INTERVIEW: Olympic Air CEO Antonis Simigdalas

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A decade after helping Aegean Airlines break into the Greek airline market, Antonis Simigdalas now finds himself leading efforts to breathe fresh life into the once proud but diminished Olympic name

Just over 10 years ago I interviewed Olympic Airways' then chief executive Rod Lynch in Athens. He had been put in place by British Airways' consultancy Speedwing and was tasked with a much-needed restructuring of the loss-making Greek national carrier.

Around then I also interviewed Antonis Simigdalas, who was leading Greek start-up Aegean Airlines. After his entrepreneur father Nikos secured Aegean's Greek market breakthrough a decade before, Simigdalas was preparing for the launch of domestic scheduled flights. He originally envisaged a role for Aegean as a regional franchise for Olympic, echoing CityFlyer's operation for BA, even approaching Lynch with the idea.

After just a year BA and Lynch had left Athens and Greek attempts to find a strategic investor collapsed. Olympic was to endure an increasingly desperate decade, while Aegean thrived with every faltering Olympic step.

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 ©Billypix

Fast forward ten years and ironically it is Simigdalas who has taken on the challenge of resurrecting Olympic in its latest guise, Olympic Air, which formally launched in late September 2009. So why do it?

"Number one, it is boring to run an established airline; number two, I always like a challenge; and number three, this was a unique project," he says, describing it as a crossroads in Greek aviation. "Each of the people and entities at the crossroads know the choice they had and are responsible for the decisions they make. I made my choice.

"My position has always been anti-monopolistic, it is the story of my life, and of my father," he adds. "Aegean had been very successful and if the Greek government had allowed Olympic to collapse we could have had another monopoly."

It says much for the contrasting fortunes of both airlines in the last decade that Simigdalas is again cast as the underdog. Aegean's consistent growth has seen it successfully expand beyond Greece, into Europe and towards Star Alliance membership. It operates 32 aircraft, is close to completing its fleet transition to Airbus A320s, and increased passengers 10% in 2009 to over 6.5 million. Over the same time Olympic Air's predecessor, Olympic Airlines, which itself was a successor born in 2003 to the original Olympic Airways, failed to break its cycle of losses. Competition intensified, its fleet aged and all the time, illegal state aid from the past - through a number of European Commission rulings - weighed it down. In 2008 the Greek government concluded the only answer was to start afresh.

Again the privatisation faltered in February 2009 when the Greek Government rejected the bids submitted. But this time when it sent out an SOS to possible saviours, things were different. There was both a credible investor in the shape of Greek investment group Marfin and a credible plan to end Olympic's woes. After years of being hounded by the EC, Greece now worked with it to come up with an acceptable plan to keep the Olympic name flying. This meant a fresh start with key assets, essentially comprising the Olympic name, logo, route rights and existing concessions.

OVERNIGHT SUCCESS 

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Olympic Air launched on 29 September, giving Simigdalas and his team a matter of months to set up an airline and go from nought to 200 daily flights overnight. "Nobody knew before the 29th if you could put all the ingredients together so quickly. As it happened, like the [2004] Olympic Games, everything went smoothly," he says. "Maybe it's something about the name." Besides the name and its rights, it has little in common with its predecessor. Only its four Dash 8-100s were previously operated by Olympic, taken under a new lease deal. Marfin boosted the fleet by ordering eight Q400s from Bombardier, while medium-term leases were taken on A319/A320s. "We have been lucky we started an airline in a time of crisis. When that happens you have aircraft, good deals, everything is available. Two years ago that plan would not have been achievable in five months." Aircraft previously operated by Olympic (including Boeing 737s pictured here) and owned by the Greek government remain at Athens airport awaiting sale by the liquidator.
This was enough to tempt Marfin, and then Simigdalas, who had favoured the idea of Aegean making a move for it. "During the tender, Aegean did not participate, although in my view that was an opportunity," he says. Central to the interest of Marfin and Simigdalas was the brand, which is still associated, within Greece at least, with successes of the past. "It's not easy for a nation to forgo and forget a success story that is part of its history. It is, by surveys, the most recognisable Greek brand around the world and a culturally important name," says Simigdalas. "You don't leave what has come to be, either in perception or reality, a historic brand, just to die. You use that, even if you have been its competitor. And that was the whole idea."

He acknowledges there is a hint of sentiment for Marfin, whose own maritime business origins are a shared heritage with Olympic's founder more than 50 years ago, Aristotle Onassis. But the project makes business sense for the Greek investment group, which generated €862 million ($1.2 billion) in revenues in the 2009 first half. He points to synergies between Olympic - which includes its handling and maintenance units - and Marfin's interests in transport, tourism, banking and IT. "An airline works like a catalyst with many of them and that was one of the main thoughts."

To those outside Greece, the notion of the Olympic name being an asset might seem whimsical given the problems of its predecessors. Simigdalas says surveys showed the negative perception was higher internationally. "Greeks might have been affected by sentiment, but non-Greeks who were looking for service were by and large disappointed by Olympic Airlines," he says.

Even in Greece the name had taken a hit. "There was a growing part of the market, before Olympic's privatisation, that stated in survey they would not choose to fly on Olympic. So you already had a visible hostile feeling, which was quite justified. I'm not going to pretend to defend old Olympic and say they did not have problems. Quite rightly when they [passengers] had a choice, the market responded unfavourably to them," he says.

"So Olympic Air is trying to reverse this perception by consistently offering a good product in European terms." He already sees perceptions changing. "When we started in October, Olympic was down to 30% [domestic] market share. At the last count in December, this has grown to 47%. It means the market is responding favourably to its product, so we must have done something right."

On the one hand Greece is a unique case. A combination of its geography and economy, and the lack of high-speed transport alternatives, means air transport is a life-blood for the country. But Olympic's may also prove to be a path other established, but long loss-making, legacy national carriers eventually follow.

There are three fundamental differences between Olympic Air and its predecessors: the new carrier is privately-owned, smaller and free of historic debts. The first two of these were conditions for the EC agreeing to the latter. Under the restructuring the new Olympic could be separated out debt-free if it moved into private hands and was capped at 65% of the size of the old Olympic (measured in 2008 ASKs). The debt, together with some of its old assets, stayed with Olympic Airlines, the liquidator and the Greek state. "Olympic was underselling something it was producing in a very expensive way, so there was no way they could break it," he says. "We put together everything fresh, nothing to connect us with old Olympic. Even people who were with old Olympic are here with different contracts."

Thus when Simigdalas and his team took the helm of Olympic, they faced a decision on how to focus the carrier. Its predecessor had been involved in virtually every market, from inter-island connections to intercontinental flights. "We all know you can't be good in everything, and that was a recipe on which old Olympic was built," he says. Rather than cut capacity across the board, the new airline has taken out chunks of the previous network. Notably long-haul operations - its predecessor flew to New York, Montreal, Toronto and Johannesburg using four Airbus A340s - and flights to Germany, where Aegean is strong through its Lufthansa partnership, were cut.

"There was no way these numbers could be fixed, at least in the short term," Simigdalas says of long-haul operations. "If we were to propose to our shareholder keeping that part of the network in a futile effort to keep the perceived glamour of the name and the size of the airline, we would have ended up with a huge disaster with that section of the fleet, financially. So we went for the next best solution, which is work together with others," he says.

Part of Aegean's growth can be traced to its link with Lufthansa, a codeshare deal which will ultimately develop into Star Alliance membership. Olympic Air appears to be following a similar path, this time connecting through SkyTeam carrier Air France-KLM's Amsterdam and Paris hubs. "The German hubs are taken by our competition. We went for a comparable solution, we redirect our part of the flow that needs to be channelled beyond Europe, through other hubs, in this case Paris and Amsterdam," says Simigdalas.

ASSOCIATION VALUES 

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This year will see Simigdalas sign off from his role as president of the European Regions Airlines Association after serving two consecutive three-year terms. Simigdalas is a product of Cranfield University and worked as a researcher during the formative years of the EC's crucial aviation market-liberalising third package. This was particularly significant for both Simigdalas and his father, as it paved the way for Aegean's market breakthrough. Consequently Simigdalas has always been one to try and influence the regulatory debate rather than rile against it. "There is no way in a democracy you can optimise outcomes, especially regulatory outcomes, if you do not state your mind," he says. "So the number one rule for an association like ERA is to state its mind. I am not saying we have always been successful, maybe we have not always been right or we didn't have the lobby power we needed. But that's what we have to do, and if you don't do it collectively there is no way in the world you can do it individually, no matter how powerful you are."
The new carrier's more focused network also meant it could benefit from a standardised fleet. Olympic Air numbered 26 aircraft at launch, comprising Airbus A319/A320s as well as Bombardier Q400s and Dash 8-100s. "What we needed to do, in view of the fact we have a crisis which we don't know how long will last, was to minimise the fuel sensitivity of our fleet. There is no issue with turboprops on the domestic part, and we minimised operating costs on the medium-haul fleet with a combination of A319/A320s on medium-term leases," he explains. The fleet will reach 32 in of March, comprising 16 A319/A320s, 10 Q400s, five Dash 8-100s and an ATR 42. The carrier is also in talks with Airbus and Boeing over acquiring its own aircraft, but is waiting for the optimum moment to take the plunge. "I must say we are still very happy with the low lease rates we are enjoying at the moment. That was one of the big advantages of starting up the airline in times of a crisis. But we know this is not going to hold forever, so we need to make our own long-term plans," he says. It is weighing the advantages of ordering aircraft now with waiting for more operational experience to validate its plans. "The more we wait, the less risk we take but we will obviously lose some opportunities we now have."

While restrictions were imposed on its starting size, the carrier is free to grow. But Simigdalas stresses growth will be commercially based. Given the various shocks in the airline market, Simigdalas is wary of financial predictions - but he believes break-even in 2011 is possible if things go well.

Although the global economy is improving, Greece is under strong pressure to reduce its debt levels - the government is working on sharply cutting its debt over the next three years. But Simigdalas believes that Greek air transport has some insulation from economic factors. "There is a dependence in Greece on air transport because of its geographic location," he says, and points to a 7% increase in overall Greek domestic traffic last year despite the global economic turmoil. "Air transport is so significant to the activities that take place in this country and economy, that it is one of the last things that will be affected."

Unlike the solution for another long-failing European carrier Alitalia, which teamed with rival carrier Air One, Greece's two leading carriers are going it alone. Simigdalas believes ultimately a healthier position for the Greek market would see the two co-existing in different market areas. "You don't need two carriers duplicating each other, what you need is two carriers supplementing each other," he says. "At the moment there is a large amount of competition. Perhaps eventually that will change, as each of us sees where our advantage is and this is how it comes naturally in a market economy. There is room for more than two, but they have to find their own niches.

"I believe we have to have a solid system to cover all aspects of air transport that are necessary in this country," he says. "That means, maximising connectivity. In my book that should have been maximised long ago."

Look back at our analysis of the opening up of the Greek market 10 years ago