Greek Airline Merger Faces Monopoly Scrutiny

(CN) - The European Commission opened an investigation into the planned merger of two Greek airlines, two years after blocking a similar proposal.

Aegean Airlines, Greece's largest airline, announced plans to acquire the smaller Olympic Air last fall for $97.5 million. Olympic had been Greece's flag carrier before the government divested its interest to private holders in 2009, and it now operates as a regional carrier.

Aegean and Olympic operate from bases at Athens International Airport, and regulators fear the merger will lead to price increases and poor service on domestic routes out of that airport. The commission's preliminary investigation also indicated that the airlines' largest competitor, Cyprus Airways, may not be a viable force in the Greek domestic market in the future.

"We have the duty to ensure that Greek passengers and people visiting Greece can travel at competitive air fares, even more so during challenging economic times," commission vice president Joaquin Almunia said in a statement.

The commission said it has considered both Greece's economic state and the airlines' financial conditions, but is taking action since preliminary figures show the merger would give the carriers a monopoly on routes from Athens to six regional cities and reduce competition on three others.

Commissioners blocked a similar merger between Aegean and Olympic in 2011 after finding competition concerns on 10 Greek domestic routes out of Athens. Regulators found that the merger would have created a quasi-monopoly on nine of those routes and sharply decreased competition for one.

Under the 2011 proposal, the two companies would have operated under the Olympic Air name. This time, the companies plan to continue under separate brands.

The commission said it will announce its final decision on the proposed merger by Sept. 3.

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