EC launches full probe into fresh Greek airline merger attempt

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European regulators have opened an in-depth probe into Aegean Airlines' fresh attempt to acquire fellow Greek carrier Olympic Air after deciding commitments from the former do not address "serious competition concerns" on overlapping routes raised in its initial investigation.

Aegean in October struck a deal to buy 100% of Olympic Air from Marfin Investment Group for €72 million ($94 million). This came little more than 18 months after European competition regulators blocked a previous merger attempt between the two carriers.

Aegean and Olympic are the two main airlines in Greece, each operating a based at Athens International Airport. "The Commission has concerns that the transaction may lead to price increases and poorer service on several domestic Greek routes out of Athens, where the merged entity would have a monopoly or an otherwise strong market position," it says in announcing the probe today.

While it says its assessment takes account of relevant factors, such as the state of the Greek economy and the financial situation of the parties, the Commission notes the deal would give a merged carrier a monopoly on routes from Athens to Chania, Santorini, Mytilene, Corfu, Alexandroupolis and Kos.

It also says that on Athens to Thessaloniki, Heraklion and Rhodes the merger would remove an important competitor leaving only Cyprus Airways. "Moreover, the Commission's investigation provided indications that the two airlines' largest competitor, Cyprus Airways, may not continue to act as a viable competitive force on the Greek domestic market in the future," it says adding

its investigation revealed "no indications of entry prospects that would occur on a scale and within a timeframe capable of constraining the merged entity and disciplining its pricing behaviour".

It says commitments proposed by Aegean during the preliminary investigation did not address these serious competition concerns. The Commission has now opened a 90 day probe into the proposed deal and will make a decision by 3 September.

European regulators rejected the first proposed merger between the two carriers in January 2011 citing competition concerns on 10 domestic routes of Athens. As part of its new evaluation it is considering how market circumstances have changed since its original decision.

Passenger numbers have been on the slide in the hard-hit Greek market since the financial crisis took hold in Europe. Passenger numbers fell 10% at Athens airport last year, a fifth consecutive year of decline which has seen the total slip from 16.5 million in 2007 to 12.9 million in 2012.

Passenger numbers at Olympic Air, the privately-owned successor carrier to the former heavily loss-making national airline, have slipped from 4.4 million in 2010 to 2.8 million last year. Aegean Airlines passenger levels fell 6% last year to 6.1 million, just 200,000 higher than the 2008 and figure.