EU Blocks Greek Airlines' Merger

BRUSSELS—The European Commission Wednesday said it has blocked the proposed merger between the two Greek air carriers Aegean Airlines SA and Olympic Air, as the tie-up would have created a quasi-monopoly in parts of the country's air-transport market.

"The Commission's investigation showed no realistic prospects that a new airline of a sufficient size would enter the routes and restrain the merged entity's pricing," the commission, which has antitrust powers within the European Union, said in a statement.

The companies offered to give up takeoff and landing slots at Greek airports, but these airports aren't as congested as other European airports that were considered in previous mergers or alliances, it added.

The commission also asked competing airlines what conditions would attract them to the Greek market and the feedback wasn't positive, Competition Commissioner Joaquin Almunia said during a press conference. "Establishing a foothold in Athens was almost impossible" because of entry barriers that are too high, he said, such as airport taxes.

The commission has blocked only two mergers in the last six and a half years: Ryanair Holdings PLC's bid for Ireland's Aer Lingus Group PLC, and a tie-up in the Portuguese electricity market. It is generally regarded by Brussels lawyers as reluctant to stop deals without very significant reasons.

"An important opportunity for a consolidated representation in the European aviation market has been lost," said Theodore Vassilakis, chairman of Aegean Airlines, commenting on the decision. "We will adjust and continue. Our track record shows that we can succeed through challenging times."

Aegean and Olympic had decided on the tie-up in February last year, after the EU commission approved in 2008 a plan to restructure Olympic, Greece's deficit-ridden national carrier, as part of a long-awaited plan to slim down and privatize the airline.

Aegean Airlines is publicly-traded, while Olympic Air is part of a group owned by Greece's Marfin Investment Group SA.

—Alkman Granitsas and Nick Skreaks in Athens contributed to this article.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit

www.djreprints.com

More In Business