European Competition Law: Commission Decisions on State Aid

On 11 December 2002 the European Commission issued a series of decisions ranging from minor investigations in inducements for new regional operations to major State Aid infringement cases. The broad nature of the Commission's decisions shows us just how important the European regulatory system has become to the everyday activity of the aviation industry.

EU COMMISSION REQUESTS GREECE TO RECOVER 194 MILLION

"The Commission concluded its examination of the Olympic Airways case". Thus began the press release announcing the Commission's decision to call on Greece to recover part of the aid granted to Olympic Airways within the scope of its restructuring plan for the period 1998-2002. In 1998, following a close monitoring of the airline's restructuring schemes since 1994, the Commission authorised a series of restructuring aid to "ensure the return of Olympic Airways to viability". The 1998 decision was granted on the basis of a new restructuring plan for the period 1998-2002 under which the company was allowed to maintain existing loan guarantees, secure a new loan guarantee totalling US$378 million for the purchase of new aircraft, carry out various operations of debt reduction (427 billion drachma - approximately US$1.5 billion) and debt conversion (64 billion drachma - approximately US$225 million) and receive a capital injection of 40.8 billion drachma (approximately US$143 million).

In return the Company had to satisfy a number of conditions, namely various financial objectives, the introduction of a computerised management system and the submission of regular reports to the Commission. The Greek State also committed to ensure that Olympic Airways would have the fiscal status of a private limited company and would be subject to the same law as other carriers with no special privileges. It was agreed the Greek State would not interfere with the management of the company, that it would enact the necessary legislation for the effective fulfilment of the restructuring plan and, most importantly, that no further state aid would be granted.

In its investigation, prompted by two complaints from the Hellenic Air Carriers' Association, the Commission found that the restructuring plan had not been put in place, the financial objectives had not been satisfied, the computerised management system had never been operational and the regular reports for March and October 2000 were not submitted.

The Commission also concluded that Olympic Airways...