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EC approves Aegean Airlines acquisition of Olympic Air

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The European Commission has allowed Aegean Airlines to acquire the loss-making Olympic Air following a six-month investigation into the competition ramifications of the proposed acquisition. Under plans announced almost exactly a year ago, Star Alliance member Aegean will pay €72 million ($97 million) for Olympic Air, which will become a subsidiary. While back office and support functions will be merged, Aegean intends to keep the two brands, with each retaining distinct aircraft and flight activity. Olympic Airlines, the former national carrier, was privatized and became Olympic Air in 2009, serving largely domestic routes including many public service obligation sectors. EC VP-competition Joaquín Almunia, said: “It is clear that, due to the ongoing 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 report noted the Greek economic crisis had 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 in 2012—and there had been a further 6.3% decline during the first half of 2013 year-over-year. Aegean said the rationale of the decision “supports the absolute necessity of economies of scale to achieve viability within the Greek aviation market.” Explaining the reasons behind giving approval for the acquisition—a similar attempt was refused in 2011 on competition grounds—the EC said if Olympic collapsed, Aegean would become the only significant domestic service provider and would take Olympic’s current market share. “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.” Greece’s economic crisis means there is little likelihood of any other carrier beginning services on the routes. It noted Olympic has never been profitable since privatization in 2009 and has received considerable financial support from its sole shareholder, Marfin Investment Group (MIG). With no prospect of improvement, MIG decided to discontinue its support of Olympic if it was not sold to Aegean. This would have led to Olympic’s permanent shutdown. Olympic serves approximately 30 short-haul destinations with a fleet of two Airbus Α319s, 10 Bombardier Q400s and four Bombardier Dash-100s. Aegean operates an all-Airbus fleet (25 A320s, four A321s and one A319).

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