ATHENS Aegean Airlines (AGNr.AT) is in talks to buy domestic rival Olympic Air as the two Greek carriers look to consolidate to cope with the country's deep economic downturn, two sources close to the airlines said.
Greece's economy is in its fifth year of recession as a result of austerity measures to deal with the debt crisis. The airlines tried to merge in 2010 but the European Commission blocked the deal on competition grounds.
"There are advanced talks on a deal in which Aegean will be acquiring Olympic," one of the sources familiar with the matter told Reuters on Monday.
Aegean Airlines, which has a market value of about 121 million euros ($158 million), would not comment.
Its shares were up 1.2 percent in light volume. Former state carrier Olympic Air was bought by Marfin Investment Fund (MIG) (MRFr.AT) after being privatized in 2009 and is not listed. Both airlines posted losses in 2011.
The economic slump could be an opportunity for the two airlines to get the green light from regulators since both have seen their market share shrink during the crisis.
"Their combined market share has been reduced because of the deep recession and new entrants in the market such as Cyprus Airways," the second source said, adding that both brand names would be maintained under the acquisition plan.
The EU blocked the merger of Olympic and Aegean in January 2011 on grounds that the combined Greek carrier would have a quasi-monopoly in the domestic air market.
The carriers offered to cede take-off and landing slots in Greece, but the Commission ruled this was not enough as Greek airports did not suffer from the levels of congestion affecting others in Europe.
Olympic and Aegean rejected suggestions of giving up part of their fleet or one of their two brand names to new entrants.
Olympic, founded in 1957 by the late shipping magnate Aristotle Onassis, fell into steady decline after being operated for many decades by the Greek government and burdened the state budget with losses.
Before the previous merger attempt, Aegean offered 170 million euros to buy the debt-ridden state carrier when it was put it on the block, but lost out to MIG.
Aegean has a young fleet of Airbus EAD.PA aircraft and flies more international routes than Olympic.
Greece is also seeing a wave of consolidation in its banking sector, with a flurry of deals as banks tie up to cope with the crisis.
($1 = 0.7674 euro)
(Editing by Helen Massy-Beresford)