Aegean Airlines' acquisition of Olympic: approved by European Commission, but questions remain

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"?