Aegean to acquire Olympic Air by Oct. 18

Aegean Airlines – a Greek-listed airline company - on Wednesday said the European Commission's approval for the acquisition of Olympic Air created the preconditions for a sustainable, dynamic Greek airline company.

In a statement, Aegean Airlines said the new company will be competitive in the wider region, capable of creating a stable growth dynamism and with the necessary size to contribute substantially to the development of tourism and the Greek economy in general. The company said the acquisition of Olympic Air’s shares and management control was expected to be completed by October 18, 2013, while the transaction will cost 72 million euros, of which 20 million euros have been already paid. Following completion of the acquisition, Olympic Air will become a subsidiary of Aegean and the unification of administration services will be immediate. The two companies will retain their brand name and logo along with their separate flight programe and fleet.

Theodoros Vassilakis, chairman of Aegean Airlines said: “From today our responsibilities towards the country and passengers are growing. We have become bigger and we have to become even better, supporting regional areas and safeguarding quality access to even the most remote island in Greece. Scale economies will allow us to offer lower fares on domestic flights, particularly to smaller islands, while we will have the ability to expand our international activities, both from Athens and regional Greece”.

The combined airline group will have a fleet of 45 aircraft, a personnel of 2,090, a passenger capacity of 8.4 million (2013 estimate) and a combined turnover of 800 million euros (2013 estimate).

Commission approves acquisition of Greek airline Olympic Air by Aegean Airlines

The European Commission has cleared the proposed acquisition of Olympic Air by Aegean Airlines, both Greek air carriers, under the EU Merger Regulation. The Commission's in-depth investigation has shown that Olympic Air would be forced to exit the market in the near future due to financial difficulties if not acquired by Aegean. Once Olympic would be out of business, Aegean would become the only significant domestic service provider and would capture Olympic's current market shares. Therefore, with or without the merger, Olympic would soon disappear as a competitor to Aegean. Thus the merger causes no harm to competition that would not have occurred anyway.

The Commission's Vice-President in charge of competition policy, Joaquín Almunia, stated: "It is clear that, due to the on-going Greek crisis and given Olympic's own very difficult financial situation, Olympic would be forced to leave the market soon in any event. Therefore we approved the merger because it has no additional negative effect on competition."

The Commission has examined the effects of the proposed acquisition on competition in the affected markets for the domestic air transport of passengers. Aegean is Olympic's closest competitor for these markets in Greece. The Greek crisis has seen a drop of 26% in demand for domestic air passenger transport from Athens: from 6.1 million passengers in 2009 to 4.5 million passengers in 2012. This decline has continued during the first half of 2013 (6.3% decrease compared to the preceding year).

Furthermore, the number of routes served by both Aegean and Olympic has decreased substantially over recent years. When the Commission blocked Aegean's previous attempt to merge with Olympic in 2011, the parties provided competing services on 17 routes, nine of which raised competition. Currently, Aegean and Olympic have overlaps on seven routes of which the following five domestic routes are served only by them: Athens–Chania; Athens–Mytilene; Athens–Santorini; Athens–Corfu (Aegean only operates in the summer); Athens–Kos (Aegean only operates in the summer).

The market investigation has revealed that entry in the immediate future by other airlines is unlikely on any of those routes. This is due to a variety of reasons: potential entrants see more profitable opportunities elsewhere, they consider the costs of entry too high or they stay away from the Greek domestic market due to Greece's current dire economic situation.

However, the Commission's in-depth investigation has also clearly demonstrated that, in any event, Olympic is a failing firm and would go out of business soon. Olympic has never been profitable since its privatisation in 2009 and has received considerable financial support from its sole shareholder, Marfin Investment Group ("MIG"), ever since. A thorough analysis of Olympic's business prospects has confirmed that the company is highly unlikely to become profitable in the foreseeable future under any business plan. MIG had therefore decided to discontinue its support of Olympic, should it not be sold to Aegean. This would lead to Olympic's permanent shutdown in the short term.

Furthermore, the market investigation has confirmed that there is no other credible purchaser other than Aegean interested in acquiring Olympic. There has also been no expression of any credible interest in the acquisition of Olympic's assets including its brand. Consequently, the most likely scenario is that, absent the transaction, Olympic's assets would leave the market completely.

The Commission has therefore concluded that any competitive harm caused by Olympic's disappearance as an independent competitor is not caused by the merger. As a consequence, the merger is compatible with the internal market and must be authorised.