The European Commission looks set to authorise Olympic Airways' outstanding state aid and once the funds are in place, the flag carrier plans to implement ambitious restructuring measures.
Olympic chief executive Jordan Karatzas is confident that the Commission will shortly unfreeze Olympic's outstanding state aid, amounting to GDr35 billion (US$121 million). Karatzas expects Commission authorisation of the remaining aid by October 1997, and says funding will be in place by the end of the year. But Trevor Soames of lawyers Norton Rose predicts Olympic can expect further conditions to be attached.
Brussels originally approved total state aid of GDr532 billion for Olympic in 1994. The Commission put the smaller last two tranches of aid, totalling GDr35 billion, on hold, however, while it investigated allegations that the Greek government had breached conditions attached to the capital injection. The Commission's major concern was over state interference in the management of operations and the government injection of an additional payment of GDr11 billion on top of the approved aid to cover for early redundancy payments. The Commission is due to decide at the beginning of September whether this GDr11 billion payment is state aid.
The Greek government has already responded to the Commission's concerns over its hiring policy of the executive management by advertising the chief executive's position. Karatzas is confident of re-election when the appointment is made in September. 'I'm very proud of the work I've done in the last year. It's essentially a small revolution.'
Karatzas points out that Olympic's net profit is projected to grow by 29 per cent to GDr14.4 billion in 1997 against a 13 per cent rise in revenues to GDr270 billion.
The airline hopes further to enhance revenues by implementing proposals put forward by management consultants McKinsey. The proposals are expected to result in an annual profits boost of GDr25-50 billion, split between cost savings and revenue enhancement, including 10 per cent increase in productivity and enhanced yield management.
Further ambitious steps at Olympic include a US$1 billion fleet renewal programme. Olympic plans to operate 10 A340s and 25 next-generation B737s within 10 years. Initial orders have been placed for two A340-300s and four B737-800s, says Karatzas. The carrier currently operates four B747-200s, eight A300s and 21 B737s, including 11 ageing B737-200s.
Karatzas says the carrier is close to signing a 'commercial alliance' with a USairline, including codesharing. He is also looking at extending the carrier's presence in Asia through alliance building and at presstime Karatzas was negotiating a codeshare and block space agreement with Garuda Indonesia.
Lois Jones
Source: Airline Business
