The future of Olympic Airways is in doubt following the European Commission's (EC) rejection of pleas to allow state funding of the Greek flag-carrier after a financial probe showed the airline is facing mounting financial problems.
Olympic is continuing to seek private investors, but is in a 'Catch-22' situation: an equity injection is unlikely given the airline's financial state, yet the EC says further state aid is out of the question until it is partially privatised.
An audit by chartered accountants, presented to the Greek minister of national economics and transport, is believed to have stated that Olympic is almost worthless and in danger of collapse. Athens has since called in Price Waterhouse Coopers to assist Credit Suisse First Boston in finding new management for the airline.
A meeting of the Olympic board has meanwhile heard that the airline lacks the finance to meet salary commitments and running expenses and may face bankruptcy in three months. Details of Olympic's problems have been confirmed by airline sources, but not by Athens, which fears negative publicity could kill the privatisation plans.
One senior source says the situation is "very serious", but that he "cannot imagine Olympic will be allowed to collapse". The airline's debts include large amounts owed to various government agencies, including health payments, and airport fees owed to the Greek Civil Aviation Authority.
Olympic's privately-owned rivals say that its failure to pay bills have given it a competitive advantage.
Representatives of Olympic's trade unions responded to the financial crisis by visiting Brussels to lobby for the approval of further aid, but met with a negative reaction. Olympic has already received two injections of state funding, but a third tranche has been barred until restructuring and privatisation have been completed.
Olympic's largest trade union has also filed a suit accusing four members of the Greek Government and certain members of the Olympic board (on which unions are represented) of mismanagement. The High Court action will focus on issues including a failed deal with British Airways' Speedwing subsidiary. It was BA's decision not to invest in Olympic which precipitated the crisis. Even if Olympic survives, 9,000 of its 14,000 staff may face redundancy.
Source: Flight International