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The risk of bankruptcy promoted the Aegean - Olympic air merger

25 October 2012 / 18:10:38  GRReporter
2979 reads

Victoria Mindova

The need for survival of Greek air transport necessitates the merger of the two largest domestic companies, Vice President of Aegean Eftichis Vasilakis explained at a press conference. "We may be the largest in the Greek market, but we are extremely small to compete in the international market," said Vasilakis. He explained that the number of foreign travellers arriving in Athens has fallen by 22% in the last three years.

"We have seen a decline in the number of arrivals in Athens and a slight increase in the traffic of passengers who travel directly to the islands of the country. However, this increase is not sufficient to cover the difference in the overall fall in the number of passengers who want to avoid the capital city. "Since 2009, total passenger flow has dropped by 30%. The negative image of the Greek capital, caused by the constant strikes, riots and the decline of the historic centre of Athens, makes tourists choose different destinations. They want to visit the Greek islands and are  looking for ways to avoid connecting flights from abroad which require them to stay in Athens in order to reach the desired island.

Vasilakis stressed that the merger will help increase passenger traffic from abroad. Up to now, external and domestic flights were divided between Aegean and Olympic air. Now the merged company will be able to offer packages from Paris, London or Berlin to the islands, which will make the Greek carrier more competitive than its foreign rivals.

For now, Greek airlines transport only 16% of the tourists coming from abroad. The remaining 84% are transported by foreign companies which operate flights to Athens. "You can understand that the profits, taxes and other benefits do not stay in Greece," added Vasilakis. He said that for a period of ten years, Aegean has paid 1.2 billion euro in taxes and social contributions, and for 2011 the state received 1.7 million euro.

To compare, he gave the example of Turkish Airlines, which holds 68% of the foreign tourist arrivals, which brings much higher earnings both for the company and the state. At the same time, airport charges at Istanbul's airport are almost three times less than those at Athens airport "Eleftherios Venizelos".

Currently, foreign flights to and from all Greek airports have a turnover of 3.5 billion euro. Domestic flights on the other hand, where Aegean and Olympic air are stronger, bring a turnover of not more than 240 million euro. "You understand that our goal is to take a greater share of the external flights market instead of searching and investing in the small domestic market which is continuing to decline in the recession. If a company wants to be sustainable, it has to find a way to take a greater share of the external flights market, "said Vasilakis. This is the main idea behind merging the two airlines, the Vice President explained.

If the merger fails, Vasilakis said that this may lead to the end of Olympic air, and Aegean, in the best case scenario, will become twice as small as it is now. He stressed that the prices of the majority of tickets, without calculating airport charges, have fallen by 25% since 2009, while the prices of fuel and the tax burden have increased by 35%. "In the past three years, the companies have been operating at a loss. The merger is a matter of survival."

If the Greek and European authorities for the supervision of competitiveness approve the transaction, the merger will be completed in five to seven months, Aegean says.

Tags: Economy Companies Aegean Olympic Air merger bankruptcy
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