Aegean Airlines is attempting once more to take over Greek rival Olympic Air, although the European Commission blocked a previously planned merger between the two carriers in January 2011.
Marfin Investment Group (MIG), Olympic Air’s current owner, has agreed to sell 100 per cent of the shares of Olympic Air to Aegean Airlines for €72 million ($93.75 million). MIG would allow Aegean Airlines to pay off the purchase price in installments, according to Aegean, whose shareholding structure would not be affected by the transaction.
Following the completion of the transaction, Olympic Air would become a separately branded subsidiary of Aegean Airlines, which is listed on the London Stock Exchange.
The deal is subject to approval by the Greek and European competition authorities, a process which Aegean Airlines says would also determine the timing of the completion of the transaction.
Following Aegean Airlines’ purchase of Olympic Airlines – should the European Commission now approve the deal because of Greece’s economic crisis – the brand names and logos of the two companies would be maintained and each would have distinct aircraft and flight staff, according to Aegean. In the two airlines’ previously planned merger, only the Olympic Air name and brand would have been kept.
“Aegean Airlines and Olympic Air in recent years have invested $2 billion in a brand new fleet. Their service quality has been recognized with the receipt of numerous industry awards,” says Theodoros Vassilakis, chairman of Aegean Airlines. “The two companies contribute in excess of €270 million to the Greek state revenues in airport taxes, fees, social security contributions.”
Continues Vassilakis: “However, our subscale size, combined with the effects of the unprecedented Greek crisis, restrict our ability to successfully compete within the European and global aviation market, leading us to further losses and further reductions of size and scope.
Says Vassilakis: “As a result we are faced with the immediate danger of Greek tourism, an industry essential for the country’s recovery, becoming entirely dependent on foreign carriers with permanent losses in local employment and state revenues.”
Vassilakis adds: “Aegean still possesses the financial reserves to lead the consolidation of aviation in Greece to the benefit of tourism and state revenues as well as our employees and shareholders. The synergies from this agreement will allow us to reduce unit costs and offer enhanced network coverage, with competitive prices to the consumers. We hope that all Greeks will support us in this challenging, ambitious and necessary endeavor.”
Olympic Air’s proposed new owner says unification of the two airlines’ administrative, planning, purchasing and commercial functions would lead to substantial economies of scale, both in terms of buying power and in elimination of duplicate systems.
Should Aegean’s buy of Olympic Air be allowed to go ahead, Aegean would optimize both airlines’ fleet usage and network planning to improve efficiencies and connectivity. This would also improve the two carriers’ network coverage and service-product offering, according to Aegean.
As of October 2012, Aegean Airlines operates four Airbus A321 jets, 22 A320s and three A319s, its fleet totaling 29 aircraft.
Olympic Air operates five Airbus A320 single-aisle jets, two A319s, and 10 Bombardier Q400 and four Bombardier Dash 8-100 turboprops. Olympic Air’s fleet total 21 aircraft.
For the summer 2012 season, Aegean Airlines’ scheduled-service network includes 19 Greek domestic routes and 51 international routes. Olympic Air’s scheduled-service network includes 38 Greek domestic routes and seven international routes.
Both airlines are currently loss-making. In its 2011 financial year, Aegean Airlines’ revenues were nearly three times as large as those of Olympic Air. Together the two carriers generated €909 million ($1.183 billion) in revenues during their respective 2011 financial years.
Aegean Airlines’ estimated passenger traffic for 2012 will include 2.6 million domestic passengers and 3.4 million international passengers, for a total of 6.0 million passengers. Olympic Air’s estimated 2012 passenger numbers include 2.3 million domestic passengers and 600,000 international passengers, for a total of 2.9 million passengers.