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Brussels, 11 December 2002

The Commission concludes its examination of the Olympic Airways case

The Commission today adopted a decision calling on Greece to recover part of the aid granted earlier to Olympic Airways, as well as new aid granted unlawfully after 1998, representing a total of approximately €194 million. It considers that all this aid enabled Olympic Airways to benefit from preferential treatment compared with its competitors, thus distorting competition in the common market. In addition, it found that a loan of €19.5 million to Olympic Airways did not constitute aid. Moreover, it confirmed that the compensation received for moving to the new airport of Spata and the application of 8% VAT on domestic links was compatible with the competition rules.

The Commission concluded its examination of the Olympic Airways case by finding that part of the State aid granted earlier was incompatible with the Treaty.(1) It considers that the aid examined by the Commission in its decision of 14 August 1998 was misused and that Olympic Airways has also recently received new unlawful aid which was not notified. This aid favoured Olympic Airways compared with its competitors. The Commission therefore requests Greece to recover the aid paid after 14 August 1998, representing a total of approximately €194 million. Greece must inform the Commission of the measures which it intends to take pursuant to the decision within two months following notification.

However; the Commission also decided that three Greek measures introduced for the benefit of Olympic Airways did not constitute State aid.(2) It therefore did not raise any objections about the loan of €19.5 million granted to Olympic airways in February 2002. It was also able to verify that the compensation received by Olympic Airways for moving to the new airport of Spata and the measure allowing the payment of a reduced VAT rate of 8% on domestic flights did not involve aid elements.

Failure to comply with the conditions of the aid authorised in 1998

On the basis of the Commission's decision of 1998 (confirming an earlier decision of 1994), Olympic Airways received restructuring aid subject to compliance with 24 conditions plus the introduction of a computerised management system, the provision of regular reports certifying compliance with those conditions and the effective implementation of the restructuring plan. The restructuring plan for the period 1998-2002 was intended to ensure the return of Olympic Airways to viability as from 2000 as a result of intensified efforts to control costs and improve productivity.

However, the Commission found that the restructuring plan has not been put in place, that none of the financial objectives have been attained and that, in particular, the viability of the company is not assured in the short or medium term. Olympic Airways has lacked equity since 1999 and remains very much in debt. The computerised management system has never been operational and the Commission has never received the regular reports for March and October 2000 certifying compliance with the conditions granting the aid in question. Lastly, Greece has granted additional aid to Olympic Airways, contrary to its commitment to no longer grant it any further aid.

New unlawful aid resulting in preferential treatment

The Commission also found that Olympic Airways enjoyed preferential treatment on account of its fiscal and legal status. While being a private limited company, Olympic Airways continues to benefit from the legislation applying to public utilities or DEKOs. This preferential treatment results in the deferred payment(3), without incurring fines, of fiscal and social security contributions to the Greek State and with regard to certain passenger boarding taxes.(4). Lastly, the company benefited from advantages related to the fuel distribution infrastructure.

This preferential treatment has enabled Olympic Airways to pursue its activities to the detriment of its competitors and was, moreover, prohibited by the 1998 decision.

Annex: Background

Since 1994 the Commission has monitored the airline's situation and has already drawn the Greek authorities' attention to the fact that Olympic Airways has not always succeeded in achieving the objectives of its restructuring plan which made the compatibility of the aid conditional on compliance with the competition rules.

The aid authorised in 1998 was granted in particular on the basis of a new restructuring plan covering the period 1998-2002. According to this plan, efficiency should have increased as a result of increasing fares, restructuring the network and improving the product. It was intended to ensure the return of Olympic Airways to viability by 2000.

To this end, the Commission had authorised:

  • the loan guarantees existing at that time,

  • new loan guarantees totalling $378 million for loans to be contracted before 31 December 2000 for the purchase of new aircraft,

  • a debt reduction of 427 billion drachma,

  • the conversion of 64 billion drachma of debt into equity,

  • a capital injection of 40.8 billion drachma to be paid in three instalments in 1995, 1998 and 1999.

The Greek State had, in particular, committed itself to ensuring that:

  • Olympic Airways would have the fiscal status of a private limited company;

  • Olympic Airways would be subject to ordinary law on the same footing as the other Community airlines with no special privileges or constraints;

  • the Greek State would not interfere in the management of OA except within the strict limits of its role as shareholder;

  • the Greek State would immediately adopt the legislation necessary for the effective implementation of the salary, social and financial aspects of the restructuring plan;

  • the Greek State would not grant any new aid.

The company has changed management several times since the 1998 decision and has not been able to apply the measures needed to achieve its restructuring plan. The company has only just published its financial accounts for 2000 and they indicate major losses which will not allow it to survive without further restructuring. The accounts for the 2001 financial year have still not been published, in violation of Greek and Community legislation.

(1)Pursuant to Article 87(1) of the Treaty.

(2)The procedure for the examination of these measures was initiated on 6 March 2002 following two complaints introduced in October 2000 and July 2001.

(3)In certain cases there is no proof of payment.

(4)Charges levied for the modernisation of Greek airports, airport taxes and rent, charges due to the Athens International Airport of Spata and other Greek airports.

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