European commission concludes merger was only way of preventing the carrier's collapse and is expected to save millions
It was the airline that put lavish into luxury: its crews wore Pierre Cardin, its cutlery was gold-plated, its glasses crystal in economy and first class. As the carrier for cosmopolitan jetters, Olympic Air not only reflected the taste of its founder, Aristotle Onassis, but in many ways lived up to his reputation as the Golden Greek.
When its first Boeing 707 jets arrived in Athens, Onassis ensured they were decked out with pianos for the exclusive purpose of entertaining those travelling up front.
In leaner times, the airline made less salubrious headlines. Sold by Onassis to the Greek state in 1975, it soon became the embodiment of everything that was wrong with the country's public sector: corrupt, unwieldy, inefficient and a hotbed of political favouritism and party politics.
By the 1990s after years of mismanagement under successive socialist governments – in which staff perks included free flights on the Athens to Sydney route – Olympic made history again, only this time as one of the biggest loss-making companies in the aviation industry.
On the eve of its sale to the Athens-based Marfin Investment Group in 2009 it was costing the Greek taxpayer about €1,500 a day.
This week, after more than half a century commanding the Greek skies, the airline changed hands again. Unable to turn profit in a climate of forbidding recession – Greece's economy contracted for a sixth straight year in 2013 – the carrier has been taken over by Aegean Airlines.
Under the €72m (£62m) deal, Olympic will become a subsidiary of Aegean, Greece's largest airline, after the European commission concluded the merger was the only way of preventing the carrier's collapse.
A previous bid by Aegean to acquire its domestic rival in 2011 was rejected on the grounds it would hand the firm a near monopoly of the Greek market and defy the rules of fair competition. But the eurozone crisis changed thinking in Brussels and earlier this month the EU competition commissioner, Joaquín Almunia, said: "It is clear that, due to the ongoing Greek crisis and Olympic's own very difficult financial situation, Olympic would be forced to leave the market soon. We approved the merger because it has no additional negative effect on competition."
Greek air travel has been affected by the country's debt crisis with domestic demand down 28% last year compared with 2009, according to Aegean's figures.
In the first half of 2013, as the effects of biting spending cuts became apparent and poverty and unemployment reached record levels, demand fell by a further 6.3%.
By contrast, demand on Aegean's 32 routes abroad has increased by 85% in the past four years – with most of its 8 million passengers flying to regional airports around Greece.
Announcing the deal, Aegean's vice-president, Eftichios Vassilakis, said the merger would combine the history of Olympic and the business savvy of a carrier that with the exception of 2010 has been voted Europe's best regional airline company for the past four years.
The merger, which will see the two airlines combining their administrative services and call centres, is expected to save the company up to €35m annually.
"Our goal is for Aegean and Olympic Air to lead in the changes in the tourism market in the country and in the region," he said, adding the new airline would seek to improve fares and connections to far-flung islands and other remote areas badly hit by the crisis.
More than 17 million tourists visited Greece this year – a vital lifeline for a nation whose economy is largely dependent on the industry. Combined, Aegean and Olympic Air will service more than 250 routes of which 205 will be to and from destinations overseas.
"At this time Greece needs a strong air carrier," said Vassilakis, insisting that the company would add 15 new routes to its portfolio next year. "It needs a strong carrier … in order to be able to respond to domestic demands but even more to demands overseas [given that] tourism is the lung of the country."
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