The European Commission (EC) has concluded its investigation into illegal state aid to Olympic Airways and Olympic Airlines – finding that the Greek government has supplied illegal support worth €540 million ($645 million).
The ruling adds to the pressure on the Greek government, which has been playing a game of cat and mouse with Brussels in an attempt to avoid, or at least stall, the day when the airline has to make repayments. However, lawyers warn that there is still ample room for Greece to drag its feet, although doing nothing to recover the money may become more difficult. Neil Baylis, London-based partner at Kirkpatrick & Lockhart Nicholson Graham, says that much depends on how much pressure is applied by other member states. “Some may want to protect their own national carriers,” he says.
Olympic has a long history when it comes to state aid. In the 1990s, when Brussels took a more liberal attitude towards public funding for airlines, the EC granted aid on a number of occasions. However, in December 2002 Brussels ruled that further aid had been granted that was incompatible with the common market, and demanded that €160 million be repaid – to no avail.
At the end of 2003, the Greek government split the carrier into two entities, with newly named Olympic Airlines taking over flight operations and most of the assets of Olympic Airways, while the latter effectively became a vehicle for the group’s debts.
Brussels has found that Olympic Airlines has been leasing aircraft from Olympic Airways and the Greek state at less than the going market rate, with the resultant loss being borne by Olympic Airways or the state. The EC has also found that the assets that were transferred over to the new company were overvalued, and by using this valuation as the basis of a cash pre-payment, Greece was effectively paying illegal state aid. Olympic Airways, meanwhile, has not been chased for its tax and social security liabilities.
In May, the European Court of Justice ruled that the creation of Olympic Airlines would have the effect of “circumnavigating the obligation to recover the aid”. It ruled that Greece had not done enough to recover another tranche of aid worth €194 million.
Source: Airline Business
