Tuesday, March 10, 2009

Olympic Airlines: A Long Overdue Privatization

The European Commission announced today that Greece's latest privatization plan for Olympic Airlines and Olympic Airways Services does not run afoul the Community's State aid rules.  Under the plan, Greece will open negotiations with interested parties to sell the carriers' assets.  In September of last year, Greece was granted approval to privatize Olympic Airlines and Olympic Airways Services by public tender.  Due to the financial crisis and worldwide economic downturn, the public tender process proved unsuccessful.

The European Commission and Greece have been at odds for fifteen years over the latter's repeated artificial resuscitation of its flag carrier.  The most heated battle began in 2003 when Greece restructured Olympic Airways, forming Olympic Airlines and providing the ailing carrier with euro 160 million in illegal State aid.  Since then, the Commission has found further injections of illegal aid, including euro 850 million since it rendered its last decision on the matter in 2005.  Clearly for Greece, State aid for Olympic was always intended to be something much more than a transitional byproduct of EC air transport liberalization.

Of course, Greece hasn't been alone in propping up a dying airline.  Across the Ionian Sea, Alitalia--civil aviation's Nosferatu--was feeding off the Italian Government until late last year.  For both Greece and Italy, national politics and chauvinism animated the unwarranted and wasteful protection of airlines which failed to discipline themselves to the market.  Now, after hundreds of millions of euros have been flushed away, can privatization and, hopefully, eventual consolidation  run its proper course.


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