GÜNTER ENDRES LONDON
The Greek Government will view the companies that declared an interest for a stake in its ailing, some would say terminally ill flag carrier, with resignation.
Following British Airways' decision last summer not to take up its option of a 20% stake in Olympic Airways, and a subsequent lack of interest from other high-profile airlines, the government's plan to link the carrier into a global alliance now appears in tatters. But it may only have itself to blame.
Olympic is now seeing the result of years of interference, frequent imposition of short-term solutions never fully implemented, and the hiring and firing of management, which was being changed with monotonous regularity, often for no good reason. The average tenure of the airline's chief executives has been less than 12 months.
Then there are the powerful unions, whose enthusiasm for change has been less than lukewarm in the past, and who will be even less enamoured with having to work with a new strategic investor. Following a meeting involving all Olympic trade unions in January, a joint statement made clear their total opposition to any attempt by the government to privatise the airline, or to impose changes in pay and working conditions.
Five groups are understood to have responded to the request for expressions of interest issued on behalf of the government by financial advisors Credit Suisse First Boston in December. Three have the backing of powerful Greek shipping, construction and commercial interests. Others are Japan's Sanwa Bank and Greek-Cypriot carrier Cyprus Air-ways. The absence of a major European carrier speaks volumes about the perceived prospects for turning around the fortunes of Olympic. On offer is a majority stake of between 51% and 65%.
Front runner is expected to be Cyprus Airways, which sees some synergies between the two carriers. Christos Kyriakides, its general manager also points to the close links between the two countries and suggests that managing Olympic would also give his carrier the chance to expand its market and assist the development of Cypriot businesses in Greece. If successful in putting together an international consortium for its bid, Kyriakides says one of the first things will be "to sit down with the unions and discuss the mode of operation, before being committed".
Local players
Also in the bidding are local carriers Aegean Airlines and Cronus Airlines, which have carved out a combined domestic marketshare of 48% over the past two years at Olympic's expense. Antonis Simigdalas, Aegean's general manager, says that in spite of Olympic's troubled history, the two partners thought it appropriate not to be left out of the process.
Having taken an initial look at the documents supplied, he adds that the picture is anything but clear. "We do not see an identifiable path ahead of us. We still don't understand exactly what is for sale and what the terms will be after the sale has been accomplished. Areas that need to be addressed are regulatory and legislative issues, and everything that concerns the future operation and organisation of Olympic."
The question of Olympic's debt, thought to be well in excess of $100 million, appears to muddy the waters. Although the government has said that it will assume certain liabilities "identified during the restructuring process", this seems far too vague a statement to instil confidence in potential buyers. But whether the whole of Olympic will be sold (as understood by the bidders), or only the asset part, it represents only a juggling of the figures. One way or another, the buyer will pay for the debt and an asset sale will push up the price.
In addition, Simigdalas warns, any bidder would have to build into its financial calculations the $500,000 operating losses Olympic is incurring on a daily basis. He adds that it might take a year of restructuring to stem this haemorrhage. These points will have to be taken into account by the other Greek companies, including the powerful Axon Group, which operates Axon Airlines, and a consortium led by Restis, an ocean-going shipping operation.
Those that submit official declarations will be required to submit a non-binding proposal, outlining exactly what part of Olympic, if not the whole group, they want to acquire. After that, a short-list will be drawn up for a firm bid, and the government hopes to complete the process before the end of the year.
Source: Airline Business
