* Aegean, Olympic Air agree to merge
* New entity to carry Olympic name and logo
* Aegean, Olympic main shareholders to have equal stakes
* Deal subject to EU competition watchdog approval
(Adds official announcement, executives’ comment)
By Lefteris Papadimas and George Georgiopoulos
ATHENS, Feb 22 (Reuters) - Greece’s two largest carriers, Aegean (AGNr.AT) and recently privatised Olympic OLY.UL agreed to team up to form a stronger player better able to compete with foreign airlines.
The merger will form one dominant carrier in the domestic market and ease pricing competition between the two airlines. Olympic ground handling and Olympic Engineering will become 100 percent subsidiaries of the new company which will be listed on the Athens stock exchange.
“The relative size of our competitors within the European Union necessitates the joining of the two main Greek airlines to achieve increased autonomy in serving our country’s tourism, increase route options for consumers and ensure the long tern viability of the two airlines,” Aegean’s Chairman Theodore Vassilakis said. The two carriers announced they were in talks on a possible cooperation in a bourse filing on Feb. 11. [ID:nLDE61A0WR]
Together, they operate a fleet of 64 aircraft and employ 5,850 workers. Aegean has been accepted into and is in the process of joining Star Alliance by June this year.
Aegean flies 24 domestic and 26 international routes. Olympic serves 41 domestic routes and 15 destinations abroad.
Under the deal, the new carrier will carry the name of Olympic Air and its logo of Olympic rings after a transition period during which Aegean’s name and logos will also be used in parallel. Olympic was founded in 1957 by the late shipping tycoon Aristotle Onassis who sold it to the government in 1974. Under state management the airline became debt laden and loss making.
Last year the government sold it to buyout firm Marfin Investment Group (MIG) (MRFr.AT), ending years of wrangling with the European Union over illegal state aid.
The merger agreement will need the blessing of the EU Commission. Until then, the exact process and timetable of the merger will be articulated, the two carriers said.
“The prevailing conditions in the Greek economy as well as in the aviation sector dictate the combination of forces in order to maintain competitive customer prices, protect levels of employment and increase our competitiveness at a European level,” said Olympic Air’s Chairman Andreas Vgenopoulos.
Under the deal, the Vassilakis Group which is the main shareholder of Aegean and MIG, Olympic’s sole shareholder, will have equal shareholdings in the new airline.
Aegean had offered to buy Olympic in March last year with an offer of 170 million euros, which included 90 million for its flight activities and 20 million for its aircraft maintenance base.
Aegean’s offer had topped MIG’s but the government said at the time it opted for the investment group because it feared the deal would hit a hurdle on EU competition grounds. [ID:nLB551548]
Analysts said the Aegean-Olympic deal is expected to get the green light by competition authorities. Similar mergers have been allowed in the past in other EU countries, including Alitalia [CAITLA.UL] teaming up with AirOne and Lufthansa (LHAG.DE) acquiring Austrian.
“Aegean Airlines’ market capitalisation stands at 285 million euros and MIG had acquired Olympic for 177.2 million. The new group may drop some destinations in favour of the competition in order to surpass any obstacles by the competition committee,” said Alpha Finance analyst Antonis Diapoulis.
As part of its binding offer in March, Aegean had pledged to reduce capacity in the domestic market in favour of other carriers and to keep domestic rates flat until the end of 2010.
“The trend internationally is for airlines to seek operating cost savings,” said analyst Costantinos Vergos at Cyclos Securities. “The deal will end the intense competition on ticket pricing between the two in the domestic market.”
Aegean's shares ended 0.5 percent higher at 4.01 euros. erasing earlier losses but underperforming the broader Greek market's .ATG 1.54 percent advance.
Aegean, with a modern fleet of Airbus jets, is a profitable carrier flying domestic and international routes. It earned 0.38 euros a share in 2008 on sales of 612 million euros and paid a 0.25 euro per share dividend. (Writing by George Georgiopoulos; Editing by Jon Loades-Carter)