Thursday, 15 November 2012 09:50

Aegean-Olympic-New Deal

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The future of the two Greek Airlines, after a possible “no” from the EU


The agreement between the two Greek Airlines has been announced and we all know what it means.

            They are two companies with supplementary and little complementary converging operation.

The ¨core¨ of their agreement is the deposit of 20.0 million Euros, paid in advance by Aegean to Olympic Air, as a part of the 72.0 million Euros total cost demanded for purchasing 100% of Olympic Air exclusively.

Not including the technical base and handling, as they are not going to be bought.

            We have analysed, in a previous article/speech, during the International Airline Conference of the 20th April, 2010, held in Athens, (A.I.A., building 17), the true financial cost of OLYMPIC AIR for M.I.G., when made the purchase from the Greek Government.

We certainly believe that its main shareholder has made a not bad deal.

If it wasn't "haunted" by the serious damages of the period, during which the company was under its management, (but even despite that), the agreement, at the moment, seems smart and profitable.

On the other side, Mr Theodoros Vasilakis, ¨Nestor¨ of business in Greece, has taken a risk, in order to satisfy his earnest desire for obtaining “the once beloved of the 5continents”.

The fact that the Hellenic Competition Commission made a pass to the European Commission, that is going to decide on whether the purchase is acceptable, may have upset him a little. Because this was not what he was expecting as valid.

He has made a substantial pre-payment and if the impending purchase is not approved, he will have 18% of the present OLYMPIC AIR as a minority shareholder.

In other words, a share that does not allow for a vital participation, (i.e. 33.4%), except for a few crucial issues, related to the legal and real functions of OLYMPIC-AIR.

            This means that if the answer is “no”, then the 20.0 million Euros have been invested to the company we all know today, as it is.                               However, what are the possibilities for the agreement to be accepted by the competition commission of EU?

Reasonably unremarkable to just a few, unless something unexpected happens.

And this is due to the fact, that approval conditions, such as real pluralistic competition, do not exist, in practice, in the Greek market.

The small existing Airlines operate temporary and without a steady pace throughout the year.

On the other hand, the range of their operation, is limited in quantity.

At the same time, Cyprus Airways, is expanding its business to Rhodes and Heraklion, additionally to Thessaloniki, but for how long?

Besides, it is in the middle of an increase in its share-capital and a possible sale. So, for how long could the competition last locally?

These, and even more, are the parameters that will influence, positively or negatively, the decision of the European Commission.

We are certain that ¨Aegean¨ will give a heated fight, in order to have the deal implemented and receive a positive answer from Europe.

This is a difficult task, yet not unachievable, should crucial and decisive convergences exist.

If an “OK” is ensured, its future course is predestined, in two phases. What is needed then is positive Legislation in the Aviation Law field, and: business environment

            We will come back to this issue soon.