Aegean Wins EU Approval to Take Over Failing Olympic Air
Aegean’s bid for its nearest rival was cleared by EU merger-review authorities today, two years after the Brussels-based watchdog blocked a previous attempt because it would create a Greek air monopoly. Aegean would emerge as the sole Greek domestic carrier anyway because Olympic was likely to close in the near future, the EU said in an e-mailed statement.
“Because of the ongoing economic crisis and Greece and Olympic’s very difficult financial situation, Olympic would be forced to leave the market soon, without or without the merger,” EU Competition Commissioner Joaquin Almunia told reporters at a press conference. “We approved the merger because it has no additional negative effect on competition,” he said in the statement.
Olympic hasn’t made a profit since Marfin Investment Group SA bought it from the Greek state in 2009. Aegean, based in Athens, said last year it would pay 72 million euros ($97 million) for Olympic Air to help the two airlines benefit from cost savings and an extended network.
Aegean expects to take control of Olympic by Oct. 18 and has already paid 20 million euros of the purchase price, the company said in a statement. Aegean’s Chairman Theodore Vassilakis said the deal’s economies of scale would allow the airline offer more competitive fares on domestic routes, especially to small islands.
The EU is asking Greek antitrust authorities to monitor the airlines on the five domestic routes that they now control, Almunia said, because a lack of competition is “not favorable” to consumers. No other airlines showed any interest in starting to fly these routes, he said, and Cyprus Airways quit two Greek routes as it sought a government rescue.
Almunia said the risk of Olympic’s shutdown helped regulators to overcome concerns they had earlier this year that the deal would create a monopoly able to raise prices and offer worse service on Greek domestic routes.
The Brussels-based authority refused to allow the two carriers to merge in 2011, saying they would form a quasi-monopoly that would have hiked passenger fares in Greece. The EU earlier this year blocked Ryanair Holdings Plc (RYA)’s bid for Irish airline rival Aer Lingus Group (AERL), more than five years after its previous takeover was also banned.
Demand for domestic air transport from Athens slumped 26 percent from 2009 to 2012 while Aegean and Olympic have shuttered services and now compete directly on only seven routes, the EU said. Marfin told the EU in August that it was preparing to cut its financial lifeline to the unit, Almunia said, and no other credible purchaser expressed any interest in buying Olympic.
The EU also cited possible business failure as a reason to set aside worries over Nynas AB’s purchase of a German refinery owned by Shell Deutschland Oil GmbH. Regulators approved the deal, saying the plant’s closure was a worse outcome that would hike prices and reduce production capacity. This outweighed earlier concerns about potentially tight supplies from some oil supplies as a result of the deal.
Aegean made a profit of 16.5 million euros in the first six months of 2013, returning to profit as more passengers boarded its international flights, fuel costs fell and it reduced costs to counter dropping domestic demand.
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