This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Europe Sues Greece Over Airline Subsidy April 24, 2003 By PAUL MELLER BRUSSELS, April 23 - The European Commission said today that it was suing the Greek government for refusing to retrieve 194 million euros ($213 million) in state aid granted to Olympic Airways, assistance that the commission has said is illegal. The action is the latest sign that despite pressure from some European Union nations, including Greece, the commission intends to stick to its hard line against state assistance for airlines, regardless of the industry's troubles. Analysts said the commission's adamant stance might be intended to hasten a consolidation of the industry with cross-border takeovers and mergers, which many countries have resisted as a matter of national pride. The commission ordered Greece four months ago to take back 153 million euros ($168 million) in breaks on payroll and other taxes and on landing fees at Greek airports, as well as a 41 million euro ($45 million) cash injection made in 1998. The Greek government failed to comply with the order, the commission said in a short statement today announcing the suit in its courts. With the Summer Olympics in Athens a year away, the Greek government is doing everything it can to keep Olympic going. It has tried to sell a 51 percent stake in the carrier, so far unsuccessfully, and has ordered the airline to overhaul its finances. The airline steadily loses money and has cost the Greek government some $2.5 billion over the last decade, analysts said; if the subsidies are repaid, the airline will most likely have to file for bankruptcy protection. Anticipating such a possibility, the Greek government has already transferred some of Olympic's assets to a new company that would take over its operations, the Greek transport minister, Christos Verelis, told Bloomberg News. While the Greek government initially agreed to recover the aid last December, its position has hardened since then, and the airline's chief executive, Dionysis Kalafonos, has said that the legality of the aid is still an open question. The European Commission, the union's executive body, set 24 conditions in 1998 that Greece had to meet for its aid to Olympic to pass muster; the commission's spokesman on transportation issues, Gilles Gantelet, said almost none of them had been satisfied. "The restructuring was not put in place, the financial targets were never met, and Greece gave further aid to Olympic," Mr. Gantelet said. "Of course they broke the conditions." He added, "It is a shame that only now the Greek government is finally trying to make changes to the management of Olympic." The commission has grown progressively more impatient with state subsidies to failing "flag carrier" airlines. It repeatedly rejected Belgium's efforts to prop up Sabena, which finally collapsed in 2001 when its part owner, Swissair, refused to inject more cash. The tough stance contrasts with the Bush administration's willingness to provide loan guarantees and other assistance to the American airline industry after the Sept. 11 terror attacks. Mr. Gantelet said the commission "doesn't share with the United States the will to grant huge subsidies." Troubled though it is with overcapacity and major bankruptcies, the American airline industry is already more consolidated than Europe's, with the United States having 29 important carriers handling about one-quarter of world passenger traffic using fleets that average 152 aircraft, according to figures from Airbus Industrie, the jet builder. Europe's 78 airlines average just 36 aircraft apiece, and handle about 10 percent of world passenger traffic. http://www.nytimes.com/2003/04/24/business/worldbusiness/24OLYM.html?ex=1052197628&ei=1&en=d3dc111b0d935488 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company