The European Commission has decided to launch a formal investigation into a number of financial flows and transfers which may amount to State aid to Olympic Airways Services SA and Olympic Airlines SA. The investigated aid payments are believed to have been made to both companies after the period covered by the Commission's negative decision of September 2005 finding that Olympic Airways/Airlines had received illegal and incompatible State aid. The Commission has also enjoined Greece to provide information relevant to its investigation.

"The thorough preliminary investigation we have conducted so far following complaints by competitors has not allayed our doubts that further aid may have been granted to both companies, and we have no choice but to open a formal investigation procedure. The only way to secure the future of a healthy air transport market in Greece based on fair competition and thereby preserve the interests of Greek consumers and taxpayers is for Greece to ensure that the law is complied with.", Vice-President Barrot, Commissioner responsible for Transport, said in a statement.

The Commission in its decision identifies four separate issues. Firstly, it has reasons to believe that Greece has granted illegal and incompatible State aid to Olympic Airways Services and Olympic Airlines through continued forbearance in relation to tax and social security debts since December 2004.

Secondly, Greece may have granted illegal and incompatible State aid to Olympic Airlines by financing some of its aircraft leases since May 2005.

Thirdly, the Commission will investigate payments made to Olympic Airways Services in respect to a number of arbitral panel decisions. These arbitral panel decisions result from a number of damages actions taken by this company against the State. The corresponding payments may involve overcompensation and constitute new State aid.

Finally, the Commission will examine whether the special creditor protection granted in 2005 by law to Olympic Airways Services and Olympic Airlines may constitute State aid. This creditor protection ensures that no legal action or enforcement measures may be taken against either company by any private creditor. It apparently is not granted to any other entity in Greece.

The preliminary investigation already carried out by the Commission does not allow it to conclude that these various State aids, if confirmed, may be declared compatible with the common market. In particular, the Commission notes that Olympic Airlines and Olympic Airways Services are successor companies of Olympic Airways, which was granted restructuring aid in the 1990s and that, as such, neither of these two companies can benefit again from such restructuring aid ("one time, last time" principle).

Greece has one month to respond to the Commission and provide the required information.

This decision by the Commission follows complaints received from competing airlines and is also based on the follow-up actions taken by the Commission following its previous State aid decisions concerning Olympic Airways/Airlines.