Sep 17, 2008, 12:42 GMT
Brussels/Athens - The European Commission on Wednesday certified the death of Greek carrier Olympic Airlines and the birth of a new airline in its stead by endorsing privatization plans while ordering the old company to pay back more than 1 billion dollars in illegal state aid.
Wednesday's decision was expected to reverberate in other European countries that are struggling to save their flagship carriers at a time of high oil prices and slowing economic growth.
The most obvious case is in Italy, where Alitalia is locked in do-or-die talks with trade unions over plans to cut jobs and salaries in order to allow it to survive.
Speaking in Brussels, European Union Transport Commissioner Antonio Tajani said an investigation into Olympic Airlines had concluded that the airline had benefited since 2005 from illegal state aid of more than 850 million euros (1.2 billion dollars).
'This amount will have to be recovered by the state,' Tajani said.
At the same time, the commission approved Greek government plans to privatize the ailing carrier, paving the way for the creation of a leaner flagship airline, which will inherit the name Olympic.
Tajani said the new company, which Greece hopes will be created by the end of 2009, will be about a third smaller than the old company and will be 100 per cent private.
Olympic is to sell off assets in order to pay back its debt to the Greek state. But with Tajani insisting that the sale should take place at 'market prices', it was unlikely that the company would be able to raise all of the amount that it owes the Greek state.
The commissioner acknowledged as much on Wednesday.
'If we had not followed this procedure, we would probably have had bankruptcy on the part of the company and none of the illegal state aid would ever have gone back to the Greek state,' Tajani said.
Greek Transport Minister Kostas Hatzidakis said in Athens that the government's privatization plan will 'permanently solve an issue that has preoccupied Greek society and the political system for the past 30 years.'
According to reports in Greece, the new company will keep running all domestic flights, but will drastically reduce its international routes.
Hatzidakis said Wednesday that privatizing the airline was the only way to provide job security for its workforce.
The fate of Olympic Airlines follows that of other European carriers such as Belgium's Sabena, which reincarnated as Brussels Airlines and is now being taken over by Germany's Lufthansa.
It could also set an example for Alitalia, which is estimated to be losing around 2 million euros a day.
Trade unions representing some of Alitalia's cabin crew have gone on strike in Italy over a government-backed rescue plan for the state-controlled airline. The plan involves the airline's takeover by a group of Italian investors, CAI, and at least 3,000 job cuts.
Tajani said Wednesday that while the crisis affecting different European airlines may differ, all would be dealt with equally according to EU rules.
Olympic airlines is facing a separate EU investigation involving 161 million euros in illegal restructuring aid received by the company between 1998 and 2002. That legal case is continuing, Tajani said.
Your Talkback on this Story