New EU probe into Olympic Airlines

Olympic Airlines, the loss-making Greek carrier, faces a fresh blow Wednesday when the European Commission opens new investigations into whether it is receiving illegal state aid.

The Commission, which has accused Athens of funnelling about €600m ($865m) to the airline from 1994 to 2005, will now examine payments after that date. It suspects that the government has waived debt interest, social security payments for staff and some fees at Athens airport.

The Commission is also to probe a domestic court deal under which the state was ordered to give Olympic €564m to pay for services rendered.

“The sums seem to add up too neatly. We are going to launch two investigations,” said a Commission official, on condition of anonymity. “We are also concerned that some of the money may have been paid to Olympic already.”

Jacques Barrot, the transport commissioner, is aiming to crank up the pressure on Athens to decide the airline’s future.

People close to Olympic said that the move could complicate matters. “This poses a problem for the Greek government. Opening a new procedure means the financial risks for the airline are not known. This discourages investors,” said one.

The European court has already ruled that Athens has failed to comply with an order from Brussels to repay state aid.

The new Commission cases concern a domestic court ruling this year that said the state owed Olympic €563.9m for costs incurred in moving to the new Athens international airport in 2001 and for transport services provided free of charge to successive governments under a contract first signed with Aristotle Onassis, the late Greek shipping tycoon.

“Under this deal signed in 1956, Olympic has been carrying ministers around and handling Greek government business for free,” said someone close to the airline.

Olympic Airlines was relaunched in 2004 after the old Olympic Airways was split into a ground services and separate flying division. The Commission has been pursuing all three entities.

Costis Hatzakis, Greek transport minister, has said that if Olympic shuts down, it would be replaced by a new Greek carrier and that EU-approved subsidies would be available to keep open loss-making routes to remote Aegean islands.

The new airline would be restricted to European and domestic routes, in competition with Aegean Airlines, a profitable private carrier controlled by local entrepreneurs. Olympic’s policy of maintaining prestigious long-haul routesis one reason why the carrier has racked up annual losses exceeding €100m since its relaunch, say analysts.

Mr Barrot has said that island routes could be subsidised as long as there was an open tender for the services.

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