With its privatisation plan grounded, financially troubled Greek flag carrier Olympic Airways is facing a European Commission (EC) inquiry into alleged illegal state aid.
The inquiry comes as unions threaten strike action in response to planned restructuring. The EC is investigating whether Olympic fulfiled conditions attached to state-aid approvals given in 1994 and 1998. These included Greek government guarantees that it would not interfere in the airline and that Olympic would be run as a normal public limited company. It also undertook to implement a restructuring plan.
Brussels is concerned that Olympic was granted certain fiscal advantages, including reduced tax payments. There are also worries that various airport-related charges were not paid. The EC says a preliminary analysis shows Olympic "may have been allowed to continue its business thanks to hidden aid".
Brussels is also uneasy about a €19.5 million ($17 million) loan from the majority state-owned Commercial Bank of Greece made in February, in the absence of any restructuring plan. The bank claims the cash was intended to cover money owed to the airline for tickets supplied to state employees. However, the amount is "too large" argues Platon Monokrousos, analyst at EFG Eurobank in Athens. The airline also has "significant short-term financial problems" notes Monokrousos, adding that "the situation is quite serious".
Following the collapse of its privatisation efforts, Athens is trying to resurrect an old plan to divide the airline in two, separating airline operations from the debts - a move widely seen as a recapitalisation. At the same time, government proposals to slim the airline down in the hope of attracting private investment, making 2,000 of the 6,000 employees redundant in the process, have met with stiff opposition from the carrier's militant trade unions, which immediately threatened strike action.
With no accounts published since fiscal year 1999, Monokrousos asks: "Who is going to invest in the company?" He adds that the ruling Pasok government can ill afford to see Olympic collapse.
Olympic is putting on a brave face: "Thanks to a series of operational and administrative measures, the airline looks to the future with optimism. Consequently, any reports of alleged dysfunction in the airline, especially during the privatisation process, has nothing to do with the truth."
Source: Airline Business
