Aegean and Olympic brace for turbulent times ahead

Following negative forecasts for the winter season, Greece?s two main carriers, Aegean Airlines and Olympic Air, are seeking ways to ensure their survival as they attempt to navigate through a particularly tough period.

Losses are soaring, operating costs are growing further due to the increase in the price of fuel, and the uncertainty regarding the domestic political and financial landscape represents a clear threat for the two rivals that are trying to regain lost altitude.

Upon announcing the company?s financial results for the first half of the year, Aegean?s Chief Executive Officer Dimitris Geroyiannis spoke of the firm?s need to move ahead with ?further significant adjustments, [increasing] flexibility and [developing the company?s] extrovert character,? suggesting that major changes are coming to its flight schedule.

It is not out of the question that the two airlines may cut more flights, as a number of them are loss-making. The most likely scenario is that they will follow the international trend of reducing the frequency of certain services. Olympic and Aegean are already in the midst of an offers war, constantly reducing ticket prices in an effort to bolster passenger traffic and turnover.

Aegean posted losses of 38.52 million euros in the first half of 2012, almost twice as much as those incurred in the same period last year (19.8 million). Aegean?s sales went down by 26 million euros in the same period compared with a year earlier, while Olympic?s were reduced by 16.4 million euros year-on-year. Aegean?s strong point is its cash reserves, which amounted to 181 million euros at end-June.

Officials of both companies are pressing harder than ever for a reduction in charges at Athens International Airport, the country?s main terminal. The carriers deem the lowering of usage costs as essential for their survival, while foreign companies are also calling for an improvement in AIA?s rates in hopes of strengthening their presence in the Greek market.

Government plans to privatize regional airports are worrying the airline and tourism sectors, which fear the move will send the cost of using regional airports sky-high.

At the same time the lack of a government strategy on air transport is generating even more insecurity for the two rival airlines. According to sources, in a recent meeting between Development Minister Costis Hatzidakis and representatives of the tourism sector, subjects raised included the need for drafting and applying a policy for air transport including the chosen method of privatization of regional airports. It is expected that a preliminary framework in this direction will have been formed by the end of October.

Decisions by several foreign companies to terminate their services to Greece, after cooperating or code-sharing with the country?s two main airlines for some time, have dealt another blow to Olympic and Aegean. There will be an estimated 55 fewer routes from abroad this winter compared to last, further limiting the potential of Greek air companies.

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