Last flight to salvation

The ultimate battle with time, as well as with the theory of possibilities is being fought now and will be decided by April. The fifth attempt to privatize Olympic Airways – now Olympic Airlines (OA) – since 1999 has already begun its course, with the government being reserved, the market even more reserved and Greek taxpayers prepared – more than ever – for the likelihood of the company entering clearance status unless an investor is found. The heavy inheritance from all governments and the perennial tax weight on citizens now has two names: Olympic Airways Services, without the flight operation but with the aircraft and all relevant activities, and Olympic Airlines, the 15-month old company with an unknown future. Last Friday, the sale process for a majority stake in Olympic Airlines entered its most decisive phase. Lazard, the financial consultancy firm, provided the government with seven candidates who had submitted non-binding offers following contacts with airlines, capital owners, funds, shipowners, etc. Most even declined to enter the process. Seven ‘suitors’ The usual «suitors» appeared, five of which have taken part in most attempts since 2000. The sole surprise came in the shape of Deutsche British Airways, a German low-cost carrier, active in the domestic market, whose profile is not compatible with the airline on sale, and the aim of its involvement in the process remains unclear. If Deutsche BA is planning to expand and expects an upturn at OA this will emerge soon, as its shareholders specialize in airline management and investments. But if its involvement is for exploration only, then the former BA subsidiary will soon withdraw. The participation of Aegean Airlines’s two main stakeholders (Vassilakis and Laskaridis) in separate bids can be interpreted but little can be said about the presence of an offer by an overseas fund. The other bidders, Olympic Investors, Chrysler Aviation and Britannia Aviation Service, have also participated in previous tenders, either for Olympic Airways or Olympic Airlines. They are involved with the market either as brokers or as small carriers, but the question remains as to their reliability as far as the purchase of Olympic is concerned. Although the government has the expressed interest of seven bidders, it has avoided committing itself with an announcement, possibly because the suitors’ profiles, the seriousness of their proposals and their economic potential have not yet been evaluated. However, keeping quiet about this extremely public affair via the pretext of the secrecy clause allows for suspicions about backstage activity, possibly even dealings. This is because the special feature of this process is the negotiations, with interested parties asking for various stakes and activities of OA, each under different terms and conditions. Some of them include clearance, the undertaking of only long-term debts, etc. The short-list will be compiled in the coming week, including those who meet the minimum conditions to participate in the process. This will give them access to the financial and business data of Olympic Airlines, permission to check contracts, etc. In its first financial year (December 2003-December 2004), Olympic Airlines showed operating losses exceeding 100 million euros. The candidate investors are aware through controlled data that in its first 20 days of operation, Olympic showed losses of 23 million euros, and in the first half of 2004, a deficit of 58 million euros. Naturally, they are not going to restrict themselves to the multi-page information memorandum they received, along with an idyllic picture and estimates from Aviation Economics, which drew up the revised business plan. Negative figures According to that, Olympic Airlines’ revenues in 2004 are estimated at 601.2 million euros; for 2005, 658.4 million euros; for 2006, 692.3 million euros and for 2007, 745.3 million euros. Its EBITDA is estimated as negative by 82.2 million euros for 2004 and by 22.2 million euros for 2005. In 2006, it is estimated to turn positive by 3.5 million euros and in 2007 by 28.1 million euros. Certainly, plans for both Olympic Airways and Olympic Airlines have been numerous. All have been contradicted by reality, despite the fact that Olympic’s peculiar accounting offices take years to issue figures and clear revenues. With the new debt weight that burdens Olympic Airlines, finding a reasonable price seems improbable. Yet even if this is overcome, the crucial question is which suitor has a development plan for the company and what kind of funding they can find to back it. The State is already under heavy pressure from the EU, which has taken legal action for Olympic to return 40 million euros to the State, while determining that the airline was given illegal grants totaling 194 million euros. This includes the capital for the set-up of Olympic Airlines taken from Olympic Airways’ coffers in 2003, in a move the EU describes as a legal trick to avoid penalties imposed in cases of breach of competition terms. The fifth sale process of Olympic is again evolving in a critical environment. No international carrier turned up for Olympic Airlines as they are all trying to recover from back-to-back crises in the sector (terrorism, Iraq, the rise in oil prices). Some interest may emerge for such domains of Olympic as ground handling, cargo and its technical base, as the time to cash in has apparently come. It is hoped this does not turn into an unruly sell-out, as some parties are plotting right at the time that the mania of helping friends by placing them in top positions has reached its full bloom at Olympic.

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