Olympic To Appeal EC State Aid Ruling

by Ulrika Lomas, for LawAndTax-News.com, Brussels

21 September 2005

Olympic Airlines is set to appeal an European Commission ruling which deemed state aid granted to it by the Greek authorities as illegal, Greek Transport and Communications Minister, Mihalis Liapis announced on Monday.

However, he did not reveal whether the Greek government also plans to appeal the decision.

Last Wednesday the EC declared illegal a number of measures taken by the Greek State which gave an unfair advantage to Olympic Airways and Olympic Airlines, the new company which has taken over its flight operations.

The decision closed the investigation, started on 16 March 2004, into the State aid granted since December 2002, when the airline was ordered to repay €160 million in illegal aid.

Between 1994 and 2000 the Commission took a number of decisions authorising public aid for the restructuring of Olympic Airways. In December 2002, however, the Commission found that further aid had been granted to the airline which was incompatible with the common market, and demanded that €160 million be repaid. That aid has still not been repaid.

Following a detailed analysis of the finances of both Olympic Airways and Olympic Airlines, the Commission last week found that Greece has continued to grant further aid to these companies, which is incompatible with the common market and therefore illegal.

This aid has included:

• €40 million from the Greek State and Olympic Airways to cover part of the costs to Olympic Airlines of leasing aircraft;
• An unjustified payment of some €90 million from the Greek State to Olympic Airways when Olympic Airlines was set up and transferred to the State, achieved by overvaluing the assets transferred to the State;
• The Greek State’s toleration of Olympic Airways’ failure to pay more than €350 million in tax and social security liabilities due between December 2002 and December 2004; and
• The assumption by the Greek State of a number of Olympic Airways’ financial obligations, e.g. in connection with aircraft leasing contracts and the repayment of a bank loan, amounting to up to €60 million.

The EC explained that: "By granting this aid, Greece has given Olympic Airways and Olympic Airlines an advantage not available to their competitors. The Commission therefore asked Greece to recover the illegal aid payments. Greece has two months in which to inform the Commission of the measures it intends to take to comply with the decision."

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