ECONOMY

Expansion plans for OA?

The only remaining bidder for Greece’s Olympic Airways SA plans to expand the ailing carrier and not prune it back, as industry analysts have generally expected, one member of the group said on Monday. Grigoris Konstantellos, president of the Greek airline pilots’ union, said in an interview with Reuters that success for the bid would also mean a substantial airliner deal for manufacturers Boeing Co and Airbus and for aircraft lessors. «The operation would be expanded by 35 percent,» said Konstantellos, whose union participates in the Integrated Airlines Solutions (IAS) group that wants to buy 51 percent of Olympic’s equity from the current sole owner, the Greek State. If the planned expansion succeeds, Olympic’s competitors will lose an opportunity to move in on its turf. Originally based in Australia but now controlled by a Greek shipping, oil and construction tycoon, IAS has until Friday to prove its ability to pay 102 million euros for Olympic, which has not made a profit in years. A government source said that if IAS did deposit the money in an escrow account then a sale would be very likely. Konstantellos said he was confident his group would produce the money within the week. Airlines analysts, skeptical of the viability of a modest-sized European carrier with only distant memories of profitability, have suggested that any buyer would cull routes drastically, focusing on a regional but more profitable network. But Konstantellos blamed Olympic’s chronic losses on years of bad management and said IAS planned to carry more traffic with fewer staff and lower costs. IAS would keep 5,000 permanent and 2,000 temporary staff out of the current total of 9,000, he said. Some routes would be dropped but many others only needed to be served more frequently and at better times to attract profitable levels of traffic, he added. Konstantellos said aircraft would be worked harder, spending less time on the ground, so that the surviving destinations would get more daily flights. «The first year (of operations under the new ownership) would not be profitable,» he said. «We believe that in 2004 we would have profitability of not more than 25 million euros. By 2005 we will have a sustained profitability of 65 to 70 million euros a year.» As part of the privatization, which would leave Olympic’s debts with the state, IAS expected to renegotiate the excessive rents the company was paying for its aircraft. New lease rates, reflecting the current very weak condition of the global aviation market, could save 37 million euros a year on just four Airbus A340 planes, he said. IAS would insist on retaining most of Olympic’s long-haul services to the United States, Canada and Australia despite the government’s view that the company would be more profitable if it focused on Europe and the eastern Mediterranean. Apart from the pilots’ union, which has a 10-percent stake in IAS, the group includes majority owner Pavlos Vardinoyannis with 80 percent, other Greek businessmen and Halliburton Co’s Brown and Root.