Largest Two Greek Airlines to Merge
March 1st, 2010
Greece’s two largest carriers, Olympic Air and Aegean Airlines, have decided to merge in anticipation of difficult times stemming from the country’s economic crisis and tougher airline competition.
“The crisis played an important role in the decision to merge,” said an official close to Olympic Air.
Analysts expect the creation of a national champion to be complete late this year or in 2011. Aegean Airlines is a listed company with a market capitalisation of about €284m ($386m). Olympic Air was bought by investment holding company Marfin Investment Group (MIG) for €177.2m last year.
According to the terms of the agreement, MIG and Vassilakis Group, the main shareholder of Aegean, will have an equal shareholding in the combined entity.
The new company will carry the name and logo of Olympic Air , following a transition period in which Aegean’s name and logo will be used in parallel.
With the Greek economy contracting 2 per cent in 2009 and expected to shrink again this year, carriers fear revenues from passenger traffic, especially in domestic routes where they dominate, will suffer. Moreover, intense competition between the two carriers since the newly privatised Olympic Air started flying last October increased pricing pressures with the average fare falling last year.
“My first feeling about this deal is positive,” said Antonis Diapoules, an analyst at Alpha Finance. “It is driven primarily by the macroeconomic crisis and concerns about the impact of stiff competition between the two carriers.”
The merger, which requires the approval of the EU and competition authorities in Greece, would create the biggest carrier in the country with a fleet of 64, mostly Airbus, aircraft.
“I would expect the new company to be asked by the competition committee to give up some domestic routes, so that smaller airlines increase their share in the domestic market,” said John Stamatakos, analyst at Proton Bank.
Aegean and Olympic Air control more than 95 per cent of domestic passenger traffic but a much smaller portion of international traffic to and from Greece.
Aegean flew 6.57m passengers in 2009, with 3.75m on domestic routes and 2.82m on international routes. Olympic is estimated to have flown more than 4m last year.
Aegean envisages joining Star Alliance by June 2010 and analysts expect the new entity to take Aegean’s place in the grouping.
Story from FT.com
