclusion of Serbia and Croatia in the EU. Marfin would be getting 51% of JAT for approximately EUR51 million.

But the first priority is bedding down the new Olympic. Olympic Air’s outlook is also subject to the position the new socialist Pasok government adopts to commercial aviation in Greece. A condition of Marfin’s acquisition of the ‘Olympic’ name was the right of a new government to renationalise the airline within 3 months of being elected. For Olympic management this must be unsettling, however with 2 months passed from the election, there have been no signals from the new Greek Prime Minister George Papandreou that the renationalisation option will be exercised. With the Greek public highly supportive of the ‘new Olympic’ and with unions finally reconciled that the old airline is dead and buried, it seems highly unlikely that Olympic Air will be back in government hands any time soon.

What is likely, however, is a further tightening of discretionary spending in Greece, following the 09-Dec-2009 announcement by international ratings agency Standard and Poor that Greece’s long term credit rating had been downgraded. With the nation’s debt spiralling out of control, this cannot be good news for Marfin’s retail businesses, including Olympic Air, with interest rates and taxes now set to further rise as the clouds as Greece’s economy enters a deeper period of instability.

However there is no turning back for Marfin, at least not in the short to medium term, as it seeks to obtain at least a reasonable return on its investment. With re-nationalisation virtually impossible, Olympic will most likely try to survive by keeping a very tight lid on costs and capacity whilst simultaneously trying to sell the new brand to a price conscious market – not an easy task.

Regardless, Olympic has been granted a fresh start. Indeed a metaphorical olive branch has been extended to the ailing former national carrier. Marfin must now grow the branch into a tree with sound execution of its strategy – and maybe just a sprinkling of luck from the gods.

If your airline goes bankrupt and leaves you stranded what are your legal rights? Members of the Parliament’s Transport Committee want grounded passengers to have access to a special compensation fund. In the last decade almost 100 airlines across the European Union have gone bankrupt – leaving thousands of holiday makers and business flyers out of pocket and stuck at a foreign airport.

Sabena, Sky Europe and Olympic Airlines are just three of the large carriers that have gone bankrupt due to a combination of high fuel costs, competition and new security measures after 9/11.

Transport Chair Brian Simpson speaks of “clear loophole”

On 7 October in Brussels at a meeting of the all-party Transport Committee its Chair, Brian Simpson (Labour, North West of England), formally asked the European Commissioner for Transport Antonio Tajani to set up “a reserve compensation fund” and consider updating passengers’ rights legislation.

He told fellow MEPs that “here we have a clear loophole and it would be preferable for all if we could work together and fill it in”.

He added: “We have also floated the idea of establishing a reserve compensation fund, but this must not be seen as a demand. We merely wish to open up the debate as to what mechanism will help us best solve this problem.”

Transport Commissioner Tajani backs compensation

Commissioner Tajani told Members that “passengers should indeed receive compensation. We are working on specific measures to find the best solution. One solution is a compensation fund derived from airlines’ contributions. Another would be changes in bankruptcy law in the member states”.

There is a consensus across the Parliament’s main political groups that the European Union needs to do more to help passengers stranded by bankrupt airlines. A Parliamentary resolution is due to be tabled later in the autumn.

Alternative flights for cancelled Olympic Airlines services

As part of its privatisation process, Olympic Airlines has cancelled all services on 15 routes until further notice, including flights between Athens and Frankfurt, Berlin, Dusseldorf, Munich & Stuttgart.

Passengers looking for replacement flights are using Aegean Airlines on the europebyair FlightPass as their replacement on these routes and more, since passengers using the FlightPass have been completely unimpacted during this turbulent time in Greek aviation. A one-way fare Frankfurt to Athens is only AU$169.00 plus taxes.

Originally established as Aegean Aviation in 1992, Aegean Airlines last year carried more passengers than state-owned Olympic Airlines and now boasts a route network of 38 European & Greek cities. In addition to the cities above, Aegean Airlines links Athens with London, Barcelona, Brussels, Paris, Milan, Rome & Venice as well as regional cities Cairo, Bucharest, Larnaca, Paphos, Sofia & Tirana. Domestic points include Mykonos, Santorini, Corfu, Heraklion, Rhodes & Samos to name but a few.

All the above flights are available on the europebyair.com.au FlightPass, a flat-price discount ticket that allows passengers unrivalled flexibility to change their ticketed flight dates and even their destinations for free.

Featuring bright, fresh cabin decor with leather seats, Aegean Airlines fleet currently consists of 21 Airbuses, 4 Boeing 737s, 6 Avro RJ100 jets manufactured by BAE Systems (British Aerospace) and 2 ATR-72-500 which operate to the smaller island airports. The future prosperity of the airline is underscored by an order of 27 more Airbus A320/321 aircraft to be gradually delivered by 2010.

European flight prices reduced in time for Christmas holidays

And coming in perfect time for the Christmas holidays, europebyair.com.au today announced an immediate reduction in the cost of FlightPasses in Europe.

Now AU$119.00 per flight, the Mini FlightPass applies on more than 220 domestic & short-haul flights throughout Europe. The most popular of the three passes, the Classic FlightPass, has been reduced to AU$149.00 and is valid on more than 350 flights including perennially popular Rome, London & Paris to Split & Dubrovnik as well as 90 flights across the continent to & from Brussels plus more.

europebyair.com.au has even stepped in to help passengers disrupted by the cancellation of Olympic Airlines flights by reducing the Premium FlightPass (applicable on international flights to/from Greece) to AU$169.00 per flight.

The FlightPass allows passengers the flexibility of changing their reservations for free, even changing their destination and/or airline for free if they want to. Passengers pay any applicable taxes at the airport prior to checking in, thus being saved the inconvenience of having to have a traditional BSP ticket reissued just for the sake of a few dollars tax adjustment if they change their journey.

What’s more, there are no passenger check-in nor baggage check-in fees with the FlightPass – each airline’s standard checked baggage allowance is included free in the ticket, unlike many other discount carriers.

The FlightPass is the most flexible airpass available, not only allowing passengers to change their dates without penalty, they can even change their origin and/or destination and/or airline without penalty, something no other FlightPass offers.

The reduced prices apply until the end of this year. For full details see www.europebyair.com.au.