European Commission shuts down Greek merger
The European Commission (EC) has vetoed the merger of Greek carriers Olympic Air and Aegean Airlines on competition grounds following a 10-month investigation.
The shareholders of Aegean and Marfin Investment Group, owner of Olympic, had agreed on a merger in principle in February 2010.
Aegean Chairman Theodore Vassilakis said: “We presented to the Commission the benefits of the merger for our companies, our passengers and our country’s economy. We also offered important commitments to safeguard consumers as well as measures to facilitate the entry of new competitors in the domestic market. Unfortunately, the EC decided to prohibit the agreement. An important opportunity for consolidation in the European aviation market has been lost."
Andreas Vgenopoulos, chairman of the Marfin board, commented: “The EC decision will benefit foreign competitors.”
The EC said it blocked the deal because it would have created a "quasi-monopoly" in the Greek air transport market. “Together the two carriers control more than 90 percent 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 Commission said in a statement.
Olympic and Aegean had offered to relinquish takeoff and landing slots, but this had limited value, according to the EC, because Greek airports “do not suffer from the congestion observed at other European airports." A combined Aegean and Olympic would have dominated the Greek domestic market, with a fleet of 64 aircraft. However, their share of international services from Greece is below 50 percent.
The announcement represents a continuation of Olympic Air’s turbulent recent history. Aegean sought to acquire the former state-owned Olympic Airlines in March 2009, but the Greek government picked Marfin, the largest business group in southeast Europe with interests in transport, tourism, food, healthcare and IT. Aegean’s higher bid was rejected as the government feared exactly the monopoly issue that has now arisen.
The renamed Olympic Air launched under Marfin ownership in October 2009 and trimmed back its long-haul operations, selling off four A340-300s and 15 A300 aircraft and dropping destinations such as New York, Toronto and Johannesburg. This severely curtailed the carrier’s cargo activity as it was left with a fleet of A319s, A320s and Bombardier Dash 8s, operating intra-Europe and Mediterranean services.
A merger still looked the best way forward as both carriers sought to restore profits. Aegean, which has overhauled Olympic as the largest Greek carrier, also primarily flies A320 series equipment. It joined the Star Alliance in June 2010, but dropped three of its international services — from Athens to Tirana, Belgrade and Vienna — after making first-half losses of EUR32.6 million.