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EU: Opening of state aid investigation procedure against Greece re. Olympic Airways

07/03/2002 10:17
The European Commission has decided to open a state aid investigation procedure against Greece with regard to the potential misuse of aid authorised in previous decisions and with regard to new aid granted to the air carrier Olympic Airways (OA) and its subsidiaries.

The opening of the investigation procedure reflects the Commission's concerns about potential misuse of aid authorised in 1994 and 1998 as well as its serious doubts about the legality of a new aid. It is questionable whether the conditions under which aid was authorised in 1998 continue to be met.

The measures and conditions covered by that decision have to be examined again, together with new subsequent fiscal and financial measures, resulting in a potential preferential treatment of OA in respect to competitors.

The Commission also apparently needs to examine in detail a loan recently granted to Olympic Airways in February for an amount of € 19.5 million, as this loan is apparently aimed at reddressing operational difficulties of the company for the period November 2001 - February 2002. However, given that OA has been since December 2000 in the process of privatisation, which is a way of seeking to restructure and reorganise successfully the company, the Commission has chosen today to reopen the procedure to investigate the whole file and the conditions under which the air carrier is currently conducting its business. This investigation will give the Commission the possibility to conclude whether the current situation can be declared compatible with the common market and under what conditions.

The Commission's concerns arise from two complaints lodged on October 2000 and July 2001.

Information sheet
Potential misuse of the aid authorised in 1994 and 1998.


The company's legal and fiscal status based on a series of Greek laws appears to confer to it exclusive fiscal benefits, which do not apply to private limited companies or any other form of commercial company.

These provisions appear to be against the commitment of the Greek State to ensure that OA would have the fiscal status of a public limited company. Also, that it would become an undertaking subject to ordinary law on the same footing as the other Community airlines with no special privileges or constraints. Furthermore, that the Greek State would not interfere in the management of OA except within the strict limits of its role as shareholder and that it would have adopted immediately the legislation necessary for the effective implementation of the salary, social and financial aspects of the plan.

Potential new unlawful aid, resulting in potential preferential treatment.

The allegations made in the complaints raise serious doubts about Olympic Airways' situation of payments to the Greek State as well as to Greek airports with regards to passenger taxes imposed for the modernisation of Greek airports, airport charges, rentals, levies and fees due to Athens International Airport in Spata as well as other Greek airports.

A preliminary analysis of Olympic Airways' current situation of payments of various taxes, airport charges, rentals, fees and levies due to the Greek State and to Greek airports indicate that the company may have been allowed to continue its business thanks to hidden aid supporting it to the detriment of its competitors. The existence of such hidden aid measures would constitute not only a breach of the commitments and conditions attached to the 1998 decision but also new unlawful aid.

The implications of a new loan of 19,5 MEuros.

The Commission also needs to examine in detail the parameters of a new loan granted to OA in February, as this loan is apparently aimed at redressing current operational difficulties of the company for the period November 2001 February 2002 without any restructuring plan covering the injection of that amount.

Background

On the basis of two Commission decisions in 1994 and 1998 Olympic Airways received aid for its restructuring subject to the fulfilment of certain conditions and commitments. The 1998 decision provided for the re-authorisation of aid to Olympic Airways based on a restructuring plan for the period 1998-2002 and respect of numerous conditions and commitments.

The Commission has been monitoring the situation of the air carrier and has drawn in the past the attention of the Greek authorities to the under-performance by Olympic Airways of the objectives foreseen in its restructuring plan:
· The company has changed management various times since the 1998 decision and has never been able to correctly implement what it set out to achieve in the restructuring plan.
· The company has only recently published its financial accounts for 1999, which demonstrate that it made significant losses, which would not allow it to survive without further restructuring. Today the company has still not published accounts for 2000.
· The last attempt to successfully restructure Olympic Airways has been the launch in December 2000 of an international tender for the privatisation of Olympic Airways and its subsidiaries. This process has still to be finalised.