ECONOMY

Olympic to keep on flying despite Brussels’s decision

Greece said yesterday that it plans to keep Olympic Airways flying, despite a ruling from the European Commission ordering the national flag carrier to repay 194 million euros in misused state subsidies to the Greek government in a move which could turn the airline into Europe’s third bankrupt carrier. «Olympic Airways will use all legal means, including applying for a suspension and filing an appeal,» the Transport Ministry said as it cited the number of cases in the past in which the courts had overturned Brussels’s rulings. «Olympic will continue to operate despite the mistaken predictions of many who said it will collapse as a result of the decision.» The ministry said the setback will not affect its latest attempt to privatize Olympic. Golden Aviation, led by shipowner Stamatis Restis, is currently negotiating with the government for the acquisition of a 70 percent stake in the carrier, with the talks expected to continue into January next year. Greece could take a leaf out of the book of Swissair, the Swiss airline which went bankrupt last year and was subsequently replaced by a new carrier backed by the Swiss government, banks and private investors, said Daniel Solon of the London-based aviation consultancy firm Avmark International. «I can imagine something similar to that happening for Olympic, some new entity majority-owned by new owners could be set up. It would be a sort of solution,» he said. Solon said the Commission’s ruling could put pressure on the government’s latest privatization attempt. «It starts the clock running for the Greek government,» he said. The new owners of Olympic would have only 18 months to get into stride before the 2004 Olympic Games. Olympic misused the state subsidies granted to it after August 14, 1998, allowing it «to benefit from preferential treatment compared to its competitors, thus distorting competition in the common market,» the Commission said. Of the 194 million euros, 41 million euros was aid approved in the 1990s and the remaining related to delayed social security payments and unpaid airport taxes. The government had granted the aid to Olympic to finance a four-year restructuring plan intended to return the carrier to viability as of 2000. Not only was the plan not implemented, putting the airline’s short and medium-term viability in question, it had also failed to publish its accounts for the 2001 financial year, in violation of Greek and community legislation, the Commission said. It cleared a loan of 19.5 million euros granted to Olympic in February this year, compensation received for its relocation to the new airport at Spata and the application of 8 percent VAT on domestic flights. The Commission’s action came after the Greek Union of Air Carriers filed complaints of unfair competition in Brussels in October 2000 and July 2001. Greece has two months to inform the Commission of its response.