November 15, 2005
Greece will relaunch its ailing Olympic Airlines for a second time in two years following the failure of its latest attempt to privatize the company, a senior government official said on Tuesday.
After repeatedly failing to find buyers for the loss-making airline, the official said the state along with private investors and banks would be the new carrier's shareholders.
"The government plans to table legislation in the coming days to set up a new company," said the official after a cabinet meeting on the future of the airline, chaired by Prime Minister Costas Karamanlis.
Analysts said the government, keen to avoid the political cost of closing down the company and 1,800 layoffs, will try to keep the carrier alive in a slimmed down version, with reduced staff and costs.
Athens has scrambled to find a solution for Olympic after a European Commission ruling in September requiring the airline to pay back to the government around EUR540 million (USD$632.8 million) in state aid.
The EU executive, which found that previous cash handouts to Olympic were distorting competition, had given Athens two months to come up with measures to comply with its ruling.
"Everything is different for Olympic Airways after the EU decision in September," Transport Minister Michael Liapis told reporters after the cabinet meeting. He did not elaborate.
But the cabinet's decision to relaunch the airline, founded by shipping tycoon Aristotle Onassis in 1957, confirmed fears that the latest tender had once again proved fruitless.
"The government is trying with the least possible political cost to keep the carrier alive, but this is not a solution," said analyst Vasilis Vlastarakis at Beta Securities. "Only a private air transport company can operate such an airline."
Analysts have said that Greece will try to follow the model of Belgium's Sabena, which was forced to shut down by the EU and was re-opened as a private company with a small state participation.
The latest tender appeared to have collapsed when negotiations with bidder Olympic Investors-York Capital, a US investment fund, fizzled out.
(Reuters)