Following the elections in Greece earlier this month, the European Commission is stepping up pressure on the new Greek government over possible wrongdoing in the reinvention of flag carrier Olympic Airways as Olympic Airlines.

Transport commissioner Loyola de Palacio has demanded that the EC be allowed to oversee the privatisation of the reformed airline. If not, the EC will force the airline's liquidation. De Palacio has asked for a full EC audit of the reform process, saying: "It is high time to take action: this is the last chance for Olympic." She adds: "I am certain that the Greek government will co-operate fully with the Commission to avoid the errors which led to this situation."

The EC doubts the legality of the decision to split Olympic Airways, creating the new debt-free Olympic Airlines - intended for privatisation - separated from the debt-ridden rump of the catering, cargo and technical divisions. In addition, the ECsays, over €150 million ($185 million) of Olympic's unpaid 2003 taxes are being written off, and the airline is withholding another €26 million in passenger taxes, rather than passing them on to the Greek government. The EC argues that Olympic Airlines should be liable for the debts of its predecessor, and that the government's decision to keep hold of the debts while selling off Olympic Airlines itself is effectively an illegal subsidy.

The new prime minister Costas Karamanlis will make his first major policy speech on 27 March, with Olympic's fate expected to be high on the agenda. If necessary, the government may invite international bidders to tender for the airline to avoid accusations of a closed market. With the Olympic Games being held in Athens in mid-2004, the fate of the national carrier is becoming ever more urgent.


Source: Flight International