Olympic Air

Aegean Airlines: caught between the devil and the deep blue sea after three annual losses in a row

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 Aegean Airlines and Olympic Air try once again to combine forces

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.  

Greek carriers fight an ominous jumble of recession, euro-woes and market fragmentation

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.

Aegean’s 3Q2011 results impacted by 40% fuel expense increase

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.

Europe's fringe carriers look for partners to overcome financial crisis; Cyprus Airways latest

Airlines on Europe's southern and eastern periphery are becoming more precariously positioned, but are looking for for partners to help overcome the growing financial crisis. Cyprus Airways is the latest such carrier, and reported a widening in first half losses in the six months to 30-Jun-2011, as lower top-line revenue fell and higher fuel costs squeezed the airline in the period. Cyprus Airways is also turning to implementing a raft of measures aimed at stemming operating losses.

Athens Airport rides out the economic storm

The Greek economy is the subject of international attention as attempts are made to restore the stability that might prevent ‘contagion’ of the debt crisis and its spreading to Portugal, Ireland, even Spain and Italy, potentially threatening the Euro itself. At the same time, the airport assets of Hochtief, a partial owner of Athens Airport, are up for sale. In the circumstances one might expect that Athens Airport would be seeing a slowdown in traffic, apart from EU and IMF entourages. But what is the true story? CAPA asked Athens Airport’s management to comment.