EU investigates Olympic Airways over illegal subsidies, state interference

BRUSSELS – This could be the end of the line for troubled state airline Olympic Airways: On Wednesday, the European Commission unanimously decided to pursue an investigation «about potential misuse of state aid authorized in 1994 and 1998» and the continuing, unlawful aid on the part of the State «resulting in potential preferential treatment.» In other words, the Transport Directorate-General, which reports to Commission Vice President Loyola de Palacio, will inquire into whether the Greek State continued to subsidize Olympic over the past four years, in violation of an agreement with the EU and whether it previously violated the terms of an agreement for restructuring the company. The so-called state aid investigation procedure is authorized by Article 88(2) of the Treaty of Rome, which founded the, then, European Economic Community. According to Commission officials, subsidies offered to Olympic Airways since 1998, in various forms, including state bank loans, exceed 1.8 billion euros; it is only these subsidies that have kept the cash-strapped company afloat. «We could have taken Greece to the European Court or imposed a fine right away,» Commission officials with knowledge of the file said yesterday, adding that the procedure followed was milder only in a political sense. According to the Commission’s legal department, the violations «are evident.» The present inquiry arises from two complaints lodged on October 12, 2000 and July 24, 2001, by the «Hellenic Airlines Association,» made up of Olympic’s private-sector competitors. At the time, there were three, Axon, Aegean and Cronus. Since then, Axon has folded and Aegean and Cronus have merged. The private airlines focus on three issues: pre-1998 aid, which, they say, violated Greece’s commitment «that OA would have the status of a public limited company»; unauthorized post-1998 aid; and a recent, 19.5-million-euro loan by state-controlled Commercial Bank, «apparently aimed at redressing current operational difficulties of the company for the period from November 2001 to February 2002, without any structural plan covering the injection of that amount.» The loan was provided using the State as a guarantor, which the EU prohibits. The Commission notes Olympic’s special tax status, remarking that no auditing of its books has taken place since 1998; in the case of subsidiary Olympic Aviation, the last audit took place in 1992. The Commission refers to the possibility of «revenue distortion» and remarks that «the company has only recently published its financial accounts for 1999.» According to the procedural rules of the inquiry, the Greek State must audit Olympic’s still unpublished, financial statements for 2000 and 2001 and present them to the Commission within a month. Olympic’s competitors accuse it of receiving preferential treatment in the form of non-payment of airport fees, the non-payment of taxes for a period of three years, non-payment of social security contributions and overcharging other companies for the use of its refueling facilities at the new Athens airport. The Commission remarked that, from time to time, the Greek State has responded to its queries, but without ever providing proof or the necessary documents, sometimes even giving irrelevant data that «corresponded to no elements» of the queries. None of the mandatory reports on the progress of the restructuring program ever arrived at the Commission’s offices. They were supposed to have been sent in March and October 2000. Commission sources said the inquiry will last about six months, during which the Greek authorities must provide, besides Olympic’s financial statements, a complete list of aircraft leased by Olympic, data about its relocation to the new airport, and proof of payment of taxes, airport levies and other fees to the State.

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