AIRLINES: OLYMPIC SAGA CONTINUES WITH FURTHER DEMAND FOR STATE AID REPAYMENTS.

Mr Barrot said that the Commission had approved state aid to Olympic between 1994 and 2000 following assurances from the Greek government that it would restructure the company and attempt to find a buyer. But following complaints from rival carriers in 2000 and 2001, the Commission ruled in December 2002 that some euro 160 million in subsidies that had previously been approved by Brussels would have to be recovered because the Athens authorities had reneged on their promises to overhaul the ailing airline.

However, Greece has thus far failed to recover any of this illegal aid. Instead, the Greek authorities decided in 2003 to transfer the assets of Olympic Airways to a new state-owned company, Olympic Airlines, conveniently leaving behind most of the former's debts and obligations. The Commission challenged this ruling, arguing that it would allow the Greek state to circumvent the obligation to recover the aid. The Commission's position was upheld by the European Court of Justice on May 12 this year.

With this state aid for the period 1994-2000 still outstanding, the Greek authorities are now obliged to recover more aid payments made to both Olympic Airways and Olympic Airlines after December 2002. These include:

- euro 40 million to cover part of the cost of leasing aircraft

- euro 90 million relating to the creation and sale to the state of Olympic Airlines, achieved by overvaluing the assets of Olympic Airways

- the 'overlooking' by the Greek authorities of more than euro 350 million in tax and social security liabilities owed by Olympic Airways

- euro 60 million from the assumption by the Greek state of Olympic Airways' financial obligations.

The exact amount to be repaid could be higher or lower than these estimates, however, depending on the final negotiations with the Greek authorities. Mr Barrot cited, for example, cases where state aid was given in the form of a loan. "If the principal of the loan has been paid back, then all that needs to be recovered would be the interest", he suggested.

Harder to find a buyer?

Despite Mr Barrot's insistence that the Commission's decision would make it easier for potential buyers to assess the true value of Olympic, the repayment of over euro 700 million in illegal state aid is likely to prove a major albatross round the neck of the carrier. A consortium of US and Greek investors, called Olympic Investors, had agreed in principle to buy the...