Mergers: Commission approves acquisition of Greek airline Olympic Air by Aegean Airlines
09-Oct-2013 The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Olympic Air by Aegean Airlines, both Greek air carriers. The Commission's in-depth investigation has shown that Olympic Air would be forced to exit the market in the near future due to financial difficulties if not acquired by Aegean. Once Olympic would be out of business, Aegean would become the only significant domestic service provider and would capture Olympic's current market shares. Therefore, with or without the merger, Olympic would soon disappear as a competitor to Aegean. Thus the merger causes no harm to competition that would not have occurred anyway.
The Commission's Vice-President in charge of competition policy, Joaquín Almunia, stated: "It is clear that, due to the on-going Greek crisis and given Olympic's own very difficult financial situation, Olympic would be forced to leave the market soon in any event. Therefore we approved the merger because it has no additional negative effect on competition."
The Commission has examined the effects of the proposed acquisition on competition in the affected markets for the domestic air transport of passengers. Aegean is Olympic's closest competitor on these markets in Greece. The Commission initially expressed concerns and opened an in-depth investigation in April 2013 (IP/13/361).
The Greek crisis has seen a drop of 26% in demand for domestic air passenger transport from Athens: from 6.1 million passengers in 2009 to 4.5 million passengers in 2012. This decline has continued during the first half of 2013 (6.3% decrease compared to the preceding year).
Furthermore, the number of routes served by both Aegean and Olympic has decreased substantially over recent years. When the Commission blockedAegean's previous attempt to merge with Olympic in 2011, the parties provided competing services on 17 routes, nine of which raised competition concerns (see IP/11/68). Currently, Aegean and Olympic have overlaps on seven routes of which the following five domestic routes are served only by them: Athens-Chania; Athens-Mytilene; Athens-Santorini; Athens-Corfu (Aegean only operates in the summer); Athens-Kos (Aegean only operates in the summer).
The market investigation has revealed that entry in the immediate future by other airlines is unlikely on any of those routes. This is due to a variety of reasons: potential entrants see more profitable opportunities elsewhere, they consider the costs of entry too high or they stay away from the Greek domestic market due to Greece's current dire economic situation.
However, the Commission's in-depth investigation has also clearly demonstrated that, in any event, Olympic is a failing firm and would go out of business soon. Olympic has never been profitable since its privatisation in 2009 and has received considerable financial support from its sole shareholder, Marfin Investment Group ("MIG"), ever since. A thorough analysis of Olympic's business prospects has confirmed that the company is highly unlikely to become profitable in the foreseeable future under any business plan. MIG had therefore decided to discontinue its support of Olympic, should it not be sold to Aegean. This would lead to Olympic's permanent shutdown in the short term.
Furthermore, the market investigation has confirmed that there is no other credible purchaser other than Aegean interested in acquiring Olympic. There has also been no expression of any credible interest in the acquisition of Olympic's assets including its brand. Consequently, the most likely scenario is that absent the transaction Olympic's assets would leave the market completely.
The Commission has therefore concluded that any competitive harm caused by Olympic's disappearance as an independent competitor is not caused by the merger. As a consequence, the merger is compatible with the internal market and must be authorised.
The transaction was notified to the Commission on 28 February 2013.