2003/372/EC: Commission Decision of 11 December 2002 on aid granted by Greece to Olympic Airways (notified under document number C(2002) 4831) (Text with EEA relevance)
Date: 2002-12-11
Institutions: European Commission
Subjects: Greece, State aid, air transport, control of State aid

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 December 2002

on aid granted by Greece to Olympic Airways

(notified under document number C(2002) 4831)

(Only the Greek version is authentic)

(Text with EEA relevance)

(2003/372/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provision(s) cited above (1),

Whereas:

1. PROCEDURE

(2)

(3)

in

2001.

occurred

new developments

of
The
supplementary complaint was transmitted to Greece for
comments by letters of 22 August 2001 (TREN(2001)
D/11863) and 6 December 2001 (TREN(2001) D/18948)
to which the Greek authorities replied by letters of 7
November 2001 (TREN(2001) A/70124), 11 December
2001 (TREN(2001) A/72694) and 12 March 2002
(TREN(2002) A/55191).

By Decision of 6 March 2002, notified to the Hellenic
Republic by letter dated 11 March 2002 (SG(2002)
D/228848), the Commission initiated the procedure laid
down in Article 88(2) of the Treaty. The procedure has
been registered under C 19/2002.

The Commission decision to initiate
formal
investigation procedure has been published in the
European Communities. The
Official
Commission invited interested parties to submit their
comments on the subject.

Journal

the

the

of

(1)

the Hellenic Air Carrier
On 12 October 2000,
Association (thereafter
lodged a complaint
‘HACA')
(registered as TREN(2000) A/69305) against the Greek
State for continuing to give Olympic Airways SA
(thereafter ‘OA') various aids and hence being in breach
with the Commission decisions 94/696/EC (2) and
1999/332/EC (3) on aid granted to OA. The complaint
was transmitted to the Greek authorities for comments
as
by
TREN(2000) D/17807). By letter of 19 February 2001
(TREN(2001) A/53318), the Greek authorities submitted
their
comments. On 24 July 2001 (TREN(2001)
A/63511), HACA lodged a supplementary complaint
against the Greek State on the same ground in the light

of 5 December

2000 (registered

letter

(1) OJ C 98, 23.04.2002, p. 8.
(2) OJ L 273, 25.10.1994, p. 22.
(3) OJ L 128, 21.05.1999, p. 1.

(4)

Greece forwarded comments to the Commission by
letter of 12 April 2002 (TREN(2002) A/57066).

(5) Within the timeframe indicated in the publication, 23
May 2002, the Commission received no comments from
any interested parties.

(6)

Having not received all the relevant information from
the Greek authorities, as requested in the opening of the
procedure, the Commission adopted an injunction of
information on 9 August 2002, notified to Greece by
letter dated 12 August 2002 (SG(2002) D/231156). By
letter of 13 September 2002 (DG TREN(2002)

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A/66323), Greece informed the Commission that a
reply would be completed by 25 September 2002. The
reply by the Greek authorities was sent on 1 October
(DG TREN(2002) A/67131).

— Loan guarantees extended to OA to 7 October 1994
pursuant to Article 6 of Greek Law No 96 of 26
June 1975;

(7)

(8)

(9)

a

called

document

On 16 of October 2002, a meeting was held with the
Greek authorities concerning the state of play on OA's
financial developments and progress realised to that
date. During this meeting, the representatives of Greece
the
remitted
to
Commission' which has been registered under
the
reference DG TREN(2002) A/69882. This document,
along with other information and with a report on a
‘Olympic Airways Performance as
limited review of
compared to its Financial Plan' in 2002 done by Deloitte
& Touche, has been sent by Greece on 14 November
2002 and has been registered under the reference DG
TREN(2002) A/70592.

‘Reporting

de

Loyola

On 21 November 2002, Mr. Verelis, Minister of
Transport for the Hellenic Republic sent a new report to
Ms.
the
Palacio, Vice
Commission, giving a ‘Synopsis of Hellenic Republic's
Case for Olympic Airways on key issues'. This additional
information has been registered under the reference DG
TREN (2002) A/70782.

President

of

Mr. Verelis also informed Ms. Loyola de Palcio by letter
of 2 December 2002 (DG TREN (2002) A/71671) that
the privatisation process of Olympic Airways was well
under way and that six expressions of interest to acquire
a majority stake in the company had been submitted to
Greece.

(11)

2. THE FACTS

2.1. Past Commission decisions regarding OA and its

subsidiaries

2.1.1. The 1994 Decision

(10) On 7 October 1994 the Commission adopted the
decision 94/696/EC (hereafter
‘the 1994 decision')
according to which aid granted or to be granted by
Greece
to OA was declared compatible with the
common market under Article 87(3)(c) (then 92(3)(c)) of
the EC Treaty and under Article 61(3)(c) of
the
agreement on the European Economic Area (hereafter
‘the EEA agreement') provided that Greece met a series
aid package
of
consisted of the following measures:

listed therein. The

commitments

— New loan guarantees totalling USD 378 million for
loans to be contracted before 31 December 1997 for
the purchase of new aircraft;

— Easing of OA's debt burden by GRD 427 billion;

— Conversion of GRD 64 billion of OA's debt into

equity;

— A capital

injection of GRD 54 billion in three
instalments of GRD 19, 23 and 12 billion in 1995,
1996 and 1997 respectively.

The last four of these five measures formed part of a
restructuring and recapitalisation plan for OA, which
had initially been submitted to the Commission. On this
basis, the Commission considered that the aid would
facilitate the development of air transport activity by
restructuring the main air carrier of a fragmented,
peripheral region of the Community, of which Greece is
one of the least developed parts.

The compatibility of the aid was, however, conditional
on compliance by Greece with the 21 commitments,
which were given to ensure that
the aid did not
adversely affect trading conditions to an extent contrary
to
these
commitments, which concerned both OA and its
subsidiary Olympic Aviation, Greece was required to
meet among the 21 commitments the following:

interest. According

common

the

to

(a) To repeal by 31 December 1994, Article 6 of the
Greek Law No 96/75 of 26 June 1975 which
permitted the Greek State to extend guarantees for
the loans contracted by OA;

(b) Not to interfere in the management of OA except
within the strict limits of its role as shareholder;

(c) To give OA, by 31 December 1994, the fiscal status
of a public limited company comparable to that of
Greek undertakings under ordinary law, except,
however, for exonerating OA from any taxes likely
to affect the recapitalisation operations envisaged in
plan
therecapitalisation
communicated to the Commission;

restructuring

and

(d) Not to grant any further aid to OA in any form
whatsoever, in conformity with Community law;

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(e) To

have

adopted

immediately

the

necessary for the effective implementation of
salary,
restructuring plan;

financial

aspects

social

and

legislation
the
the

of

(f) To submit to the Commission each year, at least four
weeks before payment of each instalment of
the
capital
increase scheduled in January 1996 and
January 1997, a report on the implementation of the
restructuring plan to enable the Commission to
comment and to postpone by four weeks payment
of those instalments should the Commission wish to
submit the report in question for scrutiny by an
independent consultant;

(g) Not to carry out the capital increases scheduled in
1995, 1996 and 1997 if
the
restructuring plan, as set out in the 1994 decision,
had not been attained for the previous years;

the objectives of

(h) To ensure that OA did not act as price leader on the
scheduled
and
Athens-London during the period 1994 to 1997
inclusive;

Athens-Stockholm

routes

(i) To ensure that throughout the entire duration of the
restructuring plan, the number of seats offered by
OA on scheduled flights within the European
including addition and
Economic Area
seasonal flights, but excluding domestic flights to
the Greek islands, would not exceed what has been
offered by OA in the EEA market in 1993;

(EEA),

(j) To ensure

the

that

remaining loan guarantees
extended to OA and the new guarantees to be
extended before 31 December 1997 explicitly
provided for by the restructuring plan to the
amount of USD 378 million, comply with the
conditions set out in the letter of 5 April 1989 from
the Commission to the Member States;

(1) The commitment by Greece not to interfere in the
management of OA in future except within the
strict limits of its role as a shareholder. Indeed, it
appeared at the time that the Greek Government
interfered in the management of OA, either directly
or through the board.

(2) The commitment by Greece not to grant any further
aid, as OA had been exempted from taxation or
public levies for the years 1995, 1996 and 1997,
from all taxes and other expenses in respect of the
loan guarantees, as well as from costs related to the
military service by OA's employees. These benefits
amounting to GRD 11 billion. Also, it appeared that
OA was not paying landing and parking fees since
the 1994 Decision was notified to Greece.

(3) The commitment by Greece to bring the agreements
with OA in line with the provisions of the third
package appeared to be not complied with as
abolition of OA's
Greece delayed unduly the
exclusive right to operate domestic flights within
continental Greece.

(4) The commitment by Greece to give OA the fiscal
status of a public limited company comparable to
that of Greek companies under ordinary (company)
law appeared to be not complied with, as various
provisions of Greek Law No 2271/94 exempted OA
generally from taxation inasmuch this was linked to
the reorganisation of the structure of OA's balance
sheet.

(5) The commitment by Greece to accept that airlines
other than OA are authorised to operate flight to
countries outside the EEA appeared to be not
complied with, as there was still no legislation in
force terminating OA's exclusive rights on such
routes.

2.1.2. The 1998 Decision

(12) However, due to the fact that several of the conditions
attached to that decision had not been observed, the
Commission decided on 30 April 1996 (4) to reopen the
procedure provided for by Article 87(2) of the Treaty,
and to initiate proceedings with regard to new and
non-notified aid of which it had been informed.

(14) On 14 August 1998, the Commission adopted decision
1999/332/EC (hereafter ‘the 1998 decision') according
to which the aid granted or to be granted by Greece to
OA was compatible with the common market by virtue
of Article 87(3)(c) of the EC Treaty (then Article 92(3)
(c)) and of Article 61(3)(c) of the EEA agreement. The
aid comprised:

(a) Loan guarantees granted to the company until 7
October 1994 pursuant to Article 6 of Greek Law
No 96/75 of 26 June 1975;

(13)

In particular, the Commission's doubts concerned the
following:

(4) OJ C 176, 19.6.1996, p. 5.

(b) New loan guarantees totalling USD 378 millions for
loans to be contracted before 31 December 1997 for
the purchase of new aircraft;

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(c) Easing of the undertaking's debt burden by GRD

427 billion;

(d) Conversion of GRD 64 billion of the undertaking's

debt to equity;

(e) A capital

injection of GRD 40,8 billion, reducing
the originally foreseen GRD 54 billion and in three
instalments of GRD 19, 14 and 7,8 billion
respectively in 1995, 1998 and 1999.

(15)

The aid measures approved by the 1998 decision were
accompanied by a revised restructuring plan (hereafter
period
‘the
1998-2002. The initial restructuring plan provided for
the improvement of yield and revenue management,

plan'). This

concerned

plan (5)

the

the

cost

staff),

changes

seasonal

freezing,

reduction based on organisational
operating
restructuring and changes in the working terms (freeze
of salaries, reduction of allowances, decreased overtime
in relation to permanent personnel, reduction of the
number of
in the
management. The 1998 plan confirmed the initial
measures and contained additional measures to achieve
the reorganisation of the cost structure of the company
(wage
and an
improvement of the yields through the introduction of
yield management. It also foresaw the redimensioning of
the network, a company-wide reorganisation of
the
in relation to
company's
investment
aircraft. Other
measures referred to the relocation of OA to Athens
International Airport of Spata (hereafter
‘AIA') and
additional
to take place
without new capital to be drawn from the shareholder.

structure
and
acquisition of

internal
the
for

reduction of

infrastructure

investment

staff

etc.)

(16)

The implementation of the 1998 restructuring plan and the achievement of the financial estimates
have been based on the following: indicators

Financial indicators

1998

1999

2000

2001

2002

Turnover (GRD millions)

324 234

329 071

344 829

359 057

380 626

Operating result after interest (GRD millions)

14 610

21 294

9 622

1 644

8 470

Profit before tax (GRD millions)

5 120

20 914

22 587

2 697

6 590

Long term debt (GRD millions)

59 501

123 993

191 542

171 625

151 708

Operational indicators

Average stage length (km)

1 014

1 053

1 087

1 097

1 110

Load factors

66,3 %

64,4 %

61,8 %

62,3 %

64,3 %

Yields (GRD/RPK (1)) — 1998 Prices

100

106

110,4

107,2

106,1

Number of employees (FTEs)

8 875

8 467

8 256

8 078

8 032

Total number of aircraft

35

37

40

40

40

Average Network Capacity

395 595

365 717

357 409

378 745

386 329

Financial ratios

Operating result turnover

4,5 %

6,5 %

2,8 %

0,5 %

2,2 %

(5) This plan was submitted to the Commission with letters dated

3 and 6 July 1998.

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Gearing

Productivity ratios

1998

1999

2000

2001

2002

2,22

2,42

2,76

2,57

2,34

ASK (2)s Number of employees

1 560 092 1 598 148

1 731 631 1 875 440 1 923 950

Staff expenditure ASKs

Cockpit crew expenditure ASKs

Cabin crew expenditure ASKs

Costs ratios

8,46

1,38

1,43

8,30

1,38

1,43

7,86

1,31

1,39

7,54

1,27

1,37

7,64

1,29

1,40

Aviation operating costs ASKs

21,20

21,61

22,37

22,56

23,04

Staff expenditure total operating costs

37,8 %

36,5 %

33,5 %

31,9 %

31,7 %

Cockpit crew expenditure aviation operating costs

6,5 %

6,4 %

5,9 %

5,6 %

5,6 %

Cabin crew expenditure aviation operating costs

6,8 %

6,6 %

6,2 %

6,1 %

6,1 %

(1) RPK: Revenue passenger per kilometre.
(2) ASK: Available seat per kilometre.

(17)

The whole scenario has been based on the assumption
that OA's aviation revenues would increase by 25,5 %
over the duration of the plan (from GRD 269 billion in
1998 to GRD 337,6 billion in 2002) while ground
handling revenues would decrease by 28,2 % during the
same period (from GRD 46,5 billion in 1998 to GRD
33,3 billion in 2002) as a result of the liberalisation of
this activity.

(18)

The aid approved by the 1998 decision was subject to
the respect of four conditions listed in Article 1 of that
decision. These were the following:

the Greek islands, would not exceed what OA had
offered in the EEA market during 1997 (7 792 243
seats),
taking into account, however, a possible
increase proportional to the growth of the market in
question;

(d) Note has been taken of Greece's commitment to
ensure that by 1 December 1998, OA would have
implemented a
and adequate
fully operational
Information System. Greece was
Management
requested to submit by 1 December 1998 a report
to the Commission on this matter.

(a) The integration into the 1998 decision of

twenty-one
authorities at the occasion the 1994 decision.

commitments given by

the
the Greek

(19) Moreover, the decision stipulated, that the payment of
the instalment of GRD 7,8 billion was to be subject to
compliance with all
the conditions attached to the
decision in order to secure the compatibility of the aid
actual
with
implementation of the revised restructuring plan and
achievement of
in particular as
the expected results,
regards the cost and productivity ratios set out in that
decision.

common market

and

the

the

(b) Note had been taken of Greece's commitment to
ensure that OA would not act as price leader on the
scheduled
and
Athens-London during the period 1998 to 2002
inclusive;

Athens-Stockholm

routes

(c) Note had been taken of Greece's commitment to
ensure that until 31 December 2002, the number of
seats offered by OA on scheduled flights in the EEA,
and
and
including
including services between continental Greece and

additional

seasonal

flights

(20)

In order to take into account the fact that the 1998
restructuring plan extended the original plan beyond
1997 and allowing OA to reach viability by 2000, the
Commission requested further commitments to ensure
the effectiveness of the aid and its compatibility with
the common market.

(21) Accordingly, the 1998 decision foresaw, that Greece had
the obligation to submit a report to the Commission in
the following cases:

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(a) at least ten weeks before the payment of the above
mentioned second instalment planned for 15 June
1999 and,

(b) by the end of the months of October 1999, March

2000 and October 2000.

the capital

injection of GRD 15
second tranche of
billion and issued part of the State guarantees, which
were authorised for an amount of USD 378 million for
the fleet renewal of OA, in particular in respect to four
new Airbus 340-400 aircraft.

(22)

(23)

(24)

The reports would confirm that all conditions imposed
were fully respected to ensure the compatibility of the
aid and the implementation of the revised restructuring
plan and thus eventual achievement of the estimated
results. Accordingly, payment of that instalment was not
to be released if all or part of the conditions were not
respected
revised
restructuring plan were not met. The decision did not
foresee any contingency plan nor provided for any
exemption to that obligation.

objectives

and/or

the

the

of

2.1.3. The 2000 Decision

the

letter of 17 July 2000 Greece notified the
By
Commission its
remaining
intention to use
authorised aid for loan guarantees to be contracted
before the end of 2000 for investment in relation to the
relocation of OA from Hellinikon airport to the new
Athens international airport at Spata, and to extend the
deadline for the loan guarantees to 31 March 2001. By
then the Greek State had issued loan guarantees
totalling USD 201,6 million for the purchase of four
of 10 November 2000
Airbus 340. By
(SG(2000)D/108307),
the Commission informed the
Greek authorities of its decision to amended Article 1
(1)(ii) of
the 1998 decision with regard to the aid
measure concerning the loan guarantees totalling USD
aid
378 million. Following this modification,
measure in question consisted of new loan guarantees
totalling USD 378 million for loans to be contracted
before 31 December 2000 for the purchase of new
aircraft and for investment necessary for the relocation
of Olympic Airways to the new airport at Spata. These
loan guarantees could be issued by 31 March 2001.

letter

the

February

In
of
2001, OA contracted
approximately GRD 62 billion from ABN-AMRO in this
respect.

loan

a

(26)

(27)

and

the
plan

In May 1999 Greece submitted to the Commission a
1998
report
implementation
on
restructuring
a
by
Memorandum in June 1999. This report was scrutinised
by an independent expert
in
accordance with the provisions of the 1998 decision
(Article 1(a) of
that decision and Article 1 —
commitment (h) of the 1994 decision).

(Deloitte & Touche)

of OA's
it

supplemented

since,

estimate made

The report was based on 1997 audited results, on 1998
management estimates and budgeted forecasts for 1999.
The report came to the result that OA had significantly
a number of
under-performed the plan. Hence,
projected targets of the 1998 decision had not been
achieved on time
according to the Greek
authorities ‘The actual 1997 results exceeded the most
pessimistic
in late February 1998'.
Indeed, the actual 1997 operating result after interest
amounted to a loss of GRD 28 billion (approx. EUR 82
million) against a previewed profit of approx. GRD 1.7
billion (approx. EUR 5 million). This poor performance
had been caused by loss of revenue due to reduced
activity levels, for which labour disruption were partly
responsible. While load factors had not deviated from
the plan, the report indicated that this was achieved at
the
such
degradation was due to agents' commissions discounts
larger than expected. Management had suffered from a
lack of control over behaviour in relation to agents'
instruments
incentives and it was doubtful whether
allowing such control were yet put
that
moment. In addition, performance has been poor due to
lack of punctuality, ageing aircraft, strikes and resulting
flight cancellations.

expense of yield. The main cause

in place at

for

2.2. OA's economic and management development

from 1998 to 2002

(25)

Following the adoption of the 1998 Decision, the Greek
government released in September 1998 to OA the

(28)

To counterbalance this underperformance the company
claimed to have undertaken austerity measures and to
have introduced strict financial practice from February
1998 to August 1999. Despite these efforts and given
also the labour unrest experienced during that period —
it should be noted however, that the restructuring Plan
had estimated costs amounting to GRD 15 billion for
such disruptions. In actual terms, costs generated were
of GRD 12 billions and thus 3 billion less
than
estimated (Report Deloitte & Touche, 21 July 1999, p.
22 — the objectives set in the plan for 1998 could not

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be reached and an operating loss after interest of GRD
10,4 billion (EUR 30,4 million) against a previewed
profit of GRD 14,6 billion (EUR 42,3 million) was
accumulated. Contrary to this, Greece confirmed the
management's commitment
to the restructuring plan
and to the objectives laid down therein.

philosophy of the previously authorised plan since it
was mainly
focusing on expansion and revenue
maximisation than on the cost side'.

(29)

(30)

the shortcomings

in the state of
The analysis of
implementation of
the 1998 plan by the report of
Deloitte & Touche showed that it would not allow the
Commission to take a positive decision on the release of
the last instalment. The Commission transmitted this
analysis to the Greek authorities by letters of 12 and 19
May and of 27 July 1999. The Commission also invited
Greece to submit an updated restructuring plan for OA,
which would then be examined by the Commission in
relation to the capital injection of GRD 7,8 billion (EUR
22,8 million). In their reply to the Commission of 26
August 1999, Greece accepted that implementation of
the 1998 to 2002 restructuring plan would have to be
further revised to meet the previewed results and to
allow the Commission to consider positively the
granting of the last instalment.

(32)

(33)

To address these concerns, and in order that ‘no more
restructuring time would be wasted' (Memorandum of
Greek authorities of 11 April 2002.)
the Hellenic
authorities had already decided and informed the
Commission by letter of 7 July 1999 of their intention
to appoint, through an international open tender, an
experienced international management
to run the
airline. Speedwing the consultancy subsidiary of British
Airways
awarded the
management contract, which also provided for BA's
option to purchase a stake of up to 20 % in OA within
one year from signing the management contract.

‘BA'), was

(herafter

finally

by

Speedwing

team formed

(31) After a meeting in August 1999 between the new
and
management
Commission's officials in Brussels, the Greek authorities
submitted by letter of 18 November 1999 a modified
restructuring plan for OA prepared by Speedwing. Both
companies, however, already started its implementation
before its formal approval by the Commission. Deloitte
& Touche examined the plan and expressed concern on
some of
its aspects. The key difference between the
Speedwing plan and the plan approved in the
Commission's decision of 1998 as applied in 1998 and
early 1999 was a focus on revenue increase and
expansion of the company's activities. Deloitte & Touche
qualified in their initial report the Speedwing plan as
‘ambitious'. The Greek authorities themselves confirmed
‘the
in their memorandum of 11 April 2002 that
from the
philosophy of

this plan was

far distant

final draft of

authorised by

the 1998 decision.

the Deloitte & Touche

By letter of 20 March 2000, the Commission submitted
report,
the
confirming the initial concerns to the Greek authorities.
Therein, the Commission expressed its concerns about
the failure to implement the revised restructuring plan
as
Speedwing
the Deloitte & Touche
contested the conclusions of
report and replied to the Commission before departing
from the management of OA in mid-2000. By letter of
29 August 2000 to the Commission,
the Greek
Authorities confirmed that OA had no official results for
1999 in the form of audited accounts and committed
themselves not to grant the last capital injection. Greece
asked the Commission to abstain from adopting a
decision with regard to that matter.

authorities

the Greek

a
consolidated balance

In parallel,
and the new
management, put in place after Speedwing's departure
wanted to re-assess the overall financial situation of the
company in order to make 1999 a sound basis for
further OA restructuring. In addition, the management
intended to ‘neutralize' some of the long-term effects of
decisions taken by Speedwing management that would
have a negative impact on the finances of the Company
and to ‘start to put emphasis on the cost efficiency of
the airline' (Greek reply of 11 April 2002). In autumn
2000 PriceWaterhouseCoopers (PwC) were asked by OA
compilation report on un-audited
to provide
preliminary
as of 31
December 1999. The findings made by PwC mentioned,
among others, that, in application of Law 2271/94 as
amended by Law 2465/97 (Article 14), corporate tax
was payable by OA and its subsidiary Olympic Aviation
on taxable profits as from 1994. However, from PwC's
the
report
companies forming the OA and Olympic Aviation had
not been audited by the tax authorities for a number of
years, as early as 1988 (Olympic Aviation) or 1992
(Olympic Airways). Furthermore,
the 1999 statutory
financial statements for OA and Olympic Aviation had
not at the time (December 2000) been approved by the
respective general meetings of shareholders.

resulted that books and records of

sheet

it

(34) After

the

thorough examination of

following the departure of

financial
this
the
situation of OA,
Speedwing management,
authorities
acknowledged in summer 2000 that it would not be
possible to achieve the restructuring of OA solely on the
basis of own funds or a sale of a minority stake. In early
informed the
summer 2000 the Greek authorities

Greek

the

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(35)

(36)

(37)

Commission of their decision to proceed with the sale
of a majority stake of OA in order to achieve the
financing of the airline. In September 2000, the Greek
authorities appointed Credit Suisse First Boston, as
financial advisor, as well as a number of other advisors
as required by the Greek Law on privatisation 2000/91.
Meanwhile,
the reports due for March and October
2000 in application of the 1998 decision had not been
communicated to the Commission.

have

however,

The 1998 decision also provided as part of the plan that
OA's move to AIA would be financed by cash flow and
the 1998 decision). The
compensation (point 82 of
company would,
granted
been
the loss of
compensation by the Greek State for
its
investments at Hellenikon airport as a result of
closure (estimated at GRD 35 billion). With regard to
this compensation, the Greek State had confirmed to the
Commission by letter of 3 July 1998 that
the
compensation would not involve any element of aid to
OA and that it would strictly correspond to what any
other company in a similar situation would be entitled
to receive.
to the
Commission's concerns with regard to the timing of this
compensation, Greece
the
had
Commission that on the basis of the agreement to be
reached between OA and the Greek State, payment
would coincide with the
expenditures
incurred by its move to AIA airport.

In addition,

company's

in order

reassured

to react

also

By letter of 12 December 1999 Greece informed the
Commission that
the compensation to OA directly
linked with its move to AIA was estimated by the
consultancy American Appraisal, UK, employed by the
Greek State to determine the losses that OA would incur
as a result of the closure of Hellinikon and its move to
AIA at GRD 33,66 billion as of 20 April 1999.

and

whether

involved
after

it
Stratford,

This report was transmitted to the Commission, without
however a formal notification for additional State aid.
The Commission appointed Alan Stratford to verify
whether the appraisal carried out by the consultancy
American Appraisal was based on the ‘fair market value'
any
principle
overcompensation. Alan
having
examined OA's situation at Hellinikon and the method
of application of
the fair market value principle,
concluded in its final report of May 2000, that the
calculations and the resulting amounts were reasonable.
Nevertheless,
also questioned the necessity of
including equipment as a compensation item and
whether certain historic benefits enjoyed by OA at
Hellinikon should be offset by compensation. According
to the
another
methodology proposed by Alan Stratford (especially in
respect of life assumptions on buildings) ‘the calculated

if Greece had used

consultant

it

compensation figure would be significantly increased'.
OA moved
to Athens
International Airport at Spata, which opened on 28
March 2001. The same day Hellinikon was closed.

operations

time

its

in

(38) At the end of January 2002, OA contracted a loan of
EUR 19,5 million from the Commercial Bank of Greece,
an
a public
assignment from OA to that bank of its claims against
the Greek State for unpaid air tickets for an amount of
EUR 22 millions. The loan was granted for one year.

commercial bank, on the basis of

2.3. The HACA complaints

(39)

The Commission received two sets of complaints on 12
October 2000 and 24 July 2001 by HACA. Members of
the HACA are
the following air carriers: Aegean
Airlines, Cronus Airlines, Hellenic Star Airways, Cal
Aviation, Trans European Airlines, Interjet, Avionic and
Aviator. They concerned:

(a) preferential payment allowances to OA workforce,

(b) unclarity of the Greek Law 2733/99 providing for
the offset of debts between OA and the Greek State,

(c)

the non payment
in time of some landing and
parking charges at Hellinikon Airport and the non
payment of airport charges to AIA;

(d) the

arrears

in payment of

the Spatosimo (a
the development of Greek

passenger
airports) of ca EUR 47 million (GRD 16 billion),

tax for

(e) default or
premises
airports that Hellinikon and/or AIA;

substantial delay for paying rent of
to other Greek

and landing charges

(f) VAT relief on fuel and spare parts for Olympic
Aviation for a financial benefit of EUR 2,6 million,

(g) default or substantial delay for paying social security
contributions, default or substantial delay for paying
VAT at 8 % on domestic fares, default or substantial
delay for paying amounts due to Olympic Catering.

28.5.2003

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3. THE DECISION OF 6 MARCH 2002

3.1. Grounds for investigation

the absence of
and in October 2000. Moreover,
information and of credible accountancy on the results
of
the company does not enable in any case the
Commission to fully verify the respect of this essential
condition without further investigation.

(40)

to the
The replies given by the Greek authorities
complaints on 19 February 2001, 7 and 11 December
2001, as well as 12 March 2002 did not dissipated the
Commission's doubts, hence it decided to reopen the
formal
investigation procedure laid down in Article
88(2) of the Treaty. The grounds for investigations were
twofold and are cited below:

1. Abusive application of aid granted in the 1994

and 1998 Commission Decisions

(41)

(42)

taken place,

The non respect of

a)
the restructuring plan: The
restructuring plan that served as the basis for the 1998
authorisation has apparently not been implemented as
foreseen. In particular, the changes in the organisational
the company have not
structure of
the
management
layers having essentially remained the
same. The number of employees have decreased more
than what was foreseen in the restructuring plan (see
paragraphs 11-17), however, this appears to be due only
to the spinning-off of activities into its subsidiaries
previously carried out by OA. While employees' salaries
the resulting
have been frozen for 1996 to 1997,
reduction in production costs was largely cancelled by
significant raise in salaries in 1998.

that

is worth noting

the objectives of

It
the
restructuring plan that served as a basis for the 1998
decision were never achieved. This resulted from OA's
financial situation as described earlier herein. Based on
the information given above the Commission had
doubts as to whether OA's economic and financial
development corresponded to the plan covering the
period 1998 to 2002 on the basis of which the aid
measures where approved with the 1998 decision. In
particular, since the Commission had not received any
information about the financial results of the company
in 2000 or any estimates for 2001 and given that
Speedwing
and
restructuring plan observing the targets set out in the
1998 decision, the Commission had serious doubts as to
the current financial situation of the company being
further apart from the targets set out for the years 2000
to 2002 in the restructuring plan.

business

produce

failed

to

a

(43) Against the requirements of Article 1 paragraph 2 of
the 1998 decision, no report on the implementation of
the plan was submitted to the Commission in March

(44)

(45)

(46)

(47)

not

have

been

resulted from the above that

It
the economic and
financial projections upon which this plan was
elaborated by the Greek State and approved by the
Commission
continuously met.
Monitoring of the implementation of the restructuring
plan indicated the existence of serious doubts as to the
continuous compatibility of OA's current economic and
financial situation with the operational and financial
indicators of
that plan. These doubts were of such
nature that justify that the Commission re-examined the
1998
correct
implementation of the restructuring plan.

decision with

regards

the

to

the

The

conditions

non-respect

implemented a

and
of
b)
commitments of the previous decisions. Article 1(d) of
the 1998 decision requires Greece to ensure that OA
would have
and
fully operational
information system (hereafter
adequate management
the Greek
‘MIS') by 1 December 1998. To date,
authorities have not
to the
Commission about the MIS nor have they informed it
about the degree of its implementation and its results.

submitted a

report

The 1998 decision required Greece to have set up a
fully operational and adequate management information
system by 1 December 1998. The purpose of setting up
the MIS was to allow the management of OA to receive
adequate information to monitor
the
restructuring plan and further amend the plan if
necessary. Also, it should be noted that on the basis of
the restructuring plan which formed the core of the
1998 decision, the Greek State was obliged to establish
consolidated accounts
subsidiaries.
Accurate input for setting up such accounts would stem
from a fully operational and adequate MIS.

for OA and its

the results of

The Commission had put emphasis on the absolute
necessity of this step, not only for the respect of the
decision's condition itself, but much more for the own
sake of
the 1997
the company. The experience of
accounts, described earlier (see paragraph 26), easily
in a plan
proved the difficulty to reach targets set
without a proper starting point. Generally speaking, this
implies that the management of a company can only
take the right decisions to address a situation for the
future if it has a coherent, precise, accurate and timely
prepared picture of the past actions and achievements
and/or failures. Such a management tool also implies
that
recorded in the
accounting systems of
the companies is timely and
accurately processed, controlled and reported to the
management.

the underlying information,

L 132/10

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28.5.2003

(48) Article 1(a) of the 1998 decision requires Greece to
fulfil the undertakings referred to in Article 1(a) to (u)
of the 1994 decision. For better understanding of the
legal context within which OA should have been
functioning as any other commercial company since
1994 under common commercial law, the following is
being recalled: OA is a public undertaking, that does not
form part of the Greek public administration and is
subject to the provisions of private law, most notably
those of Law No 2190/1920 governing the form and
functioning of private limited companies (‘Anonymos
Eteria' – ‘Societé Anonyme'). Such companies are subject
to strict publicity obligations. However, even though OA
was
its
articles of association do not form part of either this
publication or any other, according to information
available to the Commission.

registry No 422/01/B/86/423,

listed under

for

that

statement

the requirement of

(49) Also, Law No 2190/1920 in its article 25 requires the
general meeting of shareholders to meet within six
months after the end of each financial year in order to
discuss and approve the financial statements of
the
company for the year which has ended. Also, according
to article 43b §5 of the same law, the managing board
of a private limited company has
to publish the
financial statements of the company for the previous
financial year at
least 20 days before the general
meeting of the shareholders. However, OA published its
financial
the year 1999 only on 28
December 2001. This statement was established on 31
March 2001 by the CEO (Chief Executive Officer) of the
company and the general manager. It was examined by
these dates
auditors on 11 December 2001. Clearly,
indicate
is
applicable to any other private limited company was
not respected. Without prejudice to any further action
by the Commission that this situation may give raise
with regards to the application of Articles 3(1) and 5 (6)
of Council Regulation (EEC) 2407/92 of 23 July 1992
on air carrier licensing (6), this matter is of particular
importance for the competitive position in the market
of OA and its competitors when considering that the
statement of the auditors, for the year ended on 31
December 1999, draws the attention to the fact that the
own funds of the company have fallen bellow 50 % of
the share capital. In fact, it appears that for the financial
year 1999 own funds (GRD 33 699 706 104 or EUR
98,89 million) correspond only to 27,8 % of the share
capital (GRD 120 947 970 000 or EUR 354,94 million).
This situation has according to article 47 of Law No
2190/1920 the consequence, that the managing board
has to call a meeting of the shareholders to decide the
dissolution of the company or other measures to redress
the financial situation of the company.

law that

the

(50)

This particular aspect
Therefore,

it

appears necessary

raises

further

serious doubts.
the

to examine

to remain active

conditions under which OA and its subsidiaries have
been able
after 1999 without
restructuring measures and against what is foreseen in
law. The Commission recalls that
normal Commercial
such situation, apart
the
from being a breach of
commitments and conditions foreseen in the previous
decisions, may also imply an aid element (see Court of
Justice, Case Magefesa, C-480/98).

The same can be said (7) about both OA's legal and
fiscal status as well as the situation of its payments to
the Greek State. These indicate, that the undertaking has
been able to continue its business at least since 1999
without complying with their tax, and social security
obligations as well as with their obligations to make due
payments for airport charges, levies, rentals and fees to
various Greek airports and to the Greek State itself.

The current situation of default on or deferred payments
of airport charges,
fees and any other
taxes, rentals,
levies to Greek airports and the Greek State raises
doubts as to whether OA is granted new state aid,
which is contrary to the 1998 decision and apparently
further
carriers
operating services to/from Greece.

competition

distorts

among

air

The Commission draws particularly the attention of the
Greek authorities to the extremely difficult situation of
OA's competitors. In that context, particular reference is
made to Axon Airlines. Also, other competitors such as
Cronus Airlines
facing
significant difficulties, which appear to be partially due
to the fact that, legally and financially, OA is not treated
even-handedly by the Greek State. It appears therefore
likely that OA's current situation regarding the payment
of its obligations to Greek airports and the Greek State
constitute aid against the common interest.

and Aegean Airlines

are

(51)

(52)

(53)

(54) OA's legal and fiscal status. A series of laws subject OA
supervision and control of Ministries
to the direct
providing for
rights and obligations, which deviate
explicitly from that law. Also, certain other Greek laws

(6) OJ L 240, 24.8.1992, p. 1.

(7) See in particular case C-480/98, points 20-21, European Court

Reports 2000, Page I-8717.

28.5.2003

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Official Journal of the European Union

L 132/11

provide OA exclusively with fiscal benefits, which do
not apply to private limited companies or any other
form of commercial company.

(59)

(55)

These provisions appear to be against the commitment
of the Greek State to ensure that:

that

it appears

the flexibility previously
Therefore,
existing for the recruitment of flying crew (and pilots)
has been removed. Furthermore, it is not clear whether
the provisions of Law 2527/97, which, as stated in the
a
for
1998 decision, provide
recruitment
staff, have not been
seasonal
procedure for OA's
implicitly abrogated by the provisions of Law 2602/98.
This appears to be the case as this latter Law does not
exclude explicitly seasonal staff from the provisions of
Law 2190/94 concerning the public undertakings and
undertakings of public law belonging to the public
sector,
to further maintain the recruitment
flexibility for seasonal staff.

specific

so as

regulations

(60) Additionally, it should be noted that OA's management
is not subject
to the provisions of Law 2190/94 as
stipulated in Article 2 of Law 2608/98 containing OA's
staff
(preamble, paragraph 3 thereof).
However, as OA is a public utility company according
to the provisions of Law 2414/96 as is explained below,
its management
the CEO and
and in particular
the Director
the Board of Directors,
Chairman of
General, the general and legal Counsels are appointed by
the
recruitment
conditions further afar form the private ordinary law
applying to private or public limited companies.

aspects bring OA's

State. These

(61)

Law 95/76. Article 3 paragraph 2 of the Law provides
that claims by the Bank of Greece against OA for loans
granted by the State to OA as from 1 January 1975 are
to be considered as claims against the State, which can
thereafter be offset against any claims by OA against the
State.

(62) Article 3 paragraph 3 of

the Law provides,

that all
contractual
transactions entered into by OA for the
transfer of any assets, real estates or any other property
of OA, in particular aircraft, aircraft engines, helicopters
etc., as well as any other notary transactions are to be
free of any notary or
registration fees. Article 4
paragraph 2 of the Law provides, that by act of the
Cabinet of Ministers OA's shares can be transferred to
the Hellenic Bank of Industrial Development (ETVA) in
contravention of otherwise applicable Greek legislation.
Article 4 paragraph 3 of the Law stipulates that OA is
subject, in any event to the control and supervision of
the Minister of Transport and Communications. The
scope of this provision is very broad and covers every
activity or managerial aspect of OA. It constitutes one
of
an
undertaking such as OA and any other private or public
the Law
limited entity. Article 4 paragraph 4 of
the
for
transactions
provides
transfer of any assets or any other property of OA to
any entity of private or public law) will be carried out
free of any taxation or any other fees or public levy.
Article 6 paragraph 2 of the law stipulates that the meal
allowance paid in cash to the personnel of OA working

that any contractual

the most

differences

important

between

(a)

(b)

(c)

from a management and status point of view (part
VII of the 1994 decision and Article 1(a) and (c)
thereof), OA would have the fiscal status of a public
limited company become an undertaking subject to
ordinary law on the same footing as the other
Community airlines with no special privileges or
constraints,

it would not interfere in the management of OA
except within the
role as
strict
shareholder (Article 1(b) of the 1994 decision),

limits of

its

it would have adopted immediately the legislation
necessary for the effective implementation of
the
salary,
the plan
social and financial aspects of
(Article 1(f) of the 1994 decision).

The legislation in question is the following:

(56)

(57)

(58)

Law 2271/94 and Law 2602/98: In the 1998 decision
the Commission considered that Article 2(12)(a) and
Article 4 of Law 2271/94 which aims at implementing
the restructuring plan of OA was not comparable to
that of
staff
management. Furthermore, the Commission took into
account that Article 4(4) of Law 2271/94 re-qualified in
practice OA and its subsidiaries as a public sector
company for the purpose of recruitment of staff.

undertaking

a private

regards

as

is
In particular, as far as the system of recruitment
concerned,
the Commission took note in its 1998
decision of the provisions of Law 2190/94 concerning
the public undertakings and undertakings of public law
belonging to the public sector. The only exemptions are
provided in article 14(2)(j) of that Law concerning OA
pilots.

‘the

cumbersome

the Commission stated in that decision
Furthermore,
(point
administrative
that
66)
procedure regarding permanent staff ‘was not unsuited
to flexible personnel management as needs for such
personnel were usually planned in advance.' The
provisions in question of Law 2271/94 have been
supplemented by Law 2602/98 on the completion of
the implementation of the restructuring plan of OA.
Article 3 paragraph 2 of
this Law provides that all
(flying crew, technical, ground staff) are all
personnel
submitted to the provisions of Law 2190/94.'

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Official Journal of the European Union

28.5.2003

(66)

at the airports does not constitute a part of its wage and
thus is not subject to withholdings in favour of the
Social Security Fund or other pension schemes. This
particular aspect was also addressed in the complaint
lodged by HACA with the Commission against
the
Greek State on 12 October 2000. Article 6 paragraph 3,
last
indent stipulates that any reevaluation of OA's
property and any resulting readjustments are exempt
from any taxation or any other fee.

The Commission considers that these measures specific
to OA raise doubts as to their compatibility with the
abovementioned commitment entered into by the Greek
State. This is so in particular because Article 1(c) of the
1994 decision referred to tax exoneration affecting the
recapitalisation and the restructuring of OA as they
resulted directly from the restructuring plan. Inasmuch
as
to OA exclusively specific financial
benefits they also constitute new aid. The measures
provided for by Law 75/96 and 2414/96 go beyond this
provision of the 1994 decision. Also, they clearly show
that OA is still not given the status of an ordinary
private or public limited company against the provisions
of Article 1(a), (b) and (f) of the 1994 decision.

they confer

(63)

Law 2414/96. This Law concerns the ‘modernisation of
the public undertakings and organisations and other
provisions'. This Law includes OA and all its subsidiaries
in the list of ‘public undertakings' to which the law
applies and qualifies as ‘public utilities'
in
Greek). Most of the companies subject to this law are
already private limited companies. Those who are not
must be transformed to such company form as required
by Article 2 of that Law.

(‘DEKO'

(64) However, the provisions of this law, which apply also to
OA, clearly derogate from those applicable to ordinary
private limited companies. DEKOs are considered to be
undertakings offering services to the general
interest
and, therefore, the Greek Government's involvement in
the management and the overall operation of such
undertakings is more intensive. Furthermore, there is no
standard legal environment for DEKOs. Therefore the
scope of intervention of the State can vary.

number

constitute

of Articles)

(65) With the exception of Articles 14, 19 and 20, which are
not applicable to OA, all other Articles of that Law (24
total
significant
deviations from the provisions of Law 2190/1920. On
the one hand the Greek State, as sole shareholder of
OA, may appoint and revoke OA's members of
the
Board of Directors at any time, as is the case of ordinary
private limited companies, where the Board is appointed
by the General Assembly of the shareholders. On the
other, according to the provisions for DEKOs the State
can de facto intervene and OA has accordingly to follow
different procedures
the
members of
its Board and their decision-making
procedures. In particular, the Chief Executive Officer is
appointed by the State
the
Government and may be at the same time the Chairman
of the Board of the company. Also, DEKOs have, unlike
ordinary private limited companies, an extra body, the
is to
Directorate's Board,
ensure that the company's policies are coordinated with
State policies. Moreover, DEKOs (and therefore also OA)
are given preferential access to state funded programmes
for projects with national, Community or international
interest.

the main tasks of which,

representative of

appointment of

the

for

as

2. Initiate the procedure with regard to new illegal

aid.

(67)

The Commission considers that the following measures,
apart of being a possible violation of
the prior
decisions, seem particularly likely to constitute State
aids:

(a) Greece tolerance with the non-application of normal
law rules to OA (Laws 2190/1920,

Commercial
2271/94, 2602/98, 95/76 and 2414/96)

(b) Greece tolerance with the default on or deferred
payment of Social Security and Tax obligations by
OA.

(c) Greece tolerance with the default on or deferred
payment of the different kind of airport charges.

(d) The exemptions from taxes, notary or registration

fees for OA transactions.

(e) The possibility of offseting debts of the State and of
including the

OA, or between airports and OA,
‘Spatosimo' tax, in a non-transparent way.

(i) The fact that by Presidential Decree 138/97 OA
is required to pay airport charges and is not
exempt from any rentals or other fees and levies
for the use of space at Greek airports, does not
in itself mean that OA factually complies with
fees and
its obligation to pay such charges,

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In fact, the Greek authorities accept in
levies.
their submissions to the Commission regarding
the complaint by HACA that OA has been in
arrears with payments and that it has indeed
requested that
its
claims against Greece.

its debts be offset against

State,

is not

relevant,

the Greek

transparent, neutral

(ii) The same argument applies to the offset of debts
as
between OA and
implemented by virtue of Law 2733/99.
It
should be stressed, that as such the offset of
debt
considered incompatible with
Articles 87 – 89 of the Treaty. This particular
measure, however, does not provide in an
objective,
and
non-discriminatory way the debt accrued on
each side. Therefore, serious doubts arise as to
how the amounts concerned by the offset have
been calculated. For that reason serious doubts
exist about the compatibility of the calculation
method and the
Law
i.e. GRD 9 862 639 493 (EUR 28,9
2733/99,
million)
by
outstanding
31 December 1998, which appear also to
tax payable by OA for overdue
include
payments for airport charges and space rentals
until 31 May 1999.

amounts offset by

amounts

as

(iii) Furthermore,

the

development

serious doubts exist about

the
payment conditions for the landing charges at
Athens International Airport as well as for the
payment of
tax
airport
‘Spatosimo'. Furthermore,
the Commission is
particularly concerned with the statement of the
Greek authorities in their observations on the
supplementary complaint, that OA has requested
the offset of amounts of EUR 15 million due as
Spatosimo,
amounts
outstanding for airport charges and space rentals
at other Greek airports. Given that OA is the
biggest operator at all Greek airports, default on
payment of such charges and rentals deprives
these airports of significant revenue and creates
important distortions of competition among the
air carriers which use these airports.

as well

the

of

as

raises

doubts

the
at Hellinikon
compatibility of such payment. In that context,
particular consideration is given to what
the
Greek authorities assert in their observations on
the supplementary complaint lodged by HACA.

to

as

(f) The granting of the operation of the fuelling facility
to an OA subsidiary without an open tender and the
tariff conditions applied. With regard to the fuelling
facility two aspects raise concerns: OA is the largest
shareholder of OFC (Olympic Fuel Company) (66 %);
OFC was selected by the Greek State in the course
of a tender procedure for
the construction and
operation of the fuelling facility at AIA. There are
significant discrepancies between the final cost as
opposed to planned cost for that facility. Serious
doubts arise on whether the amounts charged by
OFC as fuelling fees to recoup this investment only
reflect differences in the exchange rate or whether
they also contain elements of State aid.

(g) The granting of a loan of EUR 19,5 millions by a
public
commercial bank (Commercial Bank of
Greece) to OA on the basis of an assignment from
OA to that bank of its claims against the Greek State
for an amount of EUR 22 millions for unpaid
tickets.

(68)

In the same opening of the procedure, the Commission
issued an information injunction in application of
Article 10 of Council Regulation (EC) 659/1999 of
22 March 1999 laying down detailed rules for
the
the EC Treaty (8) with
application of Article 93 of
the
regard to all
Commission to decide about the alleged violation of the
commitments and conditions included in the 1998
decision, about the implementation of the restructuring
plan at the basis of such decision and about the alleged
new unlawful aid referred to above. This information
should include
and in
particular:

information necessary

elements

relevant

the

the

for

all

(a)

the audited financial accounts for the years 2000
and 2001;

(iv) It appears that the Greek State tolerates that OA
is in arrears in its payments of airport charges,
taxes, rentals and other levies to the airport and
to the Greek State itself, because it has not made
full payment
that compensation.
Therefore, the state of payment by the Greek
State of any amounts agreed and/or outstanding
at this moment to OA for the loss of investment

to OA of

(b) the use of the loan guarantees provided for in the
1998 decision with regards to the purchase of
aircraft and with regards
to the relocation of
Olympic Airways to AIA;

(8) OJ L 83, 27.3.1999, p. 1.

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Official Journal of the European Union

28.5.2003

(c)

the State of all financial and operational leases for
the aircraft operated by Olympic Airways and its
subsidiaries;

(d) all information regarding the introduction of a yield

management policy and programme;

(e) all information regarding the State of relocation of

all activities of Olympic Airways to AIA;

(f)

on

reports

the
the
restructuring plan as due by March and October
2000;

implementation

the

of

(g) the State and details of payment by Olympic
Airways of the ‘Spatosimo' tax as well as of VAT
concerning the company and its subsidiaries,
the
airport charges at Hellinikon and AIA, all rentals,
fees and levies payable to Hellinikon, AIA and all
other Greek Airports since 1998 until today;

(h) all

information and particular all payment details
and conditions regarding the loan guarantee of EUR
19,5 million extended in February 2002 by the
Greek State (Commercial Bank of Greece) to OA to
cover operational costs.

(69)

The Greek authorities replied on 11 April. Although the
information sent was extremely dense,
the audited
accounts for 2000 and 2001 were still missing, as well
as
the
restructuring plan as due by March and October 2000.
In the same letter, Greece informed the Commission
that a new process of privatisation of OA is triggered.

implementation of

on the

reports

the

in 2001 (9)

Airways did not met
(further
enlightening the charges for the year 2001 on
the one hand, and the charges for the previous
years on the other hand), as well as
the
repayment plan of those debts from 1 January
2002.

(b) The following additional information:

(i) Precise and quantitative information on all the
current debts in any financial
institutions and
others, as well as the repayment plan of the
debts (10).

(ii) Concrete economic data of Olympic Airways for
the first six months of 2002, as well as an
the company to reach
objective analysis for
viability
shall be
controlled and certified by an independent
expert.

in 2002. This

analysis

(iii) The legislation modifying the Law 2414/96 and
Articles 3 paragraph 2, 3 paragraph 3, 4
paragraph 2 to 4, 6 paragraph 2, 6 paragraph 3
of
to
the Law 95/76, which would permit
Olympic Airways to act as an effective private
independent from any other
limited company,
resulting from its
State influence than this
shareholder position.

(71)

By 1 October 2002, Greece sent a reply and asked the
Commission to convene a meeting on this
issue.
However, the 2001 audited accounts were still missing
from the information sent
to the Commission. The
2002 analysis certified by an independent expert has
eventually been transmitted on 14 November 2002.

3.2. Information injunction

4. COMMENTS BY THE GREEK AUTHORITIES

(70) As a result a second information injunction was adopted
it requested

by the Commission on 9 August 2002,
from the Greece:

(72)

(a) The information already requested in the decision of

6 March 2002:

(i)

the audited financial accounts
2000 and 2001.

for

the years

The Commission would like to emphasise the fact that
the information transmitted by Greece following the
opening of the procedure and the two injunctions of
information, notably by letters of 11 April 2002 and
1 October 2002, and by hand at the occasion of the
meeting of 16 October, have been often late and
incomplete. The
situation according to the Greek
authorities concerning first the abusive application of
the aid granted in 1994 and 1998 and secondly the new
illegal aid is as follows:

(ii) Precise and quantitative information on the
costs Olympic
the operating

payment of

(9) It concerns debts, which have to be paid to suppliers and other

third parties (airport charges, social security etc.).

(10) It concerns financial debts (banks) or possibly debts related to the

financing of the fleet.

(73)

(74)

(75)

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L 132/15

1. Abusive application of aid granted in the 1994 and

1998 Commission Decisions

(a) The non respect of the restructuring plan

(77)

for

In addition,

The Greek authorities underlined that the 1997 results
exceeded the most pessimistic results.
in
financial crisis, shortfall of
1998, because of strikes,
aircraft as well as significant personnel retirements,
it
was not possible to achieve targets
the year,
especially as far as productivity was concerned. Efforts
were nevertheless undertaken (strict management,
introduction of a Frequent Flyer Programm, progress in
the development of a Management Information System).
On 18 November 1999 Speedwing presented a new
restructuring Plan. However, due to the disagreement
with the expert appointed by the Commission, Deloitte
accepted. A
& Touche,
such a plan was never
privatisation process started in 2000.
In parallel, the
management of OA rationalised OA's operations
(reduced capacity and costs etc.).

first

has increased the operational landing costs by 1000 %).
The
by OA's
management would show that the company would have
a positive EBITDA of EUR 11 million.

for 2002 made

estimations

the recent achievements of

Indeed the new Deloitte & Touche report submitted by
Greece points out
the
company in its operation and financial result. It states,
nevertheless, that depending on the hypothises taken
into account, the EBITDA would however range from
EUR 10 to EUR 58 million, with a ‘most likely' scenario
being a loss, of EUR 39 million. The differences are
mainly linked to variances in revenue estimations but
also, according to the report, to a negative impact of
staff cost vs. Plan objectives up to EUR 7,4 million.
Deloitte explains that this impact may be linked to the
indeed ‘Staff
still unsatisfactory
productivity,
to 2000
however, when compared
productivity per ASK (Available seat-kilometres) has
deteriorated by 5,7 %'.

staff productivity;

In the meeting held in Brussels on 16 October between
DG Energy and Transport officials and the Greek
authorities, accompanied by OA representatives, it was
specified that OA had made significant progress since
the arrival of the new management, in summer 2000,
in terms of reduction of costs, as well as efforts not to
maximise revenue.

(78) Once all operational costs (i.e. depreciation of assets and
interest charge) are included, the operating result 2002
shown by OA's management would be a loss of EUR 41
million. The review made by Deloitte & Touche also
gives a lower figure, with a loss ranging from EUR 63
to EUR 111 million and a most likely scenario of EUR
92 million. Although these estimates tend to show an
improvement from the previous years operating results
(2001: EUR 194 million and 2000: EUR 164 million),
they remain in all cases negative.

By doing so the domestic market share of Olympic
Airways in the first half of 2002 was 57 %, as against
53 % in the same period of 2001. The international
market share was 25,2 %, as against 22,6 % in 2001.
The load factor indicator for the network as a whole
rose to 63,7 % in the first half of 2002 from 60,84 % in
the same period of 2001.

(79)

(76) On the economic side, and in spite of such progress, the
Greek flag carrier still recorded losses. Earnings Before
Interest, Taxes, Depreciation of Assets ((‘Earnings Before
Interest Taxes and Depreciation of Assets', hereinafter:
EBITDA) amounted to a loss of EUR 132 million in
2000. Such results are due, according to OA to the
change of management and the increase of USD and
petrol. In 2001 the EBITDA estimation is a loss EUR
149 million (mainly due to the move to Spata, which

the profit and loss accounts

In addition,
include
exceptional results of about EUR 60 million in 2002
(EUR 57 million in 2001 and EUR 69 million in 2000),
which would enable the company, according to its
projection, to post a net profit in 2002 for EUR 18
million. On the basis of the operating result reviewed by
Deloitte,
the net result would remain, according to
management expectations, a loss and could range from
EUR 3 to EUR 50 million and a most likely scenario of
EUR 31 million. OA informed the Commission that
these incomes would come from the next sale of planes,
Galileo Hellas, Olympic Catering etc. Such possible
actions have not been quantified in the report of
Deloitte and have only been mentioned as expectations
from the management. On the other hand,
the
consultant takes note of the possible necessity for OA to
additional
build
expenditure, of EUR 23,5 million in relation to fines

provision,

therefore

up

an

a

L 132/16

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Official Journal of the European Union

28.5.2003

and surcharges
pendent for settlement with the Greece.

for past-due payments

indicated as

considered unrealistic for a company, which had to
implement such a system from the start.

(80) On the balance sheet side, the company has a negative
stockholders equity since end 2001 for EUR 136
million. No comments on this side have been made by
Deloitte in their new report.

(81)

the Hellenic
In the light of such late achievements,
authorities consider
they have made progress
towards the restructuring of the company. Hence, the
Commission should not assess a formalistic attachment
to a plan.

that

(82) As far as the absence of reporting for March and
October 2000 is concerned,
the Greek authorities
considered that they could have only been able to send
a report on the basis of the Speedwing report. Given,
however, that it became apparent that the results of the
plan up to the summer 2000 were not satisfactory
against the time frame of the restructuring of OA (non
achievement of revenue targets, costs increase), Greece
took the view that a realistic assessment of the situation
of the airline (i.e. the PriceWaterhouseCoopers report)
had to be made before the adoption of a decision for its
restructuring. Greece considered therefore appropriate
to inform the Commission once such assessment and
verification of the situation had been achieved.

(83)

changes

of management;

in their comments of 21
To conclude, Greece insist
November 2002, that the restructuring process has been
impeded by ‘insurmontable obstacles': First, OA has
always operated under a situation of unrest due to the
no
several
restructuring Plan has ever had the chance of being fully
implemented; third, the authorised aid has been delayed
by the Commission. In particular the payment of the
last tranche of GRD 7,8 billion (EUR 22,9 million) has
not been authorised, preventing the restructuring effort
to bear its fruits; fourth and final point, a number of
critical external factors (i.e. September 11th, Relocation
to AIA, aviation market downturn etc.) have negatively
affected OA's performance.

second,

(85) Article 1(a) of

Indeed,

the adoption of

the 1998 decision.

the 1998 decision requires Greece to
fulfil the undertakings referred to in Article 1(a) to (u)
of the 1994 decision. In general Greece considers that
all these conditions were fully complied with in the
they were a
context of
prerequisite for
the said decision.
Hence, the application of normal commercial law to OA
was one of
the basic issues at stake for the 1998
Decision. As far as OA's articles of association are
concerned they have been published in the Government
Gazette 4518 of 15 June 2000. Concerning Article 47
of Law 2190/1920 Greece draws the attention of the
Commission to the fact that as sole shareholder it could
the
not have been able to convene a meeting for
dissolution of the company. Instead, it has decided to
privatise the company, taking also into account the fact
that the last instalment of GRD 7,8 billion of the capital
injection had not been released. The delay for presenting
the 1999 accounts are due to the fact that OA needed
to have a sound basis for future decisions and could not
rely on best estimates any longer. 1999 was chosen to
constitute such a basis. Nevertheless, Greece insists that
information was available to the
sufficient
management well before the audit of accounts.

financial

as

(86) As for the legal and fiscal status, Greece maintains that
Law 2271/94 has been repealed or modified in
accordance with Commission suggestions,
the
adoption of the 1998 Decision was conditional on this
aspect. Besides, the provisions of Law 2602/98 have not
abrogated Law 2527/97, providing for a specific sui
generis recruitment procedure for OA. The former,
adopted in March 1998, has been carefully examined by
the 1998
the Commission before the adoption of
Decision and was accepted. The same explanation
applies to Law 2414/96 of which most aspects have
been implicitly repealed by Article 1 of Law 2602/98
before
the 1998 Decision. The
formally
application of Law 2414/96 to OA was
repealed following the adoption of the Interministerial
Decision for
the company. Law
2602/98 was a precondition for the adoption of the
1998 Decision, it is, according to the Greek authorities,
in full compliance with the requirement of the 1994
and 1998 Decisions to enact legislation necessary for
the implementation of the Plan.

the privatisation of

adoption of

the

(b) The non-respect of the conditions and

commitments of the previous decisions

(84) Article 1(d) of

the 1998 decision regarding the MIS
system. The Greek authorities argue that by imposing
the 1 December 1998 deadline to implement the MIS,
the 1998 Decision actually required OA to put in place
such a system within four months. This requirement is

(87)

Concerning Law 95/76, the Greek authorities stress that
Article 1 of the 1994 Decision required the Hellenic
Republic to repeal Article 6 in so far as it concerned the
extension of guarantees for the loans contracted by
Olympic Airlines. The Greek authorities were not
required to repeal the second paragraph of this article,
this explains why such a request was not formulated for
investigation
instance during the opening of

the

28.5.2003

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Official Journal of the European Union

L 132/17

insists

in its
that

industry. Moreover,

still apply to OA there is no pecuniary element of
support
to OA and thus no State aid within the
meaning of Article 87 of the EC Treaty. As for OA's
competitors, Greece fails to see why their
financial
difficulties should be attributed to the Greek State, as for
instance in the case of Axon, it ceased operation solely
on business grounds. Its shareholders did not want to
accumulate losses in this difficult period of time for the
comments of 21
air
November, Greece
are
the plaintiffs
insignificant players compared to OA and they are not
in real competition with OA. It also considers that no
distortion of competition is imputable to OA as it has
lost almost 40 % of its market share since 1998. Greece
considers that future relationship of OA with the State
has now been rationalised. The Secretary General of
Ministry of Economy and Finance has already issued a
decision that payments of air tickets in the future will
be effected as per market practices (i.e. cash). In this
regard, OA also issued an internal document to all OA
Departments which prohibits the issuance of tickets to
State employees on credit.

the Greek authorities

B.
The Member State tolerance with the default on or
deferred payment of Social Security and Tax obligations
by OA; Concerning delayed OA payments of social
security contributions for its employees for the period
March to December 2000, a settlement with IKA has
been concluded in accordance with applicable Greek
legislation. Following the signing of the settlement, OA
is obliged to pay all new debts in time,
if not all
outstanding settled amounts will become immediately
due again. In their reply of February and October 2001
Concerning the alleged non payment of VAT on fuel by
Olympic Aviation,
reassessed,
while giving supporting evidence (VAT statements) that
OA buys fuel for it and Olympic Aviation, which in
returns then pays the VAT to OA. Concerning the
non-payment of 8 % VAT on domestic fares (journeys to
islands), when OA operates flights between a certain
number of Islands, it pays a reduced VAT (the 8 % VAT
reduced by 30 % provided OA maintains
rate
branches at these locations). The Greek authorities argue
that this is a ‘insignificant fraction of the total sales
volume' that is why they have not explained the VAT
situation as regards the flights to the concerned islands,
reply of 24 October 2001. The Greek
in their
authorities acknowledge, however, that such a situation
(passengers on these flights seem to be charged an
amount up to EUR 3 per flight, which is paid to the
State) is not consistent with the applicable legislation,
but that it does not constitute State Aid.

is

In substance, Law 2602/1998
procedure in 1996.
(Article 1(3)) repealed food allowance for the entire
flying crew and reduced it to 10 % of the gross monthly
salary for the rest of OA's employees. Consequently, the
social security contribution exemption corresponding to
is
this 10 % of monthly salary of ground staff
If
insignificant.
finds this Law
incompatible,
it is up to the European institution to
propose appropriate measures for its modification since
Law 96/75 pre-dates accession.

the Commission still

(88)

the ‘mere fact

In general Greece considers that
that
delays or deviation occurred during the implementation
of a restructuring plan does not suffice in itself
to
characterise the aid granted as misused'. They consider
that those elements are not a proof of contravention of
the
a
restructuring plan is always possible.

decision. Moreover,

amendment

an

to

2. The granting of new illegal aid

(91)

(89) A.

The State tolerance with the non-application of
normal Commercial
to OA. The Greek
law rules
authorities categorically deny such allegation. They
considered that
the measures involved in this case
should not be considered as State aid measures, but can
only be assessed in the context of an examination of
compliance with conditions. As such, there is no causal
link between the delay of publication of 1999 OA
accounts and the ability of the company to survive since
1999. With regard to the alleged support to OA via
defaulted or deferred payments, the Greek authorities
refers to the poor functioning of Greek administration,
which is not
in possession of modern and efficient
resources and infrastructure. However, both the law and
the administration practice are applicable in a general
fashion and do not discriminate in favour of OA.

(90)

The Magefesa case is not applicable in the present case,
as the Greek authorities consider they have used all
available legal measures to ensure payments of
the
amounts due. Such a treatment of OA did not provide
to what
for any discrimination since it
happens in every similar case. OA competitors also have
outstanding debts to the State (~ GRD 1,5 billion) and
some of them intend to settle due outstanding debts to
AIA exactly the same way OA has. Even in the case of
an extremely limited number of legal provisions which

is identical

(92)

The State tolerance with the default on or deferred
C.
payment of the different kind of airport charges. Greece

L 132/18

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Official Journal of the European Union

28.5.2003

fees for

stated that the overdue payments have been organised
via offset, in a transparent manner and that there is no
discrepancy of data. Concerning the non-payment of
rental
facilities (ex-US
the use of different
hangar) at Hellinikon, the Presidential Decree 138/97
imposes on OA to pay airport charges. Such legislation
does not provide for any exemption from any rentals or
other fees levied for the use of space at Greek airports.
In case of delays of payments by OA, the applicable
procedures are imposed (e.g imposition of
interest).
With regards to the allegation of OA's debts to AIA for
unpaid charges (ca EUR 30 million), as the Spata airport
operates as a private undertaking, no State aid is
involved. There has been indeed an accumulation of
debts due to the moving to AIA, hence OA has
its
increased
1000 %.
expenditure
However,
the two companies, AIA and OA, have
reached an agreement to settle all OA outstanding debts.
Such
the
Commission when signed.

agreement will

forwarded

operating

by

an

be

to

(93)

(94)

Concerning the delays in paying rent of premises and
landing charges to other Greek airports, it is stated that
common Greek law applies in full should OA default its
payment obligations. The offset of payments between
debts of OA to the Hellenic Civil Aviation Authorities
(hereinafter referred to as HCAA) and debts of HCAA
towards OA (ca. approximately GRD 750 million) are
ongoing, Greece promised to provide the Commission
with an update within one month, as from 11 April. As
the Greek
regards
authorities insist
in case of defaults OA pays
interests and fines. In the present situation OA has to
pay fine and interest
for GRD 5,1 billion (EUR 15
million)
for a total unpaid Spatosimo of GRD 2,2
billion. Currently, OA has contested the payment of a
fine of EUR 15 million, the Administrative Courts have
upheld the action and ordered the suspensions of the
HCAA decisions
Finally no
outstanding debt exists between Olympic Airlines and
Olympic catering, except for normal commercial debt.

the non-payment of Spatosimo,

assessment.

and Tax

that

it does not
fines.

In general the Greek authorities contest the allegation
that it tolerates absence or default of payments by OA
impose interests on deferred
and that
payments or
replies of
It considers
19 February and 24 October 2001, as well as Annexes
19 to 21 of that memorandum demonstrate that OA is
treated as any other Greek Company. OA has requested
the payment of delayed State debts in order to improve
its cash-flow position during the 2002 winter season,
(and all the more
which is always a difficult season,

that

its

after 11 September). Besides, for the unpaid amounts by
OA, Greece has initiated applicable procedures for the
recovery of amounts due.

(95) D.

The exemptions from taxes, notary or registration
fees for OA transactions. The Greek authorities affirm
that OA does not enjoy such exemption. Legislation has
been enacted to implicitly repeal Articles 3(2), 3(3), 4(2),
4(4) and 6(3) of Law 96/75.

(96)

(97)

(98)

The possibility of off-seting debts of the State and
including the
in a non-transparent way. The Greek
system is

E.
of OA, or between airports and OA,
‘Spatosimo' tax,
authorities consider
transparent.

the off-setting debts

The totality of last years' defaulted payments of OA to
the Greek State (including Spatosimo) have been verified
as debt to the State in accordance with common Greek
law and has been forwarded for payment arrangements
(including all corresponding interest and fines due. This
is common procedure and is applied also to other
airlines. As soon as OA is in default of payment, the
applicable procedures for
recovery are applied. The
outstanding OA claim of GRD 19 billion for
eviction from
compensation for
Hellinikon is still a pending issue and thus cannot be
offset against OA debts to the State by virtue of Greek
law, such offsets can be effected only against certified
claims towards the State). Finally, as for the argument
that airports are deprived from important revenues
because of the delayed or non payment by OA (the
main contributor) and that this affects competition, the
Greek authorities replied that airports in Greece are not
autonomous but are funded by the State budget, all
income derived goes to State budget, hence there is no
distortion of competition.

forced early

its

The granting of

the operation of

the fuelling
F.
facility to an OA subsidiary without an open tender and
the tariff conditions applied; there was an international
tender run by Spata airport in 1997 and not by the
Greek government. On the basis of clearly stated
entire
assessment

criteria OFC was

chosen. The

28.5.2003

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L 132/19

(99)

development costs amount to approximately GRD 14
billion, while the expenses on a 12-month basis are
budgeted by OFC at approximately GRD 600 million.

the annual operating expenses,

The hydrant fee charged by OFC to airlines for the
storage and distribution of aviation fuel amounts to
4,36 US cents/Ugallon at the EUR/USD exchange rate of
for the
April 2002 and allows, according to Greece,
recovery of
the loan
amortisation and a contained return on the investor's
equity at an annual rate of well below 15 %. At an
estimated projected fuel consumption growth of 2 % per
year,
the
the current value of OFC's charges over
21-year operating period amount to approximately GRD
30 billion according to the Greek authorities, as
opposed to the Commission estimation of GRD 100
billion. Finally, Greece stated that OA has decided to
join OFC in order to make sure, as it is the biggest user
of the airport, that the fee would not rise significantly
it would not be controlled by petroleum
and that
companies and refineries solely.

(100) G.

The granting of a loan of EUR 19,5 million by a
public commercial bank (Commercial Bank of Greece)
to OA on the basis of an assignment from OA to that
bank of its claims against the Greek State for an amount
of EUR 22 million for unpaid tickets. The Commercial
Bank of Greece ((CBG) is not part of the public sector),
10 % is acquired by Crédit Agricole Caisse Nationale.
OA needed such a loan to face likely problems of
cash-flow for winter 2002, which is always a very
difficult season. The loan was granted by CBG against
certified claim of OA towards the State for unpaid air
tickets amounting to EUR 22 million. This is not a State
Guarantee. Besides, the loan has been granted at worst
market condition than if it had been covered by a State
guarantee: EURIBOR + 1,25 %.

5. OA's situation as of November 2002

(101) Before engaging in the assessment of

the abusive
application of the previous aid and the alleged new aid,

is necessary examine the current economical and

it
financial situation.

(102) The Commission would like to emphasise the fact that
the examination of OA's present situation has only been
information. The
possible after
two injunctions of
replies however not only have they been late,
for
instance the requested objective analysis on whether the
company is going to reach viability as of 2002, was
only remitted on 14 November 2002, but Greece never
forwarded to the Commission the main information in
relation to audited accounts for 2001.

5.1. Abusive application of the aid granted in 1994

and 1998

5.1.1. The restructuring plan

(103) The Commission insists on the fact that the analysis of
OA's results and financial situation must be conducted
bearing in mind that the reliable audited information
only relates at the latest to the year 2000. For more
recent figures the Commission relies on the information
provided by Greece, which does not consist of audited
for 2001, and on estimations made by the
account
company and subject
to a limited review by an
independent consultant for 2002.

(104) All

figures reported in the text are rounded to the

closest million EUR or billion GRD.

(105) The table shows key indicators of the 1998 decision
accumulated by the Commission on the basis of the
information provided by Greece. Some of the figures
and ratios corresponding to those of 1998 can not be
provided on the basis of the information available today.

L 132/20

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Official Journal of the European Union

28.5.2003

Financial Indicators (1)

Turnover

1998

1999

2000

2001

2002

Plan

Actual

Plan

Actual

Plan

Actual

Plan

Estimated

Plan

Projected

Million GRD

324 234

269 519

329 071

273 602

344 829

283 083

359 057

— 380 626

—

Million Euros

951,5

791

965,7

802,9

1 011,9

830,8

1 053,7

761,8

1 117

802,8

Operating result after
interest (2)

Million GRD

14 610

– 10 362

21 294

– 16 832

9 622

– 55 651

1 644

—

8 470

—

Million Euros

42,3

– 30,4

62,5

– 49,4

28,2

– 163,3

4,8

– 194,3

24,9

– 41,7

Profit before tax (3)

Million GRD

5 120

1 660

20 914

– 25 980

22 587

– 32 378

2 697

—

6 590

Million Euros

15

4,9

61,4

– 76

66,3

– 95

7,9

– 137,3

19,3

Gearing

2,22

2,01

2,42

3,87

2,76

303

2,57

NS (4)

2,34

Total number of aircrafts (5)

35

33

37

33

40

32

40

32

40

—

18,6

N/A

26

(1) Actual figures 1998 to 2000 taken from OA's balance sheets; estimations for 2001 and projections for 2002 from draft figures submitted by the Greek authorities.
(2) Or EBT (Earnings Before Taxes — and exceptional items —)
(3) And after exceptional items
(4) Gearing can not be calculated as shareholders equity is negative.
(5) Figures-other than plan – do not include the aircrafts of the subsidiaries.
1 EUR= 340,75 GRD

(106)

It can be seen that serious difficulties arose in the
implementation of the plan as early as 1998. In 1997
operating result after interest amounted to a loss of
GRD – 28 billion (~EUR – 82 million) against an
intended profit of GRD ~1,7 billion (~EUR 5 million).
Despite austerity measures undertaken in 1998 to
counterbalance this development, the objectives set by
the plan for 1998 were not be achieved. The operating
loss after interest
the company experienced in 1998
amounted to GRD – 10,4 billion (EUR – 30,4 million)
against an intended profit of GRD 14,6 billion (EUR
42,3 million).

(107) The restructuring plan foresaw over its whole period a
significant increase in turnover: in 2002, the turnover
should have reached GRD 380 billion (EUR 117 million)
compared to GRD 275 billion in 1997 (+ 38 %).
Between 1998 and 2002 the turnover remained in fact
in the range of GRD 270 to 283 billion (EUR 792 to
831 million) bearing in mind that 2001 itself was an
overall difficult year for the air industry.

(109)

almost breakeven level for 2001 before a return to more
positive results in 2002. In reality the operating loss (i.e.
after all operative expenditures including depreciation of
assets and interest
cost on financing, but before
exceptional items) remained ca. GRD – 10/– 17 billion
(EUR – 30/– 49 million) in 1998-1999, it increased to
GRD – 55/– 66 billion (EUR – 163/– 194 million)
respectively in 2000 and 2001 and is estimated to be
EUR – 41 million (GRD – 14 billion) in 2002.

If the 2002 estimated figure of EUR 11 million EBITDA
represent an improvement compared with the last two
years, which had negative figures, this result can only be
confirmed in actual figures when the 2002 accounts
will be audited. It is, however, very unlikely that OA will
report
achieve
this
from
commissioned
Deloitte (11).

the
authorities

result,
by

confirmedby

the Greek

as

(108) The operating result was intended to be positive already
in 1998. The restructuring plan forecasted a drop to an

(11) See paragraph 75 and followings.

(110)

In that respect it must be pointed out that the level of
performance to which the Greek authorities refer as

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L 132/21

Operating profit in their reply to the Commission of 1
October 2002 cannot be considered as such. It is also
not the definition used for the same heading in the
Decision of 1998 and in the spreadsheet included and
reproduced above. Therefore,
the
company has now achieved a positive operating profit is
not valid, since such profit actually corresponds to the
so-called EBITDA. Indeed, the EBITDA has to cover, not
only the normal profitability for the shareholders —
which is not even envisaged here — but also two major
costs components for all companies:

claim that

the

— the depreciation of fixed assets represents,

invested in the activity of

in the
accounting form, the decrease of value, linked to the
use, of assets
the
company, here mainly the aircrafts and other
their
air-related
in other
expected lifetime. This
amortisation over
heading plays also a key role for
the future
financing of new assets to replace the existing ones
and to ensure
the
company;

long-term running of

or
their

fixtures,

terms

the

— the interest charge paid by the company to its banks
and other financial institutions providing funding to
its activity and/or investments.

as

the

forwarded

(111) Therefore, it must be emphasised that such a low level
of EBITDA remains unsustainable. On the basis of OA's
the
to
figures
depreciation of fixed assets and the interest charge will
together amount
to an estimated EUR 52 million.
Deducting this amount from the EBITDA would bring
the operating result or EBT (‘Earnings before taxes' (12)
of 2002 to a loss of more than EUR – 41 million and to
a most likely case of EUR – 92 million as per Deloitte
review.

Commission

improved

(112) However, Greece insists, in their reply of 21 November,
report
according to the Deloitte & Touche
that
indications, the application of International Accounting
Standards (IAS) instead of the Greek ones, would have
EBITDA.
the
significantly
be
underlined, nevertheless,
this only constitutes a
that
classification issue as the use of IAS, i.e. in the present
case accounting the leases as economic purchases of the
assets, would transfer part of
from the
financial
to the depreciation charge. The Deloitte &
Touche report, accordingly, makes clear that it does ‘not
believe that this change would significantly affect the
overall results of OA', i.e. the operating profit on which
the analysis of the Commission is based since 1994.

the costs

It must

(12) And also before exceptional items.

(113) According to Greek information an important amount
of exceptional gains seems to have been generated since
2000 and would have reduced these losses. Indeed, their
amount is very significant (EUR 68 million in 2000,
EUR 57 million estimated for 2001 and EUR 60 million
forecasted for 2002). For the years 2000 and 2001 they
mainly consist of the compensation received from the
State for moving from Hellinikon airport to AIA Spata
(EUR 51 million in 2000 and EUR 65 million in 2001).
In addition there has been the sale of a building (EUR
In 2002 exceptional gains are
22 million in 2000).
intended to consist of
the
a
compensation for moving to AIA Spata of EUR 6
million as well as of gains from the sale of tangible
fixed assets — such as aircraft of up to EUR 16 million
in
fixed assets
— and financial
participation of up to EUR 25 million. These gains,
which may partially be linked to disposals of non-core
assets, may indeed help easing the financial situation of
the company. They remain nevertheless a one shot
operation, which has no consequences on the cost
structure of the company, which remains worrying. It
must be emphasised that only operating profit may in
the long run allow the survival of an undertaking.

instalment of

such as

shares

last

(114) The information provided also refers to an exceptional
income for 2002 of EUR 5 million relating to the
compensation offered by Greece to all Greek airlines
following the events of 11 September 2001 and the
closure of airspace. This aid scheme has been registered
by the Commission under the number NN 119/2002
and is still under scrutiny by its services under the State
aid rules. The present decision will not prejudge the
outcome of this examination.

(115)

For 2002, the last information provided on 16 October
2002 by OA's management and the Greek authorities
in addition to these EUR 60 million
would be that
item, an additional EUR 112 million of
exceptional
exceptional income is awaited. No formal evidence on
the content of such item was communicated, however,
the OA's management broadly explained that it could
correspond up to EUR 37 million to the sale of the
in the catering and reservation's
company's
systems activities. The remaining and major part (EUR
sale and lease-back of
75 million)
is described as
airplanes. The magnitude of
in
this alleged profit
comparison with the underlying value of these assets in
the last balance sheet of the company per 31 December

shares

L 132/22

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Official Journal of the European Union

28.5.2003

2000 (Gross book value of EUR ~155 million and Net
book value – after depreciation – of EUR ~41 million),
as well as the poor level of second-hand aircraft's selling
prices at the moment, when many of them are already
grounded awaiting a buyer or lessor, can not lead the
Commission, until final proof, to consider these figures
as reliable.

reaction by the shareholders, which may constitute
in an increase in share capital and/or in putting into
action severe restructuring measures in relation to
the cost structure, which may lead to adapting the
company's activities. There has been no such
reaction of Greece, neither by increasing the share
capital nor by undertaking important adaptations to
the restructuring plan in time.

(116) Due to the company continuing making high losses the
equity situation, the increasing debts and the gearing
status (total payables of the company divided by equity)
remain that of a company in difficulty.

— The negative gap of shareholders equity (plan vs.
actual) has increased from GRD 32 billion (EUR 93
to GRD 37 billion (EUR 108
million)
in 1997,
in 1998,
million)
to GRD 85 billion (EUR 249
million)
in 1999 and finally arrives at GRD 132
in 2000. For that year
billion (EUR 387 million)
own funds were almost nil (GRD 645 million or less
than EUR 2 million). Based on the non-audited
figures communicated to the Commission for 2001
own funds further decreased to EUR – 136 million.

— Following

for

the

figures

various

2002 (13)
mentioned above and depending of
the level of
exceptional income effectively achieved, own funds
as of 31 December 2002 may range between EUR
– 209 million and EUR – 6 million and with a ‘most
likely case' as described by Deloitte of EUR – 139
million. Even in the most favourable assessment of
the effect of exceptional income on the company's
in
financial situation, the shareholders equity will
any event remain negative during the final period of
the restructuring plan.

— In view of this situation the company relies since
the end of 2000 only on borrowed money to
finance its activities. In 2001 the need for external
funds financed by the banks and other third parties,
State
suppliers
trading
authorities, through additional loans or by granting
delays in payment has increased even more. Indeed
these borrowings finance not only the whole assets
of the company but also the negative shareholders
equity of EUR 136 million.

partners,

as well

as

— The debt has notably increased in 2000 and in
2001. Financial debt increased in 2000 by approx.
GRD 15 billion (EUR ~ 44 million) and thus
multiplied by 4 compared to 1999.
In addition,
liabilities towards suppliers also increased by GRD ~
11 billion (EUR ~ 32 million), whereas liabilities in
relation to taxes and social security were GRD ~ 11
billion higher than in 1999. In both cases the 2000
figures doubled the amounts shown for 1999. Such
important increases in debt can not be justified by
the
i.e.
development
turnover, which remained more or less stable, and
costs
which could have generated higher
for
purchases, salaries, etc.
increased
if
significantly. The debt situation relates in fact to
OA's overall financial situation and the company's
lack of means
financial
obligations in relation to third parties.

it had itself

company's

to meet

activities

current

its

of

— This level of shareholders equity is exceptionally
uncommon for a company still active. The audited
accounts confirm that the red line of 50 % loss of
capital has been crossed in 1999.
the
share
immediate
such a
Normally

situation triggers

(13) See paragraph 78: net result could amount par management
estimations to + EUR 18 million and following Deloitte analysis to
losses from — EUR 3 million to — EUR 50 million. Possible
additional exceptional income of EUR 112 million and charge of
EUR 23 million could also arise.

— According

figures

audited

to OA's

current
liabilities (14) in total increased from GRD 39 billion
(EUR 116 million) in 1999 to GRD 86 billion (EUR
252 million) in 2000. In 2001 the long-term debt
increased by EUR 187 million due to the loan
guaranteed by the State financing the relocation
costs in connection with the OA's move to AIA
Spata.

(14) Caption Liabilities C 2 of OA's balance sheet.

28.5.2003

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Official Journal of the European Union

L 132/23

— In 2001 current liabilities to third parties increased
by another EUR 90 million from EUR 252 million
in 2000 to EUR 342 million estimated for 2001.
They almost
tripled in comparison with 1999.
Figures show that OA debts in relation to social
security payments rose from EUR 19 million in
1999 to EUR 29 million in 2000 and almost EUR
44 million at the end of 2001. Between the end of
1999 and 2001, OA's debts relating to taxes have
been multiplied by 10 (EUR 10 million in 1999,
EUR 33 million in 2000 and EUR 99 million in
2001). Once again such an increase may not be
in the company's activities
justified by changes
causing higher debts.
In relation to the factual
situation of OA on the contrary, current assets,
which are normally financed by current liabilities as
described above, slightly decreased from EUR 313
million in 2000 to EUR 301 million as of
the
non-audited 2001 figures, thus normally reducing
the need for financing. The acute need for cash to
compensate recent losses is the only justification for
the described development.

— The gearing is one indicator provided by the 1998
decision intended to monitor the implementation of
the restructuring plan. This ratio is to be calculated
as the total of all debts owed by the company
divided by the shareholders equity (15). Depending
on investment and operating results of each year, it
was expected to remain between 2.22 and 2.76, in
the worse for year 2000. In fact, after a positive
start in 1998 (2.01 instead of 2.22), the weight of
the debts combined with poor operating results
brought the actual figures to 3.87 in 1999. At the
end of 2000, when the equity had almost vanished,
debts represented 303 times the equity and the
gearing arrived at 303.

to the 2000 and 2001 total debt level (16) requests a
net equity of OA representing of at least EUR 200
to 300 million,
in case exceptional gains foreseen
for 2002 can be realised. The only way to achieve
an increase in equity in the company's present
financial situation is through an equivalent cash
injection in capital by shareholders. To compensate
the current negative equity in 2001 the necessary
capital injection would rather amount to EUR 340
to 450 million.

by

— The above figures represent the minimum necessary
capital injections supposing that as of 2003 OA will
remain at least breakeven. Under the condition that
all conditions and obligations laid down by the
present
the
restructuring plan authorised
Commission 1998 are met, OA may still receive a
last instalment of EUR 23 million (GRD 7,8 billion)
foreseen therein. Not only the conditions and
obligations have not been at least partially met, but
also the amount of the last instalment of the 1998
restructuring aid of EUR 23 million (GRD 7,8
the
billion)
above-described minimum need
capital
injection meeting paying off the current debts of
OA.

from corresponding

for

far

to

is

a

to implement

(117) Conclusion: Greece
stated to the Commission its
the 1994 and 1998
commitment
restructuring plans. Most of the targets requested therein
have not been achieved. In addition the conditions and
obligations requested by the plans have not or not
correctly been implemented. The company continues to
be
financial difficulties. OA's described
financial situation and the serious difficulties identified
lead to a lack of viability in the short as well as in the
long term.

in serious

5.1.2. The implementation of a Management

Information System ‘MIS'

(118)

— Today the ratio can not be calculated any more due
to the negative level of the equity. It is a further
element proving that OA is a company in financial
difficulties far away from any possibility to achieve
viability independent from outside intervention. A
gearing ratio of 2.76 (highest ration allowed for
2000 by the 1998 restructuring plan) put in relation

‘the

that:

In relation to the effectiveness of the information system
put in place by OA in September 1999 Alan Stratford
and Associates, the independent experts investigating it,
stated
that
consultants
management will receive valid and reliable information,
but only provided that data is input according to the
defined timetables'. The information system should have
been put in place at the latest in December 1998, as
decision.
the Commission's
requested

satisfied

1998

are

by

(15) Captions B: Provisions for liabilities and charges + C: Creditors +
D: Accruals and deferred income on Caption A: Net Equity in the
liabilities of OA's balance sheet.

(16) As calculated in the preceding footnote: EUR 575 million at the

end of 2000, EUR 825 million at the end of 2001.

L 132/24

EN

Official Journal of the European Union

28.5.2003

on

and

depend

‘contracting

There were

According to the consultants the success of the system
would
efficient
implementation of a new Revenue Accounts System'
providing data allowing the calculation of revenue and
profitability.
potential
weaknesses of the system identified by the consultant,
which relate to the fact that the MIS is not applied to all
subsidiaries of OA (for example; Olympic Aviation) and
that certain key management
information is not yet
included, which seriously reduces the management's
ability to obtain a true overview of the whole of their
aviation business.

further

two

in very severe cases or suspected frauds. In between,
one finds the grey zone of
the so-called ‘qualified
opinions' where the auditors accept the accounts under
the condition that they also mention their reservations
or qualifications in the same report. Hereby it has to be
noted that certain qualifications are in some cases
unavoidable, for instance, for a first audit year or when
big changes
in the accounting policy occur. This
remains, however, the exception and does not relate to
the present case. A qualified opinion, with the exception
of the mentioned specific situations, is always a negative
occurrence for a company, which the management will
always try to avoid by persuading their auditors to lift
their reservations. A qualified opinion has always an
impact on the company's situation vis-à-vis its clients,
suppliers and credit institutions.

(119) According to the information submitted on 11 April
2002, Greece argued that the deadline of 31 December
1998 has been unrealistic as it would have meant to
implement a MIS within four months. Greece also
submitted to the Commission the MIS currently
applicable to OA as Annex 39 to the mentioned
information,
it has been completed in
stating that
October 2000 and been applied since.

(123) OA last audited reports relating to 1998, 1999 and
2000 were all subject to a qualified opinion referring in
financial terms to very serious issues, which may be
mainly qualified as follows:

(120) According to Annex 39 the MIS is not applied to any of
the subsidiaries and in particular neither to Olympic
Aviation nor
to Macedonian Airlines, which both
operate air transport services. The Commission is not in
possession of any evidence confirming that the system
has been successfully implemented and whether it ever
became a ‘fully operational and adequate management
information system' as requested by the Commission
decision of 1998. From the information provided (page
4 of Annex 39) it shows that the system has not been
made
full
implementation. Limited access has been granted as of
October 2000. The actual application of the information
system is not being proven by any of the information
available to the Commission nor are any results thereof
reflected in the data transferred to the Commission.

as would be necessary

accessible

for

in concern'.

liabilities and receivables

(124) Qualifications made on the basis of the audit process, its
scope and restrictions. In relation to year 1998 auditors
state that ‘Until today (note: 10 September 1999) we
have not received a satisfactory number of confirmation
letters for
In
relation to 1999 it was written that ‘the balances of
certain receivable and liability accounts have not been
fully investigated, for which due to discrepancies, cross
checking, lack of data etc., provisions (…) have been set
up against the results'. They also refer to ‘The delay in
completing the closing entries of the Balance Sheet and
the
in the uniform
application of the inventory method among the years '.
In 2000 it is stated in relation with the overdue drawing
‘the aforementioned delay
up of
auditing
restricted our
applying basic
procedures
and
reconciliation of cash and cash equivalents, inventories
and other assets).'

that
ability of

the accounts

significantly

verification

(physical

affected

counts,

events

(121) The most significant evidence that

the MIS is not
operational
is provided by the official auditors of OA
(SOL SA – Certified auditors) in the audit reports for
the years 1998, 1999 and 2000, and by the enormous
delay it took to have the accounts audited.

(122)

It must be reminded that audit reports can generally be
broken up into three major categories. The most
favourable situation, and by far the most frequent one,
relates to reports issued without any remarks, the so
called ‘clean opinions', showing no restriction in the
opinion of the auditors and therefore fully ensuring a
true and fair view of the accounts of the company. On
the opposite side, there can be a refusal of certification

(125) The Commission understands from the above that the
auditors, in order to be able to release a non-negative
opinion, had to remind the public to which the report
has been addressed that
the work and assessment
usually required by the rules of the profession could not
be fully performed as the relevant evidence was not
available. Indeed, an audit assignment never undertakes
it however requests compliance with
a 100 % check,
normal auditing standards required by both national
legislation and rules as well as International standards of
auditing,
the
In OA's case the remarks
beginning of each report.
mentioned in their report are designed to show that

to which auditors make reference at

28.5.2003

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Official Journal of the European Union

L 132/25

compliance with normal audit standards could not be
assured.

organisation in this respect and, especially in terms of
time-table.

(126) Qualifications linked to the accounting, management
and internal control status. For the year 1998, auditors
mentioned the following: ‘Generally speaking the system
the book-keeping for the income and the whole
of
accounting system has to be improved in order
to
ensure the full compliance with Accounting standards
and principles'. In 1999, they went one step further by
stating that ‘The incomplete following up system of the
revenue and the presented weaknesses in the accounting
organisation along with the inefficiency of
internal
control, entail immediate measures to be taken in order
to eliminate these significant weaknesses'. In relation to
2000, the criticisms in the same field became not only
more precise, but
incomplete
application of
the revenue Information System that
resulted in deficient application and monitoring of the
revenue, receivables and payables cycle, as well as the
significant deficiencies
in the company's accounting
infrastructure, combined with the absence of internal
control, entail immediate action to be taken in order to
eliminate these significant weaknesses'.

also harsher:

‘The

(127)

Indeed, where,

It
the
is obvious from the successive reports that
auditors, not only were not satisfied with and confident
in the Information System of OA, but moreover had
growing concerns over the years.
in
1998, the report mentions the need for improvement of
the revenue and accounting system, the 1999 report
stresses the need to take measures against weaknesses,
on the revenue side, as well as in relation to internal
control qualified as deficient. In 2000, the auditors had
an even more devastating opinion. Not only the revenue
cycle but also the whole key aspects of the relations
with third parties (including customers and suppliers)
were reported as weak and needing immediate action.
the
As
judgement is more than clear: from inefficient in 1999,
in 2000 full absence is being reported.

internal control

is concerned,

far as

the

(128) As a consequence, the Commission may not conclude
Information System has been
that a Management
implemented. The auditors, who are mostly involved in
its control, have so acutely described its downtrend over
the years and thus providing little comfort
the
management to monitor their actions and to all third
company's
parties
performance. In addition is the recent outsourcing of
the Revenue system a further evidence of the poor past
performance of the company in this respect. It appears
in relation to
to be
internal
cost-reduction but

linked not only to efforts

to the complete lack of

confidence

gain

the

for

to

in

(129) The delay in producing final accounts confirms the
auditors'

trend mentioned in the

overall negative
reports.

(130) The Commission notes that during the restructuring
period audited financial accounts of OA have never
been presented in time. According to Greek law,
in
particular Article 43 paragraph 5 of Law 2190/1920,
the managing board of a private limited company has to
publish the financial statements of the company for the
previous financial year at
least 20 days before the
general meeting of shareholders. Such a meeting has to
be convened six months after the end of each financial
year. Moreover, Articles 3 and 5 paragraph 6 of
Regulation (EEC) No 2407/92 require an air carrier ‘to
provide its
licensing authority every financial year,
without undue delay the audited accounts relating to the
previous financial year'. Since 1998, however, Olympic
Airways has been unable to present
final audited
accounts in due time:

— the 1998 accounts have been finalised, as shown by
the audit's report, on 10 September 1999, more or
less eight and a half months after the closure of the
financial year. This was already late compared to the
legal deadline in Greece, as well as per European
common practice, which are six months after the
closure of the year;

— for the 1999 accounts, the report was issued on 11
two full years after the
the

December 2001, almost
closing and more than five months after
deadline of those for 2000;

— as a consequence, the report on 2000 accounts was
issued on 1 August 2002, still 17 months after the
closing and again after the deadline for the 2001
accounts;

— as far as the 2001 accounts are concerned no audit
accounts were supplied to the Commission and it is
therefore more than doubtful
that such accounts
exist. The best estimate of OA management, given
orally in the meeting of 16 October 2002, would be
a signature of the accounts early 2003, which would
be still one year after the closing of the financial
year and at least six months out of schedule.

(131) Once more the problem relating to the production of
audited accounts has not decreased but worsened or at
least remained at a disturbing level as shown above. The
Greek authorities consider that the last reduction in the
delays, prove that the situation is improving. In fact the

L 132/26

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Official Journal of the European Union

28.5.2003

Commission would like, on the contrary, to emphasise
the degradation occurred between 1998 and following
years. Should the reduction of delay improve further,
one can only hope, but without any certitude, to have
2002 or possibly 2003 accounts on time.

(132) These accumulated delays create further difficulties as
the management may not rely on properly audited
accounts for their daily business. In addition, neither the
shareholder nor third parties ever gain a proper view
the company's performance and
and security over
results. The delays
in relation with the qualified
opinions raised by the auditors may only lead to greater
suspicion regarding the reliability of the accounts and
any data related to it. The conclusions drawn up by
the
Deloitte & Touch
Commission (17) on 1998 and 1999 going into the same
direction prevail. Greece
the
Commission of any action able to comfort the situation
in the future.

has not

informed

reports

their

to

in

reports on 1999 and 2000 that, despite obligation
under Greek law and in infringement to the Seventh
Council Directive 83/349/EEC of 13 June 1983 based on
the Article 54 (3)(g) of
the Treaty on consolidated
accounts (19),
lastly amended by Directive 2001/65/CE
the European Parlament and the Council (20),
the
of
company has not prepared consolidated accounts for its
group. In addition to what constitutes a breach of law,
such behaviour, in the context of the growing role of
the two major
subsidiaries, Olympic Aviation and
Macedonia Airlines (in the overall network and air
lack of
transport
information for
the
shareholder and the engaged third parties, including the
Commission, to gain a proper vision of OA's group
activity, results and financing flows.

activities of OA)
all parties,

represents
the management,

a

(136) Even the newest piece of

information,

the report
submitted by Greece on 14 November 2002, and very
recently prepared by Deloitte & Touche confirmed the
absence of reliable data at OA. The consultant stated ‘As
reports, Management
we have noted in previous
Information relies on manual systems that are, in some
cases, unreliable or inconsistent.'

(133)

In view of the above relying on non-audited data for
2001, although necessary to obtain a final picture, has
to be undertaken with great caution. During recent
years significant differences are traceable between the
company's last announced figures and those finally
showed by annual audited accounts. In their assessment
of
the expert appointed by the
Commission, Deloitte & Touche, reported a change from
a net profit of GRD 15 billion to a loss of GRD – 7
billion between the last forecast and the final figure.

the 1997 figures,

(137) Conclusion: No reliable MIS is in place in relation to OA
and its subsidiaries. Apart from confirmation to this
respect offered by the Greece no respective prove has
been granted to the Commission. OA management is
still unable to rely on valid data or to produce reliable
figures. Surveying the effects of the restructuring plan
authorised by the Commission in 1998 is therefore
unachievable.

for

the year 2000. This

(134) More recently Greece reported by 11 April 2002 (18) a
net loss estimated at GRD ~ – 26 billion (EUR ~ – 76,3
figure, although
million)
provided more than 12 months after the closure of the
financial year, had then to be changed to a loss of GRD
in the audited
– 32,4 billion (EUR – 95 million)
accounts
incident
signed on 1 August 2002. This
confirms the persistence of the lack of reliability of the
non-audited figures presented.

(135) Finally, in relation to the implementation of a reliable
information system applying
to the
the auditors have mentioned in their

management
holding OA,

(17) Pages 55 and 56 of the draft report of 3 July 1998 and page 74 of

the report of 21 July 1999.

(18) Appendix 2 of the Greek memorandum forwarded on 11 April

2002.

5.1.3. The specificity of OA status

stake

(138) Greece has informed the Commission that the legislation
at
(Laws 2271/94, 2602/98, 2527/97 and
2414/96) does not contravene Article 1(a) of the 1998
decision (Article 1 commitments (a), (b), (c) and (f) of
the 1994 decision), as it has been examined, verified
and accepted by the Commission within the proceeding
leading to the adoption of
the 1998 decision. The
Commission acknowledges that such legislation in the
contest of the 1998 decision was indeed acceptable.

(139) However, as far as Law 95/76 is concerned, the Greek
the

indicated their

to redress

authorities

readiness

(19) OJ L 193, 18.7.1983, p. 1.
(20) OJ L 283, 27.10.2001, p. 28.

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the date of accession of Greece

situation created by the provisions of this Law in favour
of OA. The Greek authorities do not refute the doubts
expressed by the Commission as to its compatibility.
Given that the law in question has entered into force
before
into the
it appears necessary to
Community (1 January 1981),
redress the situation by requiring appropriate measures
which would consist in the simple abrogation of the
relevant provisions of that law, i.e. Article 3 paragraph
2 and paragraph 3, Article 4 paragraph 2, paragraph 3
and paragraph 4 and Article 6 paragraph 2.

(140) The Commission takes note of the fact that OA's articles

of association have been published.

(141) Concerning the financial accounts, the Greek authorities
argue that
there is no link between the delay of
publication of the financial audited accounts and the
ability of
the company to survive. The Commission
acknowledges the absence of such a link strictu sensu.
However, it observes that by accepting that the audited
financial accounts are never produced in time (on the
contrary delays increase), Greece accepts that OA clearly
infringes Community and national Greek law,
it also
shows that the MIS has not been implemented as asked
in the 1998 Decision.

5.2. The new illegal aids

5.2.1. The granting of EUR 19,5 million loan

(142) OA has been granted on 8 February 2002 a loan by a
public commercial bank (Commercial Bank of Greece)
to OA on the basis of an assignment from OA to that
bank of its claims against the Greek State for an amount
of EUR 22 million for unpaid tickets. The loan has to be
repaid within one year. The repayment interest of the
loan shall be equal to the Euribor rate + 1,25 %. If there
is default for late payment, late payment interest will be
due with penalty interest of 2 % above the repayment
interest. According to the submission of Greece (Annex
10) since the mutual settlement of debt between the
Greek State
in
December 1998, the accrued debt of the Greek State
towards OA amounted as of 31 December 2001 to GRD
14 844 375 105 (ca. EUR 43 563 830), out of which
EUR 37 304 401) were
GRD 12 711 474 679 (ca.
overdue amounts of unpaid tickets. This piece of
evidence appears to be in line with the amount of EUR
22 million which has been recognised by Greece as debt
towards OA and which has been ceded to Commercial
Bank of Greece to secure its loan for EUR 19,5 million.

and OA (and Olympic Aviation)

5.2.2. Greece tolerance with the default or deferred

payment or any other advantageous
treatment under Greek fiscal and commercial
law

development

(143) The Greek authorities submitted as annex IX of their
reply of 1 October 2002 an extract
(Article 22) of
Greek Law 2731/1999 of 5 July 1999 on cooperation
non-governmental
and
regarding
organisations and other issues. Therein it
is referred
implicitly to OA. The relevant provision states that
where a decision is taken in accordance with Article 2
of Greek Law 2000/91 regarding company privatisation,
the provisions of Greek Law on DEKOs (companies that
qualify
2414/96
regarding the modernisation of public undertakings and
and other provisions, will not be
organisations
applicable except from Articles 9 and 10 of that law.
These concern the procedure to be followed in the case
of privatisation (Article 9) and the percentage of the
capital of the companies' under privatisation, which has
to remain always Greek (at least 51 %).

undertakings')

‘public

utility

as

(144) Hence it appears that OA is no longer a DEKO. This has
been confirmed by the Greek authorities
in their
submission of 1 October 2002 (point 5) stating that OA
was not subject to the provisions of Greek Law 2414/96
June 1999, when the Greek State
on DEKOs, as of
conferred the management of OA to Speedwing.

(145) Application of Article 2 of Greek Law 2000/1991
requires a decision to privatise a company, which has
been until then subject to the provisions of Greek Law
2414/96 regarding DEKOs. In their correspondence of
26 August 1999, the Greek authorities referred to the
OA's new managers without however indicating any
privatisation procedure.
It was only on 13 December
1999 that the Greek State took the decision to privatise
OA, a procedure, which was launched on 20 December
in February 2002.
2000 and declared unsuccessful
However,
the Greek authorities never notified the
Commission about the actual change of status of the
company.

(146) Taking into account the fact that OA is no longer a
DEKO and hence OA is not subject to the provisions of
Greek Law 2414/96 since June 1999 (or even December
1999) but only to the general provisions of Greek Law
2190/1920 regarding public limited companies, certain
provisions of Greek Laws 2271/94 and 2602/98 should
have been adapted accordingly as they do constitute a
the recruitment and staff
separate legal
regulations of OA's
employees. The Commission
observes that OA, while being a normal public limited
to the
company continues, however,
DEKO's legislation.

to be subject

frame for

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(147) With regard to the payment of

social

security
obligations, according to the submission of Greece (as
communicated in Annex 53 section 15 and 16, as well
as Annexes 31 and 32 of the 11 April 2002 reply)
amounts have been due to the Greek State by OA in
form of social security payments since 1993 until 2001.
During this period of eight years when OA has not paid
these charges, no actions in the form of fines, auctions
etc as foreseen in the applicable Law (21) have been
undertaken by the Social Security Institution (‘IKA'). In
April 2001 OA benefited from a settlement with IKA
for amounts due up to EUR 32 million. Accrued interest
brought outstanding payments to a grand total of EUR
45 million. The amount was payable in 24 monthly
instalments plus one
(2
bulk
instalments). The monthly rate of the settlement was set
at EUR 1 760 821. The monthly rates of contributions
for the ongoing monthly due payment vary, but are ca.
GRD 2,235 billion,
i.e. ca. EUR 6 559 060. The legal
basis for that settlement was Greek Law 2676/1999,
which allows for such settlement under the condition,
that no payment after the date of settlement is unpaid
and overdue. Otherwise the entire settlement collapses.
Also, according to that law, OA had the possibility to
suspend overdue payments for 3 months after a period
of six months of payments after the settlements was
agreed. However, that should have not affected OA's
monthly due payments.

advance payment

(148)

In order to secure payment of its claim IKA proceeded
in July 2001 to an execution on immovables of OA for
the amount of EUR 21 218 264. However, there is no
evidence of any further action against OA's property to
secure this payment. OA appears to have paid effectively
after the settlement agreement only until September
2001. For the months of October — December 2001 it
benefited from the provision of the above mentioned
Law regarding a three-month suspension of payments of
the amounts concerned by the settlement. However, OA
does not appear to have made any payments to IKA for
any social
security contributions due during these
months.

(149) Therefore, not only OA has not paid its social security
contribution during eight years, without incurring any
punitive action, but it has also not observed the late
settlement, which
upon
non-payment of the settlement instalment of one month
(October 2001). Against the amount of EUR 45 million,
payment has been effected for 6 months in 2001 plus
January and February 2002
the advance payment.

collapsed

should

have

appear to have been paid. Thus paid amounts are EUR
17 608 210.

(150) With regard to the non-payment of VAT on fuel and
spare parts by Olympic Aviation, after examination of
Annexes 28 and 29 to the 11 April Memorandum, there
is no evidence that Olympic Aviation has paid the
concerned VAT to the fiscal authorities from January to
May 2001, and from November to December 2001.

(151) Concerning t he possibility of offseting debts of

the
State and of OA, or between Airports and OA,
including the ‘Spatosimo' tax, in a non-transparent way,
the Commission has raised the issue of the vagueness of
the Greek Law 2733/1999 as to the calculation of debt
mutually owed and settled as per that law. Greece in its
submission of 11 April 2002 presented the offset
agreement between the Greek State and OA of 24 June
1999,
it gives a breakdown of the amounts due and
unpaid on each side. The amount offset was GRD
9 862 639 493 (ca. EUR 28,9 million).

(152) OA's outstanding payments to the Greek State represent
airport charges for domestic and international flights for
the period November 1994 until December 1998 as
well as ‘rentals'. The documentation submitted (22) fully
covers the airport charges. There is, however, no details
(only a total amount) regarding the ‘rentals' that concern
the period 1996 to 1998 only. Thus, the amount of
GRD 509 192 802 (ca. EUR 1 494 330) are unidentified.

(153)

11 April,

the Memorandum of

should also be noted that

It
the Greek State's
outstanding obligations towards OA do not cover a
particular period of time. Therefore, it is not possible to
verify the validity of the submission. In particular, the
offset agreement refers, under point 2 (a) of Annex 15
to
that GRD
3 402 729 422 (ca. EUR 9 986 000) represent amounts
due for unpaid tickets of officials of
the HCAA,
maintenance of aircraft used to transport officials by the
HCAA, utility costs of buildings of
the HCAA. A
breakdown of these costs in an annex to that agreement
which forms integral part of it indicates that these costs
EUR
amount
7 172 361). There is no explanation on the difference
between the two figures. According to point 2 (b) of the
offset agreement the amount of GRD 6 459 910 071 (ca.

to GRD 2 443 981 910 (ca.

only

(21) Greek Law 2238/1994,

in particular Article 95 and encyclia of

IKA No 42/1999 for the settlement of obligations.

(22) In the Annex 15.

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i.e.

the amount offset,
the rest of
EUR 18 957 317)
represented obligations of various Ministries and public
service organisations towards OA. Here too, there is no
reference to which period of
time these obligations
correspond. Also, Greece does not provide any evidence
for the amounts presented neither tickets, nor invoices.

this
Service Obligations revenue to AIA throughout
period and by granting a first rate mortgage on a
737-400 fully-owned aircraft. However, no proof of any
payment made in that respect has been communicated
meanwhile.

(154) Concerning the period 1998 to 2001 no offset between
OA and Greece has been forwarded.
the
Commission notices that rentals for different airports for
the period 1998 to 2001 are due up to an amount of
EUR 2,46 million (EUR 1,6 million for OA and EUR
860 000 for Olympic Aviation). No evidence of
payment has been communicated.

Instead,

the

total amount of

(155) Regarding the imposition of the airport development
tax ‘Spatosimo', according to the submission of 11 April
2002 (23) it appears that no evidence of payment has
ca. EUR
been adduced for
60 999 156 as Spatosimo tax for
the period of
December 2000 to February 2002 as well as for the
month of March 1999. The complementary documents
an
sent on 14 November 2002,
outstanding debt of EUR 31 million would be settled in
accordance with
procedure.
However, no proof of payment, nor details on the
period and the airports concerned are provided.

applicable

law and

specifies

that

(157) The exemptions from taxes, notary or registration fees
for OA transactions. These exemptions are linked with
Law 95/76 and should be treated in the context of the
appropriate measures to be adopted.

(158) With regard to the non-payment of VAT at 8 % collected
by OA on domestic fares. Greece in its submission of 11
April 2002 ascertain that the reduced VAT is to be paid
by OA and Olympic aviation ‘only for flights between
the
islands of Lesbos, Hios, Samos, Dodekanesse,
Cyclades as well as the Aegean islands of Thasos,
Samothraki, Northern Sporades and Skyros, provided
that it maintains branches at these locations. Through
the documentation received, the Commission has been
able to verify that the amounts were in fact paid by OA
to the State as they are charged on the passenger ticket.'

(159) Concerning the outstanding debt to Olympic Catering,
the Commission
the
been
information that OA has a normal commercial debt of
EUR 2,43 million.

presented with

has

(156) With regard to the payment of the Airport charges to
AIA, Greece in its submission of 11 April 2002 (in
particular Annex 44) states that airport charges and any
other levies and fees (including rentals and payments for
utilities) have been duly made and that there is therefore
no issue of state aid. Examination of
the material
submitted by Greece reveals that according to Annex 44
costs and payments incurred between March 2001 (start
of activity at the new airport) until February 2002, are
reported at EUR 24 million. OA and AIA had reached
an agreement on 23 April 2002 to settle OA
outstanding debt. The Commission has received copy of
the final agreement dated 23 April 2002 on 14
November 2002. This document assesses the debt to
EUR 33,92 million for the period March 2001 to March
2002. Debts should be reimbursed with 12 quarterly
instalments for 3 years, beginning in July 2002. The
interest rate for the repayment are based on Euribor
rate + 2,5 %, which is actually high. OA has secured this
three-year settlement by conceding all anticipated Public

(23) In Annexes 41-44.

early

forced

(160) As far as the compensation for the early eviction from
Hellinikon and the relocation to Spata, the amount set
on April 1999 and agreed by the Commission in
December 1999 was GRD 33,66 billion (EUR 98,8
million). An additional GRD 8,7 billion (EUR 25,6
million) has been determined by an independent review
in February 2002 and is linked to disturbances because
of OA's
the
compensation due to EUR 124,4 million. As a whole,
Deloitte mentions that OA has received EUR 138,7
million in compensation. This amount, when taking into
account the inflation and interest impacts,
is close to
the one established. OA, however, requests up to GRD
its claims
19 billion (~ EUR 55 million) to settle all
arising from the move from Hellinikon but this amount
is not at
the time recognised by Greece. Therefore,
considering the documents analysed, the Commission
can be satisfied that there is no overcompensation of
OA for such a move.

eviction.

brought

It

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5.2.3. The granting of the operation of the fuelling

facility to an OA subsidiary

(161) The Greek authorities have stated that the granting of
the fuelling facility has been undertaken through an
international open tender launched by AIA in 1997. The
initial cost for the construction and operation of the
fuelling facility by OFC was set at GRD 9,6 billion (ca.
EUR 28,3 million), and the contract was awarded to
OFC for 23 years according to Greece. OA is OFC's
largest shareholder with 66 %. According to Annex 24
the Greek
submission of 11 April 2002,
of
authorities submit as part of a fuelling concession, the
agreement of 13 August 1998 between the AIA and
Olympic Airways, Avinoil, Motor Oil Hellas, BFSC and
commissioning,
Hansaconsult
for
an aviation fuel
operation and maintenance of
distribution system at AIA.

construction,

their

the

(162) They

an

also

have

amendment
communicated
agreement No 2 of 22 May 2001 relating to that
fuelling concession agreement between AIA and the
initial
OFC SA providing for
agreement
the maximum agreed
construction cost. The fuelling concession agreement
does not contain any reference as to the initial cost of
the investment as well as how the throughput fee would
be applied given that it clearly states in point 16.4 of
that agreement that:

amendment of

implement

the

to

concession agreement the cost of the facility increased
and reached the amount of GRD 14,030 billion (EUR
41,175 million). Therein it also mentioned that
the
fuelling concessionaire would need additional financing
of an amount of GRD 1 381 476 238 (ca. EUR 4,054
the relationship
million).
between the initial financing requirements of the facility
is, neither how additional finance may be achieved, nor
how the additional costs would be amortised through
fuelling charges or State subsidy.

is not explained what

It

6. ASSESSMENT OF THE AID

(164) Under the terms of Article 87(1) of

the Treaty and
Article 61(2) of the EEA Agreement, any aid granted by
a Member State or through State resources in any form
whatsoever which distorts competition by favouring
certain undertakings or the production of certain goods
is incompatible with the common market and with the
EEA Agreement. The measures to be assessed are:

(a) The aid granted to OA,

initially authorised by the
Commission's Decisions of 7 October 1994 and of
in relation to which the
14 August 1998,
Commission decided
procedure
the
to
provided for in Article 88(2) of the Treaty on 6
March 2002, relating to the non-compliance with
the restructuring plan as well as the non-compliance
with commitments undertaken by Greece (will be
treated in section 6.1).

open

in respect of

‘Subject to the foregoing [the fuelling concessionaire
implement a charging policy
— OFC SA — shall
(including without
the
limitation,
throughput fee) which is fair, objective, transparent
and non-discriminatory between users and which
does not discriminate on the grounds of the volume
of
the
relationship between the user and the Fuelling
Concessionaire or any connected persons with the
fuelling concessionaire] the fuelling concessionaire
may charge through put
than those
calculated in accordance with annex M but in no
circumstance shall it charge at a higher level.'

frequency of aviation fuel

supplied or

fees lower

(b) The alleged non-notified new aid granted to OA in
relation to which the Commission also decided on 6
March 2002 to open the procedure provided for in
Article 88(2) of the Treaty, relating to the granting
of EUR 19,5 million, tolerance with default payment
or any other advantageous treatment under Greek
law as well advantages in
fiscal and commercial
the fuelling facilities
relation to the operation of
(will be treated in Section 6.2).

6.1. Assessment of the aid initially granted in the
1998 Decision, referred above under (a)

(163)

It should be noted that there is no evidence submitted
as to the actual fuelling throughput fees charged to OA
and its subsidiaries, or to its competitors by OFC SA.
The part of the fuelling concession agreement submitted
as Annex 24 does not contain any reference to the cost
of the facility at the moment of the conclusion of the
fuelling concession agreement (Annex C which has not
been forwarded). It must be borne in mind that the cost
of the construction of the fuelling facility is the basis for
the calculation of the base rent and the throughput fee.
As per amendment agreement No 2 to the fuelling

6.1.1. Existence of State aid within the meaning of

Article 87(1) of the Treaty

(165) With regard to aid initially authorised the Commission
already in the previous decisions of 1994 and 1998

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between Member

stated that it constitutes State aid and that it affects
trade
also distorts
competition within the common market. In this respect,
the Commission refers to its assessment set out in those
decisions.

States

and

to rectify the financial difficulties of the company been
abused. The Commission does not see any justification
to consider the aid assessed by this decision as helping
to achieve any regional development purposes and
therefore
to any
exemptions with regional objectives.

aid as not

regards

eligible

the

6.1.2. Legal basis for the assessment of

compatibility

(166) The Commission considers that the derogation provided
by Article 87(2) of the Treaty and Article 61(2) of the
EEA Agreement as well as Article 87(3)(b) of the Treaty
and Article 61(3)(b) of the EEA Agreement do not apply
in the case at hand. In this respect, the Commission
refers to its assessment as set out in the previous two
decisions.

(170) With regard to the derogation provided by Article
87(3)(c) of the Treaty in respect of aid to facilitate the
development of certain economic activities where such
aid does not adversely affect trading conditions to an
extent
the
Commission also refers to its initial decisions whereby it
considered that the restructuring aid of the company
was considered compatible with the common market
under proviso of respect of the conditions.

common

contrary

interest,

the

to

(167) Article 87(3)(a) and (c) of

the EC Treaty contain
derogation in respect of aid intended to promote the
economic development of areas where the standard of
living is abnormally low or where there is serious
underemployment. Greece is a region falling entirely
within the scope of Article 87(3)(a).

(171)

(168) However,

the regional needs in relation to Olympic
Airways and aviation services in general, are taken into
account thorough public service obligations imposed by
Greece to companies offering services between the
Greek mainland and the islands as well as between
islands. When offering such services Olympic Airways,
like all other airlines, is subject to these obligations and
from compensation in
benefits, as the case may be,
relation to non-viable routes.
In particular cases, the
airlines in question may operate under exclusive rights
granted in accordance with Article 4 of Council
Regulation (EC) No 2408/1992 (24).
In a liberalised
market services necessary to achieve economic and
social cohesion as well as regional development may be
offered by any operator. In addition, the Commission
considers
aid are
normally met more easily through aid schemes, which
ensure the supply of such services by a variety of
operators.

the objectives of

regional

that

(169) The aid under examination is a clear-cut restructuring
aid granted to a company in financial difficulties since
almost 10 years, a situation which has not considerably
improved. Not only has
the restructuring aid not
achieved the envisaged results, but moreover has the
authorisation by the Commission for State aid granted

(24) OJ L 240, 24.8.1992, p. 8.

6.1.3. Appraisal of the compatibility of the aid

granted in the 1994 and 1998 Commission
Decisions

In its 1998 decision, Commission considered that the
compatibility of the aid with the common market was
subject to the full implementation of the restructuring
plan aimed at the restoration of the viability of the
Company,
to the respect by Greece of 24 specific
conditions attached to the authorisation of the aid; the
avoidance of undue distortions of competition and that
the aid was to be limited to the exact minimum. The
compatibility of
to specific
commitments, the Commission by the following has to
assess the impact of
these
commitments.

the breach of certain of

the aid being subject

6.1.3.1. The full implementation of the plan

(172) As early as 1999, the Commission had informed Greece
that it could not authorise the grant of the remaining
instalment of GRD 7,8 billion, as the achievement of the
regards costs and
in particular as
expected results
productivity ratios had not been achieved. On 26
August 1999, Greece, while stating its commitment to
the 1998 restructuring plan, accepted that it would have
to be further revised to achieve the targeted results.
1998
From mid-1999
restructuring plan had been unilaterally changed by OA
and Greece for a new restructuring plan, established by
Speedwing and mainly focusing on expansion rather
that cost containment, and which, as such, could not
have been accepted by the Commission. Moreover,

onwards,

however,

the

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Speedwing had initiated its implementation in August
1999, even before the plan was
submitted to the
Commission on 18 November 1999. During the period
August 1999 – Summer 2000 i.e. management period
of Speedwing, the restructuring efforts and objectives
were suspended. After the departure of Speedwing a
new phase of cost containment started with the arrival
of a new management. Meanwhile, the company had
lost 50 % of it share capital.

the sole shareholder,

(173) The Commission is forced, therefore, to construe that
the reduction of costs, which had been identified as a
the restructuring plan of 1998 (25)
key element of
together with the improvement
in yields, was not
considered as such any longer by OA management and
the Greek authorities. Moreover, the continuing losses
the
by the company and the decreasing level of
shareholder equity have kept OA has a firm in difficulty.
This should have triggered an immediate reaction by
Greece,
in order to redress the
situation, either by increasing the share capital or by
undertaking important adaptations to the restructuring
plan in time. None was done.
Indeed, Greece could
have, during the rest of the restructuring period, had
presented changes to the restructuring plan and even to
the amount of the aid according to the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty (26). However,
it has not done so,
although Greece has repeated at several occasions that ‘a
formalistic attachment' to the restructuring plan could
not serve as a reference any longer. The Commission,
therefore, can only assess the full implementation of the
plan on the basis of the restructuring plan of the 1998
decision.

(174) The Commission accordingly observes that

the plan,
object of its decision, was not fully implemented any
longer. Moreover, the appointment and then departure
of Speedwing management, created a stop and go effect
between cost reduction phases (1998 – early 1999) and
expansion phases (late 1999 – early 2000). Such a
situation could only be seen as counterproductive by all
layers of the company staff and could create frustration,
impression of lack of direction and of support by the
State, thus creating an additional difficulty to restore OA
situation. It is interesting to note in this respect, that
Greece itself in its comments of 21 November 2002
acknowledges
created a
that
situation of unrest in the company.

changes have

these

to try to renew with the
departure of Speedwing,
in addition to the
application of the plan. However,
negative effects of
this new stop and go movement
imposed again to the company, such a move arose one
and a half year before the deadline of the restructuring
plan, thus giving little time to the company to restart
and achieve the plan. In that respect, the Commission
considers
various
behaviour
management, as tolerated or even generated by the
State,
the company, and as a
shown a
consequence
constant, effective and willing attitude to put in place
the plan presented for approval to the Commission.

the Greek State, have not

sole shareholder of

of OA's

that

the

tranche of

(176) The argument put forward by the Greek authorities that
the non payment of
the capital
the last
injection (EUR 22,9 million) has further aggravated the
financial situation of the company and hence weakened
its restructuring effort, can hardly be accepted. Greece
acknowledged as early as 1998, that the implementation
of the 1998 to 2002 Plan would have to be further
revised for the Commission to consider positively the
granting of the last instalment. Besides, as explained in
section
from
EUR 23 million
corresponding to the minimum need of capital injection
necessary to restore the equity of OA.

5.1.1

are

far

(177) Also, the Commission could hardly verify, not being in
possession of the audited accounts for 2001, what the
real impact of the 11 of September events have had on
OA financial situation.
that
irrespective of these implications and irrespective of the
compensation already received by OA and currently
being examined by the Commission, the non respect of
the restructuring plan can be identified as early as 1999
and confirmed in the following years.

It appears, nevertheless,

(178) The fact that OA has not put in place a MIS has also
prevented the company to implement the plan, as it
lacked an appropriate monitoring tool and a proper
accounting system.

(179) As a consequence, since the plan was not effectively
implemented, the objectives initially set have never been
indicators as reviewed in point 5.1.1.
met. Indeed, all
depart significantly from the ones set
in the 1998
decision.

(175) The Commission could certainly welcome the move
the
made mid-2000 by the Greek authorities, after

(25) Indeed, seven major actions were described under the heading —
reorganisation of the cost structure of the company — in the
1998 decision.

(26) OJ C 288, 9.10.1999, p. 2.

(180) Finally,

in order for the Commission to fully monitor
the progress of the restructuring plan, it needed detailed
and regular reports. The Commission opposes the Greek

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that reports transmitted in various forms,
statement
gave the necessary information that should have been
supplied through the March and October 2000 reports.
The information received, sporadic and heterogeneous,
could have not allowed the Commission to clearly
restructuring plan,
monitor
according to the indicators set in the 1998 Decision.
This is clearly demonstrated by the fact that the table in
point 5.1.1 as per today, cannot be fully completed.

the progress of

the

(181) Conclusion: Bearing in mind all abovementioned financial
elements, it is the view of the Commission that OA has
not implemented the restructuring plan as accepted by
the Commission in its 1998 Decision and has been,
since 1999, a firm in difficulty according to the
definition of the Guidelines on State aid for rescuing
and restructuring firms in difficulty (27). This has been
acknowledged by the Greek authorities, which in
contradiction with their constant statement to respect
the restructuring plan admitted in their comments of 21
November 2002 that no Restructuring plan has ever
had the chance of being fully implemented. Considering
this deviation from the results foreseen in the plan, the
lack of a timely reaction by the Greek authorities, which
the situation, can also be seen as a
were aware of
violation of
the original decision. The Commission
considers that the non respect of the restructuring plan
alone would be
the
conclusion that previous aid has not been respected.
The Commission will nevertheless also assess the impact
of the breach of the other conditions.

enough evidence

to justify

(184) However, since the restructuring plan has not been
respected, as a consequence the long term viability of
the company, primary goal of the Commission decision,
has never been achieved, neither for the long term, nor
even for the short term. This is clearly demonstrated by
the total financial collapse of the company, which has
no own funds, only debts. Under any usual commercial
practice, OA should have been forced to file for
bankruptcy by any associated third parties. Hence, even
if the Commission was to assess OA financial situation,
the 1998
irrespective of
restructuring plan, as repeatedly requested by the Greek
authorities, the viability of the company would be very
unlikely to be established.

implementation of

the full

(185)

in their
It must also be reminded that the auditors,
their
for the year 2000, had mentioned that
report
certification was made ‘under the strict assumption that
the company continues its activities as a going concern'.
This statement is quite unusual in an audit report and
shows that the viability of OA was already questionable
and that other options, such as liquidation, which would
have led to another balance-sheet, could have been
considered.

6.1.3.2. The respect of the 24 specific conditions

T h e r e s t o r a t i o n o f t h e v i a b i l i t y

A r t i c l e 1 ( d ) o f t h e 19 9 8 d e c i s i o n r e q u i r e d
O A t o p u t i n p l a c e a M I S b y D e c e m b e r 19 9 8

(182) A restructuring plan, the duration of which must be as
short as possible, must, according to the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty, lead to the long term viability of the
firm within a reasonable time-scale and on the basis of
realistic
future operating
conditions.

assumptions

to the

as

(183) As early as 1994,

the Commission considered in its
decision that OA's recapitalisation and restructuring
plan could enable the company to create an operation
of lasting viability within three years without receiving
further aid. Due, however, to the difficulties met and
following the wish of the Greek authorities, an updated
plan was submitted and approved by the Commission in
1998. As a consequence, the restructuring period has
been extended to 2002.

(27) Paragraph (5)(a) of section 2.1 specifies that a firm is in difficulty
in the case of a limited company, where more than half of its
registered capital has disappeared and more than one quarter of
that capital has been lost over the preceding 12 months.

(186) Greece informed the Commission that such a system is
in place as from October 2000.
It can therefore be
affirmed that a MIS was not put in place in time as
required by the decision. However, considering the
amount of
time necessary to have such a system
working effectively, the Commission can accept Greece
arguments that 4 months to implement the system were
not sufficient.

to

evidence

submitted

substantiate

(187) However, the Commission considers that today there is
no
the
implementation of the requirement of the decision for a
fully operational and adequate system to allow OA to
monitor the results of the restructuring plan. On the
contrary, OA has met huge delays to have its annual
accounts
include
qualification that testify the lack of reliable accounts and
of internal control, as well as the deficient application
and monitoring of the revenue, receivables and payables

approved. All

reports

audit

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28.5.2003

cycle. There has been no improvements in this respect
over the last three years. In several instances, OA had to
contract external experts to assess its financial situation
(PriceWaterhouseCooper),
to
monitor the restructuring plan and hence its normal
the
day-to-day activity. Finally, Deloitte & Touche,
consultant appointed by OA, confirmed in 2002 the
unreliability of the MIS.

it was

unable

since

not contravene the above three commitments (c),
and (f) in this respect.

(b)

(193) As to the commitments for which no breach by Greece
was identified (Article 1(d) and (g) to (u) the information
available to the Commission demonstrates that Greece
has not failed to comply with these commitments.

(188) Besides,

the MIS should have allowed the Greek
authorities to amend the restructuring plan on the basis
of monitoring. Such amendment was never done,
although the Greek authorities on 16 October 2002
accepted that the restructuring plan was not respected.

(189) Conclusion: The Commission concludes that Greece has
not respected the condition of Article 1 (d) of the 1998
decision to put in place a fully operational and adequate
MIS.

A r t i c l e 1 ( a ) o f t h e 19 9 8 d e c i s i o n r e q u i r e d
G r e e c e t o f u l f i l t h e u n d e r t a k i n g s r e f e r r e d
t o i n A r t i c l e 1 ( a ) t o ( u ) o f t h e 19 9 4
d e c i s i o n

(190) According

to

the

1994

decision (28),

restructuring

likely to affect

from a
management and status point of view, OA would have
the fiscal status of a public limited company comparable
to that of Greek undertakings under ordinary law in
Greece, except, however, for exonerating OA from any
taxes
the recapitalisation operations
envisaged in the undertaking's ‘1994' recapitalisation
the
and
in
Commission. Also Greece would not
accordance with
in the
management of OA except within the strict limits of its
role as a shareholder. Finally in order to respect Article
1 commitment (f) of the 1994 decision, Greece would
have adopted immediately the legislation necessary for
the effective implementation of the salary, social and
financial aspects of the plan.

the 1994 decision (29),

to
interfere

communicated

plan

(191) The Commission takes note that OA's articles of
association are published and hence that the obligations
of transparency of Law 2190/1920 are respected.

(192) The Commission considers

clarifications
transmitted by the Greek authorities give the insurance
that Laws 2271/94, 2602/98, 2527/97 and 2414/96 do

that

the

(28) Article 1 commitment (c).
(29) Article 1 commitment (b).

(194) As far as Law 95/76 is concerned, the Greek authorities
indicated their readiness to redress the situation created
by the provisions of this Law in favour of OA. The
Greek authorities do not refute the doubts expressed by
the Commission as to its compatibility. Given that the
law in question has entered into force before the date of
accession of Greece into the Community (1 January
the possibility of
1981),
proposing
separate
procedure.

the Commission reserves
appropriate measures

in

a

(195) However, Greece by tolerating that OA never publishes
its audited financial accounts in time and never applies
penalties clearly accepts infringement of Greek Law
2190/1920 and Community Law (EC Regulation (EC) No
2407/92). By not
imposing the remedies available
according to national law or by not withdrawing the air
carrier license, Greece clearly demonstrate that it allows
further
to prolong OA's activity after 2000, without
restructuring measures, whereas a company applying
normal Commercial
stopped.
Article 1(c) of the 1994 decision is not respected.

activity should have

(196) Article 1(e) of the 1994 decision requires Greece not to
grant OA any further aid. This has been clearly
infringed, as it will be explained in section 6.2.

6.1.3.3. Conclusion

(197) The Commission has authorised in 1994 to 1998 State
Aid under the conditions, which were considered the
minimum requirement necessary to accept the aid as
not distorting competition contrary to the common
interest and therefore compatible with the EC Treaty.
The Commission notes that Greece has granted the aid
under modified conditions contrary to those under
which the aid has been originally authorised in 1994 to
1998 and concludes that the aid no longer complies
with the authorisation and can therefore, not be
considered compatible with the EC Treaty. It is recalled
that
the
the second tranche of EUR 41 million of
restructuring aid authorised in August 1998 by the
Commission, was paid in September 1998.

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6.2. Assessment of the alleged new aid, referred above

under (b)

6.2.1. Existence of State aid within the meaning of
Article 87(1) of the Treaty with regards the
alleged new aid

6.2.1.1. Alleged new aid related to the granting of EUR

19,5 million

(198) The Commission has been able to verify that the loan of
EUR 19,5 million has been granted according to market
conditions, the repayment interest of the loan is equal
to the Euribor rate + 1,25 %. There is no advantage
granted to OA as the loan has been secured not against
a State guarantee, but on the basis of an assignment
from OA of its claims against the Greek State for an
amount of EUR 22 million for unpaid tickets. The
Commission has also been able to examine that this
amount is in line with the total amounts declared by
Greece as debts towards OA for unpaid tickets (total
amount of approx. EUR 37,3 million. The Commission
concludes to the non-existence of State aid as far as the
EUR 19,5 million loan is concerned.

6.2.1.2. Alleged new aid concerning the tolerance with

default payment or any other advantageous treatment
under Greek fiscal and commercial law

(199) With regard to the exemption from taxes, notary or
registration fees for OA transactions, as it is linked to
Law 95/76, the Commission reserves the possibility of
proposing
separate
procedure.

appropriate measures

in

a

(200) Concerning the non-payment of VAT at 8 % collected by
OA on domestic fares and the compensation for the
early eviction from Hellinikon and the relocation to
Spata, the Commission has been able to verify that OA
no
has
over-compensation for the latter. The Commission can
conclude that there is no State aid involved.

former

there

paid

that

and

the

is

(203) With regard to OA fiscal and legal status, Greece has
decided on its own initiative, without a specific request
by the Commission, to modify OA status in order to
start its privatisation. Greece has confirmed that as early
as June 1999, OA was not subject to Law 2414/96 on
DEKOs, which had been accepted by the Commission in
the framework of the 1998 decision. However, since
then, OA instead of being treated as any other Greek
public limited company continues
from
specific legislation which is normally only applied to
the
DEKOs
Commission in that context. This is an exceptional
situation, which does not appear to be foreseen by the
Greek law.

and which had

been accepted

to benefit

by

(204) The Commission is, therefore, unable to verify that such
a framework, which only applies to OA, does not entail
possible State intervention and hence possible distortion
of competition. Moreover, the fact that OA is imposed
specific cumbersome legislation on the recruitment of
staff cannot exclude the infringement of one of the 24
conditions attached to the granting of the restructuring
aid (Article 1(b) of the 1994 decision and Article 1(a) of
the 1998 decision), where Greece would not interfere in
the management of OA except within the strict limits of
its role as a shareholder. Hence the situation seems to
stem from an infringement of the Greek law, a misuse
of the previous aid by the non-respect of the conditions
attached in the 1998 decision and the existence of
distortion of competition.

(205) Concerning the payment of social security obligations,
the settlement with the
before the conclusion of
Organisation for Social Security (IKA), which Greece has
not provided the Commission with yet, OA has not paid
its contributions from 1993 to 2001 (EUR 32 millions)
incurring any fines or penalty. Since the
without
that
signature for an amount of EUR 45 million of
settlement
the outstanding
(accrued interest brought
payments to that total) OA appears not to have paid
October to December 2001, thus being in breach with
the settlement. A private creditor, considering the
financial situation of OA, would have immediately used
all
legal
means of execution to obtain the payment of the due
amounts as laid down in the settlement. The fact that
IKA has not undertaken such action constitutes State
aid. Therefore, the amount of EUR 27 391 790 as part
of the (collapsed) settlement is overdue and immediately
payable. To that amount default
interest should be
accrued.

legal means of action,

if needed,

including,

(201) The Commission can also conclude that

there is no
State aid involved in OA's commercial debt of EUR 2,43
million towards Olympic Catering, which represents a
normal commercial liability.

(202) The information received concerning the operation of
the fuelling facilities does not allow the Commission to
conclude to the existence of State aid.

(206) With regard to the non-payment of VAT on fuel and
spare parts by Olympic Aviation, no evidence of
to
payments
December
the
Commission has not received this information, it cannot
it constitutes State aid. No proof of
exclude that
payment for the rentals for different airports for the

from January to May and November
been

provided. As

2001,

have

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period 1998 to 2001 to an amount of EUR 2,46 million
has been given. A normal creditor,
informed of OA
financial difficulties, would have used, as a minimum
from 1999, all
if
needed,
execution to obtain the
settlement of the due payments. The absence of such
action may lead the Commission to conclude to the
existence of State aid.

legal means of action,

legal means of

including,

(207) No evidence of payment has been forwarded either to
the Commission for the irport charges to AIA following
the adoption of a settlement agreement between OA
and AIA for an amount of EUR 33,92 million. The
Commission takes note of such an agreement. However,
having not received any proof of payment as from today
and taking into account that the first payment should
have occurred in July,
the
agreement has not been respected. In accordance with
the terms of the agreement, a normal creditor should
have claimed the total unpaid amount of instalments
bearing default interests and would in that respect have
used all legal means of action, including, if needed, legal
means of execution to obtain this
settlement. The
Commission has not received any information of this
nature, it cannot exclude the existence of State aid.

it cannot exclude that

(208) No proof of payment has been adduced for

the
Spatosimo tax for the period of December 2000 to
February 2002, as well as the month of March 1999 for
an amount of ca. EUR 60 999 156. As the Commission
has not received the information that the tax has been
paid, the tolerance of a persistent non-payment of the
due amount constitutes State aid.

(French Republic v. Commission) (30), the imputability to
the State of a measure taken by a public undertaking
may be inferred from a set of indicators arising from
the circumstances of the case and the context in which
that measure was taken. In the present case, there are
no doubts that it is the State itself, which tolerates the
constant deferral, non-payment of different charges,
taxes due by OA, as well as
the infringement of
Community and Greek law. In some other cases, the
measures are imputable to airports or to IKA. As far as
airports are concerned, the Greek authorities have stated
that all airports run by the HCAA are funded by the
State budget and all income derived from their activities
goes to the State budget. Airports in Greece are not
autonomous financially, nor is the HCAA. As for IKA, it
is a public body established by the Greek Law (31),
which has
State
supervision for managing the social security system, and
collecting mandatory employers'
and workers'social
security contribution. The measure is, therefore, clearly
imputable to the State.

been made

responsible,

under

(211) Secondly,

for instance)

it needs to be examined whether the new
illegal aids involve any transfer of State resources. This
is the case by accepting that OA does not pay in time
(eight years delay for IKA,
its different
financial obligations. It must be reminded to the Greek
authorities that deny the existence of State aid in this
case, as
there is no pecuniary
that
advantage involved, that the concept of aid ‘is wider that
that of a subsidy because it embraces not only positive
benefits, such as subsidies themselves, but also measures
which, in various forms, mitigate the charges which are
normally included in the budget of an undertaking' (32).

they consider

(209) Finally the offsetting of debts of the State and OA, or
between Airports and OA for an amount of ca. EUR
28,9 million, does not include details as the reference
period for the State‘s outstanding obligations toward
OA. As the Law forming the basis for the offset lacks
precision, the actual agreement itself reproduces such
vagueness, coupled with a lack of evidences. Therefore,
the validity of these amounts cannot be verified and
they cannot be invoked to demonstrate the absence of
tolerance of a persistent
aid under
non-payment of airport charges.'

form of

the

(212) Thirdly,

it needs to be determined whether the new
illegal aid distorts competition. The conduct of the State
gives OA a significant commercial advantage over its
competitors by mitigating for OA the burden associated
with normal application of the social security system, of
levies and airport charges. It gives OA the opportunity
in
to
contradiction with normal commercial practices (33) and
artificially maintains the Hellenic flag carrier alive. Even,
interests and
if OA would pay the all amount of
in
penalties due, as stated by the Greek authorities,

obligations,

regularly

financial

escape

its

(210)

In relation to all measures considered as new aid herein,
it needs first to be determined whether those measures
are imputable to the State. According to the judgement
the Court dated 16 May 2002 in case C-482/99
of

(30) The so-called Stardust Marine case. See in particular paragraph 55.
(31) Greek development Law 1846/1951, Article 11.
(32) Case C-387/92 Banco Exterior de Espana V. Ayuntamiento de

Valencia (1994) ECR 1-877, paragraph 13.

(33) Case C-256/97 D.M. Transports.

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L 132/37

facilities (34),

like a private creditor,

these
return for the generous payment
amounts cannot wholly undue the advantage gained by
OA. IKA, as well as the fiscal authorities and airports by
constantly accepting at their discretion the deferral of
payments (35), must be held to have acted, vis-à-vis OA,
is
as a public creditor which,
seeking to obtain payment of sums owed to it by a
in financial difficulties (36). Considering the
debtor
magnitude of the facilities obtained by OA by different
public bodies and their relative frequency, and taking
into account the fact that OA is in financial dire straits,
OA would have been manifestly unable to obtain
comparable facilities from a private creditor in the same
situation. Besides,
such a creditor would not have
allowed a situation where the debts continue to increase
while the assets that might be used to satisfy these debts
are disappearing (37). On the contrary, a private creditor
would have asked by all legal means the payment of the
arrears or the execution of
its guarantees. There is
accordingly a distortion of competition by favoring OA
within the internal market, over the other Community
air-carriers. Indeed, aviation is a liberalised sector since
the implementation of the third package in 1992.

(213)

the

examined measures do affect

trade
Fourthly,
between Member States, since OA carries a transport
activity, which by nature is a cross-border activity and
covers the whole internal market.

assures

the Commission

(214) The Greek authorities cannot prevail themselves with
the internal weaknesses of their own administration to
allow the granting of further aid to OA, neither that
because other companies do not fulfil their financial and
fiscal obligations, OA could be allowed to be in
contravention with the 1994 and 1998 Decisions, nemo
auditur propriam turpitudinem allegans. Finally, the Greek
authorities
future
relationship with OA have been rationalized, as tickets
for civil servants will have to be purchased as per
normal practices. Such a statement only reinforces the
Commission conviction that OA has never been allowed
to operate as any other commercial entity. The fact that
the State tries to change such a situation as per now,
does not modify the fact that the Greek authorities have
not complied with their obligations derived from the
1998 Decision not to grant further aid. Furthermore,
the letter of
the Secretary General of Ministry of
Economy requiring that officials of the Greek State pay
according to market practices as of 1 May 2002, is of
no legally binding nature to its addressees. Therefore, it

that

(34) It must be reminded that for the social security the period covers

eight years.

(35) According to Law 2676/1999 IKA has

the
obligation) to reach a settlement agreement for late payments or
debts.

the right

(not

(36) Case C-256/97 D.M. Transports, point 24.
(37) Opinion of

the Advocate-general Mischo, Case C-480/98,

Magefesa, points 32 to 43, Rep I-8717.

remains to be seen, whether, currently, the Greek State
is paying for the purchase of tickets from OA or any of
its subsidiaries.

(215) On this basis the Commission considers that this new
non-notified measure constitutes State Aid within the
meaning of Article 87(1) of the EC Treaty.

6.2.2 Legal basis for the assessment with regard to
the alleged new aids concerning the tolerance
with default payment or any other
advantageous treatment and the advantages in
relation to the operation of the fuelling
facilities

(216) To safeguard the functioning of the common market,
and in view of the principles enshrined in Article 3(g)
of the Treaty, derogations from the principles enshrined
in Article 87(1) and set out in Article 87(3) must be
strictly interpreted when a system of aid or any
individual aid measure is under examination.

(217) Article 87(2) of

the Treaty, which provides for aid
having a social character, aid making good the damage
caused by natural disasters or exceptional occurrences
and aid granted to the economy of certain areas of the
Federal Republic of Germany is not applicable in the
present case.

(218) Article 87(3)(a) and (c) of

the EC Treaty contain
derogation in respect of aid intended to promote the
economic development of areas where the standard of
living is abnormally low or where there is serious
underemployment. Greece is a region falling entirely
within the scope of Article 87(3)(a). Therefore the aid
may have to be assessed under regional aspects. The
Commission does not consider this aid to meet any
regional objectives as it has demonstrated in section
6.1.2.

(219) Article 87(3)(b) of the EC Treaty, which provides for aid
to promote the execution of an important project of
to remedy a serious
common European interest or

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disturbance in the economy of a Member State, and
article 87(3)(d) of the EC Treaty, which provides for aid
to promote cultural and heritage conservation, are not
applicable to aid to aviation transport.

mentioned guidelines, indicate that today, OA, while not
respecting the ongoing restructuring plan, has still no
alternative
can allow the
Commission to conclude to a return to viability of the
company in the medium and long term.

restructuring plan that

(224)

(220) Under Article 87(3)(c) of the EC Treaty, aid to facilitate
the development of certain economic activities or of
certain areas may be considered compatible with the
common market, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest. In the case at stake, the Commission
considers Article 87(3)(c) of the EC Treaty as the legal
instrument, which could provide an exemption. It this
respect it also considers that aid for restructuring may
contribute to the development of economic activities
without adversely affecting trade if the conditions set
in both Community Guidelines of 10 December
out
1994 on the application of Articles 87 and 88 of the
Treaty to state aids in the aviation sector (38) and the
Community Guidelines on State aid for rescuing and
restructuring firms in difficulty are met.

It results from the above that the new aids granted do
not fulfil the conditions for a derogation laid down in
article 87(3)(c). The Commission finds that Greece has
unlawfully granted non-notified new aid relating to the
other
tolerance with
payment
or
advantageous
and
under Greek
law, as well advantages in relation to the
commercial
operation of the fuelling facilities in breach of Article
88(3) of the Treaty.

default
treatment

any
fiscal

6.3. Conclusion

6.2.3 Appraisal of the compatibility of the alleged

new aids

(221) The new non-notified aids are clearly an infringement of
to grant any further aid
the past commitment not
(Article 1(e) of the 1994 Decision) and contravene also
the Community guidelines on State aid for rescuing and
restructuring firms in difficulty (paragraph 42). There is
no legal or economic justification to accept these new
aids.

(222) More importantly,

situation indicates

the new identified
the grant of
unlawful aid, has been examined against the background
that OA has already received aid in the past, so that the
the
current
both
‘one-time-last-time'
Community Guidelines of 10 December 1994 on the
application of Articles 87 and 88 of the Treaty to state
aids
and the Community
Guidelines on State aid for rescuing and restructuring
firms in difficulty.

clear breach of
contained

a
principle

aviation sector,

in the

in

(223)

Irrespective of the breach of the above principle, the
examination of
should
accompany a restructuring aid according to the above

the other

conditions

that

(38) OJ C 350, 10.12.1994, p. 5.

(225) The doubts prompting the Commission to initiate the
procedure have been allayed as far as the commitments
(b) and (f) of Article 1 of the 1994 decision (Article 1(a)
of
the 1998 decision) are concerned, as well as
concerning the granting of EUR 19,5 million loan, the
compensation for the early eviction from Hellinikon to
Spata, the debt of EUR 2,43 million towards Olympic
Catering, the operation of the fuelling facilities and the
payment of VAT at 8 % collected by OA on domestic
fares.

(226) The Commission takes

the view that

the abusive
application of the 1994 and 1998 aid and the new aid,
except for the elements stated above, are incompatible
with the common market as referred to in Article 87(1)
the
of the Treaty because they do not meet any of
necessary requirements
the
the application of
derogation provided for in Article 87(2) and (3).

for

6.4 Recuperation

(227)

In the light of the above, the Commission is of the view
that the State aid granted by Greece to OA pursuant to
Decision 94/696/EC and Decision 1999/332/EC,
is
incompatible with the common market and needs to be
recovered.

(228) However, as far as the period of recovery is concerned,
a distinction has to be made between the period 1994
to 1998, and 1998 to 2002. In accordance with Article

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L 132/39

‘The Commission
14(1) of Regulation (EC) 659/1999,
shall not require recovery of the aid if this would be
contrary to a general principle of Community law'. The
in
Commission
some
occasions (39)
to request
recovery in the light of the specific circumstances of
those cases.

has
account
that provision in order not

taken

into

in 1994 the

decision
(229) The Commission adopted
aid with conditions.
State
94/696/EC authorising
However, the Commission noticed that several of those
conditions had not been observed and, therefore, it was
decided to re-open the procedure. Subsequently, on 14
August 1998 the Commission took a new positive
decision with conditions. In that decision, in particular
paragraphs 66(c), 68, 76, 83 and 91, the Commission
considered that all the commitments set out in Decision
94/696/EC were
fully complied with by Greece.
Moreover, although the Commission concluded to the
it
existence of
nevertheless decided in paragraph 93(b) of that decision,
not to recuperate that aid, which was fundamentally
equivalent to the aid authorised in the decision of 1994.
it can not be
In order to ask for the recovery now,
excluded that the positive decision of the Commission
in 1998 has created some kind of expectations that the
aid package of 1994 was unproblematic. Consequently,
in the light of the very specific circumstances of this
case, no recovery is necessary for the aid granted before
14 August 1998.

illegal and incompatible new aid,

are

the

aids

there

concerned,

(230) The same cannot be said for the period 1998 to 2002.
First of all, it is recalled that the second tranche of EUR
41 million of
restructuring aid was paid in
September 1998, namely one month after the second
decision of the Commission. Moreover, as far as new
illegal
is no decision
whatsoever from the Commission that could create any
expectation that
the aid would not be recovered.
Secondly, the timing of this Commission's decision is
within normal practice. Finally,
the aid
granted in that period is the new illegal aid for which
the Commission has received two complaints (see point
39 above). That new illegal aid has been examined in
depth following the opening of the procedure launched
in March 2002, and where the Commission has found
that there is State aid involved incompatible with the
common market, there is no reason for not asking its
full recovery.

the core of

HAS ADOPTED THIS DECISION:

Article 1

The restructuring aid granted by Greece to Olympic Airways
in the form of:

(a)

loan guarantees extended to the company until 7 October
1994 pursuant to Article 6 of Greek Law 96/75 of 26 June
1975;

(b) new loan guarantees totalling USD 378 million for loans to
be contracted before 31 March 2001 for the purchase of
the
new aircraft
relocation of Olympic Airways to the new airport in Spata;

investment necessary for

and for

(c) easing of
billion;

the undertaking's debt burden by GRD 427

(d) conversion of GRD 64 billion of the undertaking's debt to

equity;

(e) a capital injection of GRD 54 billion reduced to GRD 40,8
billion in three instalments of respectively GRD 19, 14 and
7,8 billion in 1995, 1998 and 1999 respectively,

is considered to be incompatible with the common market
within the meaning of Article 87(1) of
the Treaty, as the
following conditions, under which the initial authorisation of
the aid has been granted, are no longer met:

(a)

the full implementation of the restructuring plan aimed at
the achievement of the long-term viability of the company;

(b) the observance of 24 specific undertakings attached to the

authorisation of the aid and;

(c)

the regular monitoring of
restructuring aid.

the implementation of

the

Article 2

(39) See

inter-alia Case C 68/99 Italy, Mesures urgentes pour
l'administration extraordinaire des grandes entreprises en dificulté,
approved on 16 May 2000, points 70 to 73; Case C 57/97 Spain,
Spanish corporate tax laws, approved on 31 October 2000, points
24 to 28; Case C 61/2000 France, Provisions pour
les
implantations d'entreprises à l'étranger en franchise d'impôt,
approved on 21 November 2001, points 32 and 33.

The State aid which Greece has implemented in the form of
tolerance of a persistent non-payment of
security
obligations, of VAT on fuel and spare parts by Olympic
Aviation, of rentals for different airports, of airports charges to
Athens International Airport and other airports, of Spatosimo
tax is incompatible with the common market.

social

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Official Journal of the European Union

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Article 3

Article 4

1.
Greece shall take the necessary measures to recover from
the beneficiary the aid of GRD 14 billion (EUR 41 million)
referred to in Article 1 which is not compatible with the
Treaty and the aid referred to in Article 2 and unlawfully made
available to the beneficiary.

shall be

Recovery

2.
effected without delay and in
accordance with the procedures of national law provided they
allow the immediate and effective execution of the decision.
The aid to be recovered shall include interest from the date on
which it was at the disposal of the beneficiary until the date of
its recovery. Interest shall be calculated on the basis of the
reference rate used for calculating the grant-equivalent of
regional aid.

Greece shall inform the Commission within a period of two
months from the date of notification of the present Decision
of the measures to be taken to comply with it.

Article 5

This Decision is addressed to the Hellenic Republic.

Done at Brussels, 11 December 2002.

For the Commission

Loyola DE PALACIO

Vice-President of the Commission