EU bans mega Greek airline merger

(BRUSSELS) - Europe's competition watchdog on Wednesday used its veto powers for the first time in four years to ban a merger of Greece's biggest carriers, Olympic Air and Aegean Airlines.

Competition commissioner Joaquin Almunia said the tie-up would have resulted in "a quasi-monopoly of the Greek air transport market", leading to higher fares for passengers in Greece "and possibly a service of lower quality."

"Prohibition decisions are never easy to take," he added. "We took this decision to protect consumers".

The two airlines slammed the EU decision which they said "is going to have negative repercussions for passengers as well as the economy," adding that "it is the foreign carriers who will benefit."

"Our companies will study the text of the decision ... and will then decide whether to pursue the matter further," Olympic and Aegean added in a joint statement released in Athens.

The commission said that with the two companies together controlling 90 percent of the market, a merger would have eliminated competition on nine crucial routes, including between Athens and Thessaloniki, Greece's second city.

As a consequence, four of the six million passengers flying in and out of Athens each year would have been affected, it added.

"We have a duty to prohibit mergers that would significantly reduce competition and make consumers worse off," Almunia said.

Brussels has enjoyed veto powers over mergers between large companies operating in the European Union since 1990, but rarely resorts to prohibition, preferring to encourage companies to find a solution or drop the proposal.

While thousands of merger cases have been investigated, the watchdog has pronounced only 20 bans, the last in 2007 when it barred Irish low-cost airline Ryanair from taking over national competitor Aer Lingus.

Olympic Air and Aegean Airlines announced in February 2010 plans to merge into a single listed company that would take the name Olympic Air and become a "national champion" in the airline business.

The commission has acted several times in the past to bar the road to domestic monopolies, the Ryanair takeover plan being one such example, along with a 2004 planned energy deal between Portugal giants EDP and GDP or a 2000 veto on Sweden's Volvo and Scania.

In the Greek airline case, Almunia said he had "spared no effort" to find a solution.

The companies had offered to cede take-off and landing slots at Greek airports.

"But unlike in previous airline cases, the problem here was not the availability of slots," he said. "There are enough slots available at Athens airort and most other Greek airports.

"The problem here was that even with slots available, there was no company who would credibly enter the market."

Neither company on the other hand was ready to cede some of its airplanes or a logo.

While aware of the difficulties faced by the two companies, Almunia said "we cannot afford that companies place the burden of the crisis onto consumers."