LOIS JONES LONDON
Olympic Airwarys appears to be making financial gains by attacking costs, but a major restructuring effort still faces the Greek carrier's new management team.The Greek Government tendered the management of Olympic to British Airways consulting subsidiary Speedwing, with a view to making it more competitive.
One of Speedwing's main tasks was to come up with a tough restructuring plan to comply with the European Commission's conditions attached to previous Greek government state aid while keeping the employees from taking further damaging strike action. The carrier's survival is in the balance, with growing competition from new local airlines, which have already seen its share on international routes slashed from 45% to 16% over the past 10 years.
Despite these problems, the airline has just added two Airbus A340s to its fleet in a deal financed by the manufacturer. It also planning to hire 45 pilots, who will fly the airline's Boeing 737-200s. "Olympic is very short on pilots," says Lefteris Vamvakoulas, a board member of Olympic pilots' union, Halpa.
The carrier's new managing director, Rod Lynch, may also give salary rises to existing employees. "He's talking about signing new contracts with all employees and the unions are pushing for raises, but nothing's been promised yet," says Vamvakoulas. Lynch has also pledged to give permanent contracts to 700 seasonal employees, in a bid to avoid the cost of voluntary resignations.
Central to the management's attempt to engineer a turnaround will be a revamp of its product and yield management system - described by Vamvakoulas as "lousy." The management forecasts a 30% increase in its revenue from fares, while it is also considering new destinations such as New Delhi.
The carrier claims to have already made some improvements in the bottom line, announcing a pre-tax profit of GRD1.66 billion ($ 5.3 million), up from losses of GRD38.93 billion in 1997. Operating losses decreased to GRD10.36 billion from GRD28 billion in 1997. According to Olympic, this was achieved by cost-cutting measures, since revenues dropped by 2%.
"I'm happy to report a profit for 1998, but the company's efficiency needs further improvement as far as its loss-making operations are concerned," says Lynch. "We are currently examining plans to improve our results, which we will present to the government at the end of year.
Source: Airline Business
