Greek holiday is over

GUNTER ENDRES / LONDON

Now that the summer holiday period is over, exclusive negotiations with the Axon Group over the privatisation of flag-carrier Olympic Airways are also due to reach a conclusion.

If Axon cannot come to a satisfactory agreement with the Greek Government then waiting in the wings is Cyprus Airways whose bid emerged from the evaluation process as next best. The pecking order of bids, as put to the government by financial adviser Credit Suisse First Boston, clearly shows that Cyprus Airways was pushed into second place only because it was not prepared to compensate the state owners for its stake. Instead it opted to provide working capital for the 'new' Olympic Airways. It was prepared to take over aircraft-related debt, but expected the government to write off the airline's operating debts thought to be well in excess of $100 million.

Christos Kyriakides, general manager of Cyprus Airways, says: "Our philosophy was not to pay for an ailing company, but to ensure that the new airline has a good chance of surviving. Our effort was made on the new Olympic Airways." While Kyriakides has not ruled out the possibility that the Greek Government may yet call upon Cyprus Airways, he insisted that even without ownership of Olympic, his airline will be expanding its activities in Greece. Cyprus' participation in the liberalised air transport regime of the European Union from next year will remove any legal constraints, he said.

In parallel with the selection of Axon as preferred bidder, the Greek Government also announced on 6 August that it would issue an international tender for a number of unprofitable, subsidised domestic routes presently being operated by Olympic Aviation with ATR-72 or Dornier 228 turboprops. The routes mostly cover some of the smaller Greek islands.

The second largest Greek airline Aegean Airlines/Cronus Airlines will be evaluating these routes as soon as it receives details on what inducements the government is offering. It is highly unlikely that any airline from outside the country would be interested. Kyriakides says that Cyprus Airways would not consider this in isolation, but would take it into account should it gain control of Olympic.

Source: Airline Business