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Olympic Air is a Greek airline formed from the privatisation of the former national airline, Olympic Airlines. The carrier is based in Athens with secondary hubs in Thessaloniki and Rhodes and operates a network of domestic services within Greece and regional services in Europe, Africa and the Middle East. Aegean Airlines purchased the Olympic Air on 23-Oct-2013 and will operate as a subsidiary of the carrier.
Location of Olympic Air main hub (Athens International Airport)
148 total articles
15 total articles
On 9-Oct-2013, the European Commission (EC) approved the acquisition of loss-making Olympic Air by loss-making Aegean Airlines. Although a previously proposed merger of the two was blocked by the Commission in early 2011, its analysis now indicates that Olympic would go broke in the near future if it were not acquired by Aegean.
This would leave Aegean as Greece’s only significant domestic carrier. The EC argues that the competition provided by Olympic on domestic routes would disappear regardless of the acquisition. It concluded that any competitive harm caused by the removal of Olympic as an independent competitor is not caused by the merger, which “is compatible with the internal market and must be authorised.”
This raises some interesting questions. For example, why did the EC not give fuller consideration to the possibility that new entrants might fill the gap left by Olympic? And why is Aegean paying EUR72 million for a loss-maker that the EC says is “highly unlikely to become profitable in the foreseeable future under any business plan”?
Greece’s largest airline Aegean Airlines reported a first half profit in 1H2013 for the first time since 1H2009, putting it on track to post its first full year profit since 2009. Aegean has laid down a good track record of cost control over a number of years, but unit revenue weakness has undermined this and led to annual losses.
The return to profit for the half year was due to strong growth in revenues, led by international routes and driven by a significant rise in RASK. Tight capacity management contributed to this performance and Aegean will be hoping that strong unit revenues can be sustained into the second half in spite of growing LCC competition.
Meanwhile, the European Commission is expected to rule on Aegean’s proposed acquisition of Olympic Air in Oct-2013 and this will be the key strategic milestone in 2H2013.
Aegean Airlines seems to be caught between the devil and the deep blue sea, challenged both by a very weak domestic market and by an increasingly competitive international market where it has neither cost leadership nor a global network. If approved by the EU this year, will its planned acquisition of Olympic Air provide a route to safety?
Aegean reported its third successive loss in 2012, albeit a narrower one than in 2011, as passenger numbers fell by 6%. Aegean managed to reduce costs at a similar rate and to limit the revenue fall to 2% by cutting domestic traffic and international traffic from Athens while growing international traffic from provincial Greek cities. Double digit passenger growth from 2003 to 2009 has been followed by domestic-led decline, with Athens (Aegean’s main hub, where it is the biggest carrier) a falling market. Although it has leading positions at its other Greek bases, LCCs are increasingly making their presence felt there.
Greece’s largest passenger carrier, Aegean Airlines, has reached agreement with the shareholders of its main rival Olympic Air to buy the airline for EUR72 million, marking a third attempt to re-consolidate the Greek air transport market and survive in a dire – to say the least – environment as the country is in its fifth consecutive year of economic contraction. In contrast with the proposed union in 2010, which was blocked by the European Commission on competition grounds after a 10-month investigation, the present deal is not a merger but an outright acquisition of Olympic Air by Aegean. Olympic Air would become a subsidiary of Aegean, with both airlines maintaining their brands and distinct liveries.
The parties argue that the combination is necessary to effectively compete within the European aviation market and shield the two carriers against continued losses and further reductions of size and scope. Aegean posted a net loss of EUR27.2 million in 2011 and Olympic Air recorded a deficit of EUR37.6 million as its revenue and passenger numbers continued to decline. Olympic’s passenger numbers fell 23% in 2011 to 3.4 million from 4.4 million in 2010 and decreased 14.5% to 1.4 million in 1H2012 compared to the year-ago period.
Greece’s airlines are operating in an unsympathetic environment shaped by four consecutive years of economic recession and austerity measures, worries about a possible exit from the eurozone and a fragmented market with the largest carrier holding a mere 33% capacity share. The situation is untenable and revives the discussion if the European Commission (EC) in Jan-2011 took the right decision in blocking the proposed merger between Aegean Airlines and Olympic Air.
Both of Greece’s major carriers are loss making and Olympic, which had high hopes to become Greece’s new national carrier after it bought some of the assets of the state-owned and de facto-bankrupt flag carrier Olympic Airlines, was forced to refocus its strategy towards regional operations to survive. Olympic’s passenger numbers fell 23% in 2011 to 3.4 million from 4.4 million in 2010.
Greece’s largest passenger carrier, Aegean Airlines, has continued to improve despite the economic crisis in Greece and other European countries, and has recorded a significant increase in international passenger traffic in 3Q2011. A rise in operating expenses, namely fuel, has negatively affected the carrier which posted a net loss of in the nine months to September.
Aegean’s expanded international network led revenue gains for the carrier with new destinations and increased frequencies in important markets across Europe. Aegean’s international network now accounts for more than half of the airline’s available seats. Meanwhile there is a weakening domestic market with capacity decreased in the face of reduced consumer demand.
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