Aegean Cronus a new possible factor in the privatization of Olympic Airways

The protracted and unwieldy process of the privatization of Olympic Airways (OA) looks like it is being further complicated by indirect involvement from Greece’s largest private airline, Aegean Cronus, whose future is a cause for concern not only to its shareholders but also to the government and the banks that have heavily financed it in the last few years. Reliable sources say that Aegean Cronus’s basic shareholders and other businessmen with potential interest in sectors of ailing OA have met with Economy and Finance Minister Nikos Christodoulakis, who is said to be considering a Swissair-type salvage plan for Olympic. This would involve the acquisition of stakes in Olympic by the interested parties, with the ultimate prospect of parceling out the carrier’s sectors (such as ground handling, Olympic Aviation – which operates domestic flights – and technical maintenance). However, such a plan is not considered without some apprehension. Transport and Communications Minister Christos Verelis, well aware that the two constituent parts of the now merged Aegean Cronus have still not reported a profit since being founded a few years ago, is reported to have questioned the soundness of its potential participation in such a scheme during a closed meeting with OA senior staff. «How would we deal with another possible failure (of Aegean Cronus)?» he is said to have asked. Verelis appears to be receiving danger signals from Greece’s only surviving private airline, whose shareholders include the Vassilakis and Laskaridis groups, Minoan Lines, businessmen David, Ioannou and Constantakopoulos and Piraeus Venture Capital (a subsidiary of Piraeus Bank). The latter, apart from being a shareholder, is also a big creditor of Aegean Cronus, which naturally places it among those with a strong interest in a solution for OA that would help the former’s survival. Rumors have it that this is also the reason why Piraeus Bank refused a letter of credit to businessman Pavlos Vardinoyiannis for the more than 50 million euros needed for his participation in the Australian-led consortium Integrated Airline Solutions (IAS) which is currently in talks with the government for the acquisition of a majority stake in OA. Recently, senior Aegean Cronus officials have been regularly seen at OA headquarters. But the main obstacle to a possible scheme to involve both Greek carriers is considered to be precisely the present official talks for the privatization of OA. Certain quarters, however, consider that the government will be forced to opt for a solution involving both carriers, as Aegean Cronus is said to have sound enough arguments to easily sabotage the OA sale by filing a suit with the European Commission. They argue that Olympic Airways is still subsidized via the state budget in contravention of EU regulations, is systematically using airport levies for operating capital, pays no social security contributions or taxes, and all this with government tolerance. The model of its privatization is self-evidently state-subsidized and even if the EU wishes to turn a blind eye for political reasons, it will not be able to shelve a suit by a competitor. And thus, it is argued, Aegean Cronus automatically emerges as a catalytic factor in OA’s privatization and is certain to play every card it possesses. Aegean Cronus shareholders have put up approximately 110 million euros in the last two years, while a further 90 million will be needed in coming years for the payment of six aircraft. IAS requests extension Sources said late Friday night that the government’s advisor in the OA privatization, Credit Suisse First Boston, was ready to endorse IAS’s request for a continuation of the negotiations and a yet further extension of the deadline for the consortium to produce evidence of its financial ability to pay the asking price and ensure the viability of the carrier. Nevertheless, it was uncertain whether the government would agree, given that the picture provided by OA’s suitor was one of a continuously fluid scheme which was negotiating for a majority stake without having arrived at a definitive shareholder composition of its own. Vardinoyiannis has still not been able to produce the type of letter of credit required by the government, as the certificate issued by Japan’s Mitsui Bank was unacceptable. This difficulty last week gave rise to rumors – later denied – that Vardinoyiannis was about to withdraw from the consortium. The rumors also said the tender will be declared null in an announcement expected today. At present, only the Civil Aviation Pilots Union (EHPA) has been officially authorized by its members to disburse 10 million euros from its reserves and is the only certain shareholder of IAS. Within Olympic Airways itself, the situation is said to be «indescribable» as management’s lack of credibility has reached record highs and critical managerial functions have been relegated to experimental status under a regime of chaotic finances and lack of any effective administration.

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