ECONOMY

Terror attacks on America pose new threat to survival of Olympic

The terrorist attacks on the USA have created a nightmare situation for airline companies throughout the world, characterized by a slowdown in business, bankruptcy, redundancy and reduced profits and revenues. The first half of the year was already bad for the industry. Not only did its prediction of a 6.5-percent increase in passenger traffic fail to come true but there was actually a decline of 3 percent compared with the same period last year. After last Tuesday’s events and the extraordinary air embargo in the USA on all foreign flights, the crisis in the airline industry is set to deepen. This in turn will cause airlines flying across the Atlantic to revise their growth plans. The International Air Transport Association (IATA) has estimated costs of more than $10 billion for its 266 members as a result of the terrorist attacks. Before last Tuesday, the association had forecast a slowdown in the global airline industry. Now it is talking about an extraordinary irregularity. What will happen should the USA decide to take retaliatory action is anyone’s guess. Investment banks and credit rating agencies have already downgraded airlines’ stocks and their credit ratings. They also warned that European airlines will suffer in particular from the current crisis. Oil prices, a principal component of airline costs, are expected to increase. The same applies to the additional security measures that need to be taken now. Another source of worry is insurance cover, with insurance companies preparing to jack up airline rates and setting reinsurance premiums for each passenger traveling to destinations considered risky or dangerous. This will lead to higher fares and could result in reduced passenger traffic as some people consider changing their mode of transportation. Add to this delays in air travel and the requirement that passengers traveling to the USA need to present themselves at the airport four hours before takeoff for strict check-in procedures, then it is possible that the airline industry could experience a slump that could drive some companies to bankruptcy. These are the new conditions under which the privatization of Olympic Airways is being carried out. Axon Airlines is currently negotiating with the government. Last Tuesday, a few hours after the terrorist strikes in the US, the government gave the green light to privatization advisers Credit Suisse First Boston to continue negotiations with Axon Airlines until October 17, at the same time allowing it to request further clarification from the other bidders, Cyprus Airways and International Airline Solutions. The 35-day extension theoretically removed a source of inner dissent which could affect the ruling PASOK party’s congress next month. Olympic Airways, however, is now more threatened by the new conditions and the possibility of a recession arising from the terrorist attacks. It has to prepare for a jump in oil and insurance costs and compensation claims for canceled flights to the USA and Canada. Furthermore, it could see further problems should the USA initiate retaliatory action against the Middle East. During the recent crisis in the Balkans, Olympic Airways had to pay $50 in re-insurance cover for each passenger. Olympic Airways will now have to review its objectives. A decision needs to be taken as soon as possible on its privatization while Axon Airlines’ and other bidders’ business plans are now negated by the new developments. Civil Aviation Authority under supervision Ten days ago, the Joint Aviation Authorities (JAA), the body comprising aviation regulators in Europe, dispatched four of its supervisory members to the Greek Civil Aviation Authority (EPA). They will stay for a year to help their colleagues adjust to requirements relating to the operations of airline companies and the granting of certificates attesting to pilots’ flying capability. In fact, EPA is under the supervision of JAA and faces the possibility of a downgrading. The Greek body has come in for criticism for not implementing rules, directions and even legislation. It has not even dealt with the issue of flight safety. EPA is now being urged to adopt strict measures regarding airport security with whatever powers it has left, especially after the recent handover of some of its responsibilities to the management of the new Eleftherios Venizelos airport. The Federal Aviation Authority (FAA) has already forwarded a list of demands to EPA and other aviation authorities concerning checks on flights heading toward the USA. Last December, it gave the Greek body a black star for inadequate security checks. Greece was subsequently downgraded to the second category of countries which do not comply with requirements set out by the International Civil Aviation Organization (ICAO).