Aegean Closes $94 Million Deal to Buy Olympic

Aegean Airlines and Marfin Investment Group (MIG) have agreed on the sale of 100% of Olympic Air to its rival, which will give them almost complete dominance over domestic air travel, almost two years after the European Commission blocked a merger on anti-competition grounds, and this deal, reported to be some $94 million, will face the same challenge.

Following completion of the transaction, Olympic Air, which was taken over by Marfin in a 2009 privatization, will become a subsidiary of the listed Aegean. The brand names and logos of the two companies will be maintained and each will have distinct aircraft and flight staff.

Aegean will make payments in installments to MIG and both said the deal would unify administration and costs and increase buying power while eliminating duplicating systems. Aegean Chairman Theodoros Vassilakis noted that the two companies have spent $2 billion in recent years in a new fleet and contribute more than $342 million to the government in taxes, fees and other payments.

But he said the country’s crushing economic crisis and the airlines’ small size “restrict our ability to successfully compete within the European and Global Aviation market leading us to further losses and further reductions of size and scope. As a result we are faced with the immediate danger of Greek Tourism, an industry essential for the country’s recovery, becoming entirely dependent on foreign carriers with permanent losses in local employment and state revenues.”

MIG’s Chief Executive Officer Efthimios Bouloutas made his group bought Olympic to try to restore the former national carrier and he believed that had been done. But he said that, “The continuously deteriorating domestic economic environment through a prolonged recession has led to an inevitable decline in passenger volumes arising mainly from the reduction of domestic consumers’ disposable income.”

Combined with other unfavorable aspects of the economy of Southeast Europe as well as a sharp increase of fuel prices, made it critical for the airlines to merge. “We believe that without the envisaged transaction, the continued losses and inevitable retraction of activities by domestic carriers would increase the country’s interdependence to international carriers thus jeopardizing Greece’s connectivity and tourism industry.” He said the Olympic brand would continue.

In January of 2011, the European Commission barred a similar deal, saying: “It would have resulted in a quasi-monopoly on the Greek air transport market. This would have led to higher fares for four out of six million Greek and European consumers traveling on routes to and from Athens each year. Together the two carriers control more than 90% of the Greek domestic air transport market and the Commission΄s investigation showed no realistic prospects that a new airline of a sufficient size would enter the routes and restrain the merged entity΄s pricing. The companies offered to cede take-off and landing slots at Greek airports, but Greek airports do not suffer from the congestion observed at other European airports in previous mergers or alliances,” the Commission said.

Olympic Air and Aegean Airlines lodged an appeal against the ruling and sources said this time they are going to return with a new proposal which is currently being processed.


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